Business Strategy: What is it & How to Develop yours?

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Digital Strategy

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Welcome to our comprehensive guide on Business Strategy, where we will explore the essential steps businesses need to take to thrive in today’s highly competitive business world.

A well-defined business strategy is crucial for start-ups and established companies to ensure long-term success. This guide will cover key topics, including identifying your competitive advantage, establishing clear business goals, and devising effective strategies to achieve them.

Throughout this journey towards accomplishing your business objectives, our partners at Digital Leadership AG will be there to offer valuable support and guidance. With their expertise in innovation and digital transformation, they have assisted numerous businesses in executing successful strategies and maintaining a competitive edge in their respective industries. Uncover profound insights in our book, “How to Create Innovation” – the ultimate guide to business strategy. Within its pages, you’ll find a diverse array of groundbreaking tools and models that will enrich your understanding and empower you to refine your approach, guaranteeing unmatched success in the competitive business landscape.

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What is business strategy?

A Business Strategy involves the carefully strategic planned initiatives that a company adopts to create value for the organization and its stakeholders, all while gaining a competitive advantage in the market. It comprises a well-developed strategy aimed at attracting and expanding the customer base, thereby generating substantial revenue to maintain business operations and secure the financial stability of the business owner.

A successful strategy revolves around three fundamental inquiries:

  1. How can my business create value for customers?
  2. How can my business enhance the customer experience to provide additional value?
  3. How can my business create value for employees and cultivate a positive work environment?
  4. How can my business empower employees to contribute to value creation?
  5. How can my business develop strong collaborations with suppliers to unlock value in the supply chain?
  6. How can my business optimize its partnerships with suppliers to drive mutual benefits and value creation?

While passion, hard work, and innovative ideas are essential, they alone cannot guarantee business survival. To thrive, a solid plan is required, including effective ways to reach customers, set affordable prices, and sustain growth for long-term strength.

Success cannot be wished into existence; instead, it demands a well-thought-out Business Strategy. This strategy must revolve around having customers who genuinely desire the offerings and can afford to pay a price that not only covers operational costs but also allows for expansion, competition, and financial stability for the business owner.

Why is a Business Strategy Important?

Business strategy holds significant importance as it helps us understand our organization’s strengths and weaknesses, address deficiencies, and capitalize on their areas of expertise.

By articulating a clear Business Strategy, an organization can effectively mobilize its resources to align with its goals. Without a well-defined strategy, resources remain idle and unproductive. A Business Strategy serves as the driving force that sets these resources in motion. At Digital Leadership, we offer Business Model Strategy and Talent Management Consulting for creating, delivering, and capturing value, fostering innovation and optimizing resource allocation and ensuring the right people with the right skills execute the strategy, enhancing leadership, creativity, engagement, and succession planning for business success.

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Established companies with a clear Business Strategy demonstrate a commitment to their future. It sends a positive signal to external stakeholders such as investors and customers, showcasing what the company deems essential. Moreover, a Business Strategy fosters motivation throughout the organization, enabling every worker to grasp their role in fulfilling the company’s overarching vision.

Understanding Strengths and WeaknessesA Business Strategy helps identify the organization’s strengths and weaknesses, enabling focused efforts to leverage advantages and address shortcomings.
Providing Direction and FocusA well-defined Business Strategy sets a clear direction and focus for the entire organization, ensuring that everyone is aligned toward common objectives and goals.
Efficient Resource AllocationWith a Business Strategy, resources such as time, money, and manpower are allocated efficiently, maximizing productivity and reducing waste.
Adaptability to Changing Market ConditionsA Business Strategy enables the organization to adapt to dynamic market conditions, seize opportunities, and respond effectively to challenges.
Leveraging Competitive AdvantageValue Disciplines
Effective Risk Management and Contingency PlanningA Business Strategy aids in identifying potential risks, allowing the organization to develop contingency plans and minimize negative impacts on operations.
Optimal Resource UtilizationA Business Strategy promotes disciplined resource management, ensuring that resources are utilized optimally to achieve strategic objectives.
Building Stakeholder ConfidenceA clear and well-communicated Business Strategy instils confidence in stakeholders, fostering trust among investors, customers, and employees.
Encouraging Innovation and Fostering GrowthA Business Strategy fosters a culture of innovation and continuous improvement, providing a roadmap for sustainable growth and expansion.
The table presents key points of Business Strategy along with their respective descriptions

Business Strategy Components

The key components of a business strategy are diverse and can vary in depth and format. Nonetheless, most business strategy documents generally include the following elements:

