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

    17 min read

    Innovation

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    Businesses begin in a lot of different ways: out of need, out of invention, out of a dream. In fact, businesses begin in such diverse in varied ways that it’s impossible to make generalizations about them. Successful businesses, on the other hand, have much more in common, and it usually includes a clear Business Strategy.

    We believe the Business Strategy is an essential component of every successful enterprise because it takes an idea and puts it in the middle of a clear vision and set of procedures that make that idea sustainable. As much as we’d like to think that our innovation and drive are all it takes to be successful in business, we also know that just isn’t true. Businesses also need practical decisions and the hard work of the people dedicated to their ongoing success. They need a Business Strategy in order to survive.

    In this article, we discuss how a Business Strategy is a fundamental element of every successful enterprise. We also define and give practical tips for writing a Business Strategy. We invite you to reach out to us with your comments and questions as you work to develop your own Business Strategy.

    More information about Business Strategies and other transformative practices can be found in our new book, “How to Create Innovation” It’s an end-to-end resource for business model development and innovation. You can register for your own free, digital copy on our website.

    What is a Business Strategy?

    Thinking simply, a Business Strategy is a document that describes processes and decisions a company takes for ongoing success and delivery of value to customers. Your Business Strategy must detail how you will continue to attract and grow a base of paying customers while generating enough income to keep the business and business owner comfortably solvent.

    It would be nice if everyone’s business survived on passion, hard work, and helpful ideas, but that’s simply not the case. The products and services that form the cornerstone of businesses must be paired with a plan to reach customers, charge a price that everyone can afford, and sustain the growth necessary to stay strong over time.

    We can’t just wish and be successful. Your Business Strategy, then, is a complex outline of how you’ll generate success. That includes having customers who want what you offer and can pay you an amount that keeps you in business – not just keep the lights on at your store, but pay above and beyond daily operational costs so you can expand, compete, and put food on your table.

    Key Elements of your Overall Business Strategy

    Your Business Strategy must align with the overall motivations of your organization.

    A comprehensive Business Strategy takes into account your vision, purpose, objectives, and available resources in a plan designed to promote the lasting effectiveness of your business.

    As such, your Business Model, Business Purpose, Value Proposition, and Business Goals are all activated by your Business Strategy.

    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

    Think in terms of planning a vacation. You may have the goal of taking the family on an enjoyable trip through Germany, learning its history and visiting as many castles as possible. Your “Vacation Strategy,” then, would focus on maximizing the time you can spend as a family enjoying those activities with the resources you have available. While you might not be able to visit all the castles given your time and funds, you can still meet the goal by finding affordable lodging, securing efficient transportation, pre-purchasing tickets where available, and ensuring that the entire family is committed to your trip.

    A Business Strategy isn’t very different.

    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 will take you through the steps involved in developing a Business Strategy. You should also be working with a Business Model Canvas to best visualize all the moving parts of your operations.

    We think now is a good time to reflect upon your Strategic Goals, and how those connect to the value you’re bringing to customers.

    Step (1): Identify your Business Purpose

    We believe that the key to an exciting, successful business is to identify a Massively Transformational Purpose that you can build your enterprise around. This way, you’re building success through revolutionary ideas and development that serves to make life easier for your customers.

    Your Purpose is the why behind your business’s existence. More than just a Mission Statement, the Massively Transformational Purpose becomes the focus of innovation and transformation.

    To identify your Business Purpose, start with a few simple elements: Who you will serve, and What value you will deliver.  You can use this template to get you started:

    Our business will deliver [this product or service] to [your primary customers].

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

    Step (2): Setting up your Objectives

    Your Business Objectives are the measurable results you’re looking to obtain. The more specific you can be, the better the objectives can guide your Business Strategy.

    General Business Objectives, like “Use profits to grow business,” can be too general to be useful. Define how much of your profit you’ll use and what measure of growth is your target. “Use 25% of profits to invest in infrastructure projects as suggested by team leaders” is a more productive and useful Objective.

    We suggest your business should always be working on five Objectives. That way you are focused but not stagnant.

    Step (3): Defining your Competitive Advantage

    What makes your business different or better than your competition? What do you know that they don’t? What can you do that they can’t?

    This is how you’ll find your Competitive Advantage.