Components of Business StrategyDescription
Vision and ObjectivesThe vision sets the aspirational and long-term goals for the organization, providing a sense of purpose and direction. Objectives are specific, measurable, achievable, relevant, and time-bound (SMART) targets that the organization aims to accomplish to fulfil its vision. Having a clear vision and well-defined objectives helps in aligning efforts and decision-making across the organization.
Core ValuesCore values represent the fundamental beliefs and principles that guide the organization’s culture, behaviour, and decision-making. They act as a compass, ensuring that all stakeholders, including employees, customers, and partners, are on the same page and working towards common goals.
SWOT AnalysisConducting a SWOT analysis helps businesses assess their internal strengths and weaknesses and external opportunities and threats. By identifying these factors, organizations can capitalize on their strengths, address weaknesses, explore growth opportunities, and mitigate potential threats to achieve competitive advantage.
Tactics and Operational DeliveryTactical planning translates strategic objectives into actionable tasks and initiatives. It involves defining specific steps, timelines, responsibilities, and resource requirements to execute the strategy effectively. Operational delivery ensures that day-to-day activities align with the strategy, ensuring progress toward achieving the objectives.
Resource AllocationEfficient resource allocation is critical for successful strategy implementation. This includes human resources, technology, financial investments, and physical assets. Proper allocation ensures that resources are utilized optimally and are directed towards the most strategic initiatives.
Measurement and AnalysisRegular measurement and analysis of key performance indicators (KPIs) enable organizations to monitor progress, identify areas of success or concern, and make data-driven decisions. Business intelligence tools and analytics help in gathering relevant data, gaining insights, and adjusting the strategy as needed to stay on track.

Key Elements of a Successful Business Strategy

Attaining prosperity hinges on the fundamental alignment between your Business Strategy and the motivations driving your organization. An effective Business Strategy thoughtfully considers your vision, purpose, objectives, and available resources, culminating in a meticulously crafted plan to sustain your business’s effectiveness.

Consequently, your Business Model, Business Purpose, Value Proposition, and Business Goals are all set into dynamic motion as your Business Strategy is thoughtfully put into action. By constantly evaluating and adapting your strategy, you ensure continued growth and success for your business.

A successful business strategy centres on understanding value creation. It involves the difference between customer willingness to pay (WTP) and the price of goods or services. The strategy aims to widen these gaps for customers, the firm, suppliers, and employees. By increasing customer delight, firm margin, supplier surplus, and employee satisfaction, businesses create value for all stakeholders. Engaging stakeholders and developing employees are crucial components of a sustainable strategy.

Value Creation Model
Designed by: Stefan F. Dieffenbacher, Digital Leadership AG

Just like planning a vacation where your goal is to explore Germany’s history and visit as many castles as possible, a “Vacation Strategy” involves optimizing the use of your available resources to maximize family enjoyment. While you might face limitations in time and budget, you can still achieve your goal by finding affordable accommodations, arranging efficient transportation, purchasing tickets in advance where possible, and ensuring everyone in the family is fully committed to the trip.

Examples of business strategy

  1. Cost Leadership Strategy: The focus is on achieving the lowest production costs to offer products or services at competitive prices.
  2. Differentiation Strategy: Aims to create distinctive and unique products or services that stand out from competitors, often commanding premium prices.
  3. Market Expansion Strategy: Involves entering new markets or expanding current market presence to boost sales and customer base.
  4. Product Development Strategy: Concentrates on introducing new products or enhancing existing ones to meet evolving customer demands.
  5. Market Penetration Strategy: Seeks to increase market share by aggressively promoting existing products in the current market.
  6. Diversification Strategy: Entails entering new markets or offering new products/services to reduce dependence on a single market or product line.
  7. Acquisition Strategy: Drives growth through acquiring other companies to gain access to their resources, customers, or technologies.
  8. Innovation Strategy: Prioritizes continuous innovation to maintain a competitive edge and foster business growth.
  9. Customer-Centric Strategy: Puts customers at the core of all business decisions, aiming to build long-term relationships and foster loyalty.
  10. Global Expansion Strategy: Aims to establish a presence in international markets to explore new opportunities and diversify revenue streams.

Different Levels of Business Strategy

Business strategies are executed across multiple levels within an organization, with each level focusing on achieving distinct objectives. These levels of business strategy differ according to the goals set by various departments or segments of the company. In general, three levels of business strategy can be distinguished, guided by common parameters.