    Recognizing and developing your company’s unfair advantage is a cornerstone of innovation. But recognizing your real unfair advantage involves work. Finding it and leveraging it is as sure a way of finding success that businesses are likely to have.

    Step (4): Build your Team

    As you articulate your Business Strategy, you’ll need to assemble a team that combines practical experience and skills with innovative thinking.

    We’ve written about building Innovation teams before, but it’s worth repeating some of the elements of successful teams. You should always strive to promote the following:

    • Encourage collaboration: have you built a space where people from different teams have an opportunity to meet?
    • Find new ways to reward thinking, not people: creative thinking isn’t always profitable, but rather, the first steps of a journey toward new ideas.
    • Reward attempts: similarly, a creative mindset won’t blossom in an environment fixated on outmoded nations of success.

    Ideally, you’ve already had some success, and developing your Business Strategy is meant to shore up or build upon what you’ve already done. If you’re starting fresh, from the ground up, build your team from experts you respect and who share the overall vision of your Business Purpose and Business Objectives.

    Step (5): Develop your Strategy Execution Framework

    At this step, you move from idea to practical planning. How will you actually execute your Business Strategy? What will the daily work of the entire team look like?

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

    As you transition from articulating business goals and objectives to actually putting together a plan of practice, consider the following elements of your business:

    • Which resources need to be allocated differently?
    • Which resources can be used in new ways?
    • Where are you likely to find reluctance?
    • How will you assign responsibilities?
    • What is your plan for communicating goals, objectives, tasks, and feedback?
    • How can you minimize disruption?
    • What is your time table for your various objectives?
    • Who is doing what?

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

    Step (6): Be Flexible with Strategy Execution

    But once your Strategy Execution Framework is put into practice, be prepared to change as necessary. We’re big fans of the business motto to “Fail Fast.”

    If something isn’t working, change it. If you need more resources to reach one of your goals, allocate them.

    Step (7): Measure & Improve

    Make active progress in measuring the impact of your strategy. Many businesses lean on AAARRR metrics, also called Pirate Metrics, to understand and track their transformation’s effectiveness. Using the Pirate Metrics framework, you can follow how a prospective customer becomes a repeating customer through the funnel of Acquisition, Activation, Retention, Revenue, and Referral. Pirate Metrics makes evaluation easier so opportunities for improvement and innovation can be developed.

    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.

    Different Types of Business Strategy

    In figuring out your Business Strategy, it’s helpful to understand the shapes they might take. Each strategy is viable in its own right, and the direction you take will depend on your Business Purpose and Objectives. You’ll also be highly dependent on where you’re starting from, as well as the resources you have available.

    Experts typically agree that there are four different types of Business Strategy.

    Organizational Strategy

    You focus on your business’s core structure: Vision, Mission, and Purpose. You work to shape how your customers view your company and how your business practices influence that view.

    Most experts agree that an Organizational Strategy is long-term. One of the most important elements of this approach is focus: because you can’t be all things to all people, the company must select a segment of their business model to highlight, to their customers and in their internal efforts. Another key point is the differentiation between you company and your competitors. The differences in how you do business should be clear, exploit your competitive advantage, and become the centerpiece of your marketing efforts.

    Because an Organizational Strategy is so dependent on your company’s various offices and roles, articulating responsibilities and accountability in your internal communications is important.

    Competitive Strategy

    You focus on developing and leveraging your business’s competitive advantage. You spend a lot of time thinking about how your business is positioned in comparison to others in your segment.

    Taking on a Competitive Strategy impacts the rest of your business decisions, too. Consider that when you concentrate on your stance versus competitors, you’re agreeing to quickly adopt emerging technologies and continuously seek new opportunities for your services and products. That requires the dedication of a lot of resources; you won’t be successful unless you fully commit.

    The payoff for your Competitive Strategy comes when your customers remain loyal to you in the face of alternatives. A cold truth about business is that there are winners and losers. When you choose to take a Competitive Strategy, you’re boldly announcing that you intend to be a winner.

    Functional Strategy

    Look to maximize the effectiveness of their different business units. That includes offices like Research and Development, Accounting, Human Resources, Operations, and other distinct branches of a business and their role in the Value Chain.