Level of Business StrategyScope and FocusKey Questions Addressed
Organizational (Corporate) StrategyEntire Organization– Which businesses or industries should the company operate in?
– How should resources be allocated among different businesses?
– What is the overall direction and vision for the company?
Business (Competitive) Unit StrategyIndividual Business Units/Divisions– What is the competitive advantage of each business unit?
– Who are the target markets for each business unit?
– What are the specific objectives and plans for each business unit?
Functional StrategySpecific Functional Areas– How can each functional area support the business unit strategies?
– What are the specific actions and plans for each functional area?
– How can each functional area contribute to achieving the overall corporate objectives?
The table shows Different levels of business strategy

How Do You Develop a Business Strategy?

How to Develop your Business Strategy - Business Strategy Development
How to Develop Your Business Strategy

The Strategic Planning Process guides you through the stages of creating a successful Business Strategy. Utilizing a Business Model Canvas can help you visualize the various components of your operations more effectively.

eXtended Business Model Canvas
The UNITE eXtended Business Model Canvas
Designed by: Digital Leadership AG – Building on the work of Alexander Osterwalder, the Lean Canvas and the thinking of Patrick Stahler

Now is an opportune moment to contemplate your Strategic Goals and how they align with the value you aim to deliver to your customers.

Step (1): Identify your Business Purpose

We firmly believe that the key to a thriving and impactful business lies in identifying a Massively Transformational Purpose to serve as the foundation of your enterprise. This approach enables you to drive success through revolutionary ideas and advancements that ultimately enhance your customers’ lives.

Your Business Purpose represents the fundamental reason behind your business’s existence. It goes beyond a typical Mission Statement and becomes the driving force for innovation and transformation.

To define your Business Purpose, begin with a few straightforward elements: Clearly identify who your primary customers will be and the specific value you aim to deliver. You can use the following template as a starting point:

“Our business will deliver [this product or service] to [your primary customers] with the purpose of [the value or impact you seek to provide].”

Business Purpose - Business Intentions
The UNITE Business Intentions
Designed by: Digital Leadership AG

Step (2): Setting up Business Goals

One important step in developing a successful business strategy is establishing clear and measurable business goals. The more specific and measurable these goals are, the better they can guide your overall business strategy.

but what are business goals?

An essential step in developing a successful business strategy is defining clear and measurable business goals. These goals act as specific targets that an organization aims to achieve within a certain timeframe, either in the short term or long term.

A Business Goal serves as an endpoint or accomplishment that the organization sets for itself, providing direction and focus to the team’s efforts. Setting general goals like “increase revenue” may not provide enough clarity for progress. Instead, it is advisable to establish goals that include key performance indicators and align with the company’s core values.

For instance, a more effective goal might be “achieve a 15% increase in revenue in the next quarter while upholding our commitment to sustainability.” Additionally, setting a limited number of goals, around five, helps maintain focus and momentum in the business without becoming overwhelmed or stagnant.

Step (3): Defining your Competitive Advantage

An integral aspect of crafting a thriving successful business strategy is the identification of your competitive advantage. This process entails pinpointing the distinct qualities that set your business apart from competitors, encompassing your unique knowledge and capabilities.

Understanding and embracing what sets you apart enables you to establish a competitive edge and effectively pursue your business objectives. Developing and leveraging your competitive advantage is crucial for fostering innovation and achieving success, but it demands dedicated effort and thoughtful deliberation.

By acknowledging and maximizing your company’s unfair advantage, you significantly enhance your prospects of reaching your business goals and surpassing the competition.

Step (4): Build your Team

As you articulate your Business Strategy, assembling a team that blends practical experience with innovative thinking becomes essential.

To build successful teams, it’s crucial to promote the following:

  1. Encourage collaboration: Foster a space where individuals from different teams can come together and collaborate.
  2. Find new ways to reward thinking, not people: Value creative thinking even if it doesn’t immediately lead to profitability, as it lays the groundwork for new ideas.
  3. Acknowledge and reward attempts: Cultivate an environment that values efforts and experimentation rather than solely focusing on traditional notions of success.

Ideally, you may have already experienced some success, and the development of your Business Strategy aims to strengthen and expand on those achievements. However, if you are starting from scratch, it’s important to build your team with experts whom you respect and who share the overall vision of your Business Purpose and Business Objectives.

Step (5): Develop your Business Strategy Execution Framework

Moving from ideation to practical planning, the primary emphasis shifts to executing your Successful Business Strategy. It becomes crucial to establish a clear roadmap for turning your strategy into actionable steps and determining the daily activities of the entire team.

As you transition from defining business goals and objectives to developing a concrete plan, give thoughtful consideration to the following elements of your business:

Innovation Strategy Execution Framework
The UNITE Strategy-Execution Framework
Designed By: Digital Leadership AG

  • How will you integrate your core values into the framework for executing your Business Strategy?
  • What reallocation of resources is necessary to achieve your competitive advantage?
  • How can existing resources be utilized in innovative ways to support your business strategies?
  • Where do you anticipate encountering resistance in implementing your strategies?
  • How will you assign responsibilities to ensure alignment with your business goals?
  • What is your plan for effectively communicating goals, objectives, tasks, and feedback while upholding your core values?
  • How can you minimize disruptions while executing your strategies and maintaining your core values?
  • What is the timeline for achieving your various business goals and objectives?
  • Who is responsible for supporting your strategies and competitive advantage?

Articulating the Strategy Execution Framework, while integrating your core values, is an important piece of your overall communication strategy. There should be no secrets and no surprises here.

Step (6): Flexibility in Executing Business Strategies

To achieve your business goals and sustain a competitive advantage, flexibility in executing your business strategies is vital. Embracing the “Fail Fast” approach can prove beneficial. Once your Strategy Execution Framework is implemented, be prepared to make adjustments as required.

If certain aspects are not yielding desired results or if market conditions change, be open to pivoting your business strategies accordingly. Do not hesitate to allocate additional resources to specific goals or objectives if necessary. Always remember that adaptability and flexibility are crucial for long-term success in the dynamic business landscape.

Step (7): Measure & Improve

Take proactive steps to measure the impact of your strategy. Numerous businesses rely on AAARRR metrics, commonly known as Pirate Metrics, to assess the effectiveness of their transformation. By employing the Pirate Metrics framework, you can track the customer journey from acquisition to activation, retention, revenue generation, and referral. This evaluation simplifies the identification of areas for improvement and innovation, facilitating your progress towards success.

Pirate Metrics Funnel - AAARRR Metrics
The UNITE Pirates Metric Funnel (AAARRR)
Designed by: Digital Leadership AG – Building on the Work of Venture Capitalist Dave McClure

Review your goals at consistent intervals so you can evaluate your success, and make adjustments based upon the data you collect. Your Business Strategy is a map of the journey to success, but you need to ensure you’re reaching your destination at a steady pace. Review your plans for Strategy Execution if you don’t seem to be making progress toward your goal.

We can conclude the 7 steps in the following table:

1Identify your Business Purpose: Define a Massively Transformational Purpose that drives innovation and positively impacts customers’ lives.
2Setting up Business Goals: Establish clear and measurable business goals that align with your company’s core values and guide your overall strategy.
3Defining your Competitive Advantage: Identify and leverage your unique qualities that set your business apart from competitors to achieve a competitive edge.
4Build your Team: Assemble a team combining practical experience and innovative thinking to support the execution of your Business Strategy.
5Develop your Business Strategy Execution Framework: Create a concrete roadmap for turning your strategy into actionable steps and allocate resources effectively.
6Flexibility in Executing Business Strategies: Embrace adaptability and be open to adjustments to achieve your business goals and sustain your competitive advantage.
7Measure & Improve: Utilize metrics and analytics to measure the impact of your strategy, identify areas for improvement, and drive continuous innovation and progress.
The table shows the steps of business strategy development

Different Types of Business Strategy

When formulating your Business Strategy, it’s valuable to consider the various shapes it can take. Each strategy is viable in its own right, and the direction you choose will be influenced by your Business Purpose and Objectives, as well as the resources available to you.

Experts commonly categorize Business Strategies into four types, one of which is the Organizational Strategy.

Organizational Strategy

The Organizational Strategy revolves around shaping your business’s core structure, including its Vision, Mission, and Purpose, to influence how customers perceive your company and how your business practices impact that perception.

This strategy is generally considered a long-term approach. It emphasizes the importance of focus, as it’s impossible to cater to all customer needs. Therefore, the company must carefully select a specific segment of its business model to highlight both to customers and internally. Additionally, a key aspect is differentiation, which involves making clear distinctions between your company and competitors. Leveraging your unique business practices to exploit your competitive advantage becomes central to your marketing efforts.

Given the reliance on various offices and roles within the company, clear communication of responsibilities and accountability is crucial for the effective implementation of the Organizational Strategy.