    A Functional Strategy pushes all of your company’s divisions to work toward the same goal. For example, if you’re main goal for the year is to release three new products, Development would be selecting and designing the new products, Marketing would be creating compelling campaigns for the new products, and Operations would be maximizing the ability to meet the release’s demands for materials and logistics.

    In a Functional Strategy, business functions share in a select number of priorities. It requires focus and buy-in across your divisions, but the extra efforts behind a Functional Strategy can have a remarkable impact on what a company is able to produce.

    Operating Strategy

    Emphasizes how those different offices deliver on goals and priorities through the company’s people, processes, and resources. Many experts group Operating Strategy as a sub-division of Functional Strategy.

    Your Operating Strategy takes a close look at production and delivery of goods, and you can use a similar focus if your product is in fact a service (how do you train the people delivering the service, what’s the experience of a customer receiving the service, for example). Because you’re prioritizing so many elements of your business—materials, design, logistics, supply chain, delivery, human resources—enacting an Operating Strategy necessarily impacts a wide range of your business activities. Because of this broad impact, Operating Strategies are often discussed within the framework of a Functional Strategy. It’s important to note, too, how an Operating Strategy incorporates so many elements of the previously discussed approaches. Operations includes finding efficiencies, properly managing resources, identifying and developing new product or service opportunities, and managing inventory. It’s an incredibly wide net to cast and requires dedication and an organizing structure that values teamwork and communication.

    Why is Strategy Important in Business?

    Business strategy is important because it helps us understand our organization’s strengths and weaknesses, shoring up where we are deficient, and finding advantages in the areas where we are strongest.

    Articulating a clear Business Strategy enables an organization to mobilize their resources in a way that best helps it meet its goals. Without a strategy, resources sit and stagnate. A Business Strategy is what puts them into motion.

    Mature companies have a clear Business Strategy. They are an indication that leadership is taking the future of the company seriously. Business Strategies show outside observers like investors and customers what a company considers important. Additionally, a Business Strategy motivates the company throughout its organization, helping workers at every level understand their role in the company’s overall vision.

    Final Thoughts

    We believe that businesses should choose a strategy that best suits their overall business model and vision. We also believe that any strategy, properly enacted, can be successful if the proper resources are dedicated to the effort.

    Who should decide which direction the business should go? That’s a complicated question, and it depends on the overall leadership culture of the individual business. Clearly, the strategies involve leadership throughout the structure of the organization, so managers at every level need to be empowered to make decisions appropriate for the strategy. But it’s also true that every business benefits from the guiding hand of one person whose voice is heard more loudly than others.

    That’s the person who should take the ultimate responsibility, and who incurs the greatest risk with the highest possible reward.

    Frequently Asked Questions

    What is in a Business Strategy?

    A Business Strategy includes a plan for using a business’s resources to meet its goals. It should be written in line with the business’s overall purpose and vision. Your Business Strategy is a reflection of the organization’s overall culture and intentions for the value it wishes to bring to customers.

    Business Strategies are specific action plans based on a company’s guiding principles. They are a roadmap for putting bigger goals into motion.

    What is an Example of a Business Strategy?

    There are many ways to think of a goal for a Business Strategy. Here are some examples:

    • Increasing profitability by asking departments to identify cost savings
    • Growing the customer base through outreach to non-profits with aligning values
    • Becoming a cost-leader by increasing overall sales to lower per-unit supply charges

    The Business Strategy is a document that outline how the organization will reach these goals. A key element of all Business Strategies is the specificity with which the actions of the company are described. While statements like Mission and Vision often use broad language to reflect the aspirations of a company and its workers, a Business Strategy describes the day-to-day efforts and priorities of everyone in the company.

    What are the 4 different types of business-level strategies?

    Experts agree the four types of Business Strategies are Organizational Strategy, Competitive Strategy, Functional Strategy, and Operating Strategy.

    Who is Responsible for Business Strategy?

    The entire organization is responsible for enacting the Business Strategy. Managers should communicate the overall intent of the Business Strategy clearly so all levels of operations are aligned with the Business Goals.

    We believe that mid-level managers and the people who work for them should be empowered to act in the best interest of the Business Strategy. That requires articulation of the strategy in ways that are meaningful throughout the organization, giving everyone clear expectations of what their daily work must look like and how it fits into the overall agenda set for the company.


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