Competitive Business Strategy

Emphasizing and capitalizing on your business’s competitive advantage becomes the core focus of a Competitive Business Strategy. This approach involves carefully assessing your business’s positioning in comparison to others within your industry.

Opting for a Competitive Business Strategy has far-reaching implications for your overall business decisions. It requires a commitment to swiftly adopting emerging technologies and consistently seeking new opportunities for your products and services. Such dedication demands substantial resources, and success hinges on wholehearted commitment.

The ultimate payoff of your Competitive Business Strategy lies in the loyalty of your customers even when faced with alternative options. In the competitive world of business, there are winners and losers. By embracing a Competitive Business Strategy, you boldly declare your determination to be a winner.

Functional Business Strategy

A Functional Business Strategy aims to optimize the effectiveness of various business units within your company. These units may include Research and Development, Accounting, Human Resources, Operations, and other distinct branches, each playing a specific role in the Value Chain.

The key objective of a Functional Business Strategy is to align all divisions towards a common goal. For instance, if the main goal for the year is to release three new products, Development would focus on selecting and designing the new products, Marketing would create compelling campaigns, and Operations would ensure efficient material and logistics management to meet the release demands.

In a Functional Business Strategy, different business functions share a set of specific priorities. This requires focus and buy-in across all divisions, but the coordinated efforts behind a Functional Business Strategy can significantly impact a company’s production capabilities.

Operating Business Strategy

The Operating Strategy is a crucial aspect of the Functional Business Strategy, emphasizing how different offices deliver on goals and priorities through the effective use of people, processes, and resources. This strategy closely examines the production and delivery of goods or services, encompassing elements such as materials, design, logistics, supply chain, delivery, and human resources.

As a part of the Functional Business Strategy, the Operating Strategy impacts a wide range of business activities. It encompasses finding efficiencies, resource management, identifying and developing new product or service opportunities, and managing inventory. Such a comprehensive approach necessitates dedication and a well-structured organizational framework that values teamwork and communication.

Within the Operating Strategy, special attention is given to how goods are produced and services are delivered. This involves considerations like training the people responsible for service delivery and ensuring a positive customer experience. The Operating Strategy works in tandem with other elements of the overall Functional Business Strategy, creating a cohesive and well-aligned approach to achieve business goals.

Final Thoughts

We strongly believe that businesses should carefully choose a strategy that aligns with their overall business model and vision. When resources are allocated effectively, any well-executed strategy holds the potential for success.

The process of determining the direction of the business is intricate and influenced by the leadership culture within the organization. For a strategy to be successful, it requires active engagement and support from leaders at all levels of the company. This empowers managers to make decisions that are in line with the chosen strategy and contribute to its realization.

Having one individual with a strong guiding voice can be beneficial. This person assumes ultimate responsibility and accountability for the strategy’s outcome, even though various leaders and managers are involved in its implementation. While this individual carries the highest risk, they also stand to gain the greatest rewards from the strategy’s success.

Frequently Asked Questions

1- What is a business strategy?

A business strategy is a comprehensive plan that outlines how an organization will achieve its long-term goals and objectives. It involves making critical decisions about the direction of the business, identifying the target market, setting specific objectives, and determining the resources and actions needed to attain success.

2- How is strategy different from tactics?

Strategy and tactics are closely related but distinct concepts in business. Strategy refers to the overall plan and approach adopted by an organization to achieve its goals. It involves making high-level decisions about the direction and positioning of the business. Tactics, on the other hand, are the specific actions and steps taken to implement the strategy and achieve short-term objectives. Tactics are more focused and operational in nature, while strategy provides broader framework for decision-making.

3- What is the difference between business strategy and corporate strategy?

Business strategy and corporate strategy are different levels of planning within an organization. Business strategy focuses on individual business units or divisions and involves decisions related to market positioning, competitive advantage, and product development. It deals with the specific actions required to achieve success in a particular market segment.

On the other hand, corporate strategy deals with decisions made at the corporate level and is concerned with the overall direction and scope of the organization as a whole. It involves decisions related to diversification, mergers and acquisitions, resource allocation among different businesses, and strategic partnerships.

4- Who is responsible for business strategy?

The responsibility for business strategy lies with the top management of an organization, including the CEO, executive team, and board of directors. They are responsible for setting the vision, mission, and long-term objectives of the company. They also play a crucial role in formulating the business strategy, making critical decisions, and allocating resources to achieve the desired outcomes.

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