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

Welcome to our comprehensive guide on Business Strategy, where we explore the critical steps that businesses must take to achieve their business goals in today’s competitive business world.

Whether you’re a start-up or an established company, having a well-defined business strategy is essential for long-term success. This guide will delve into topics such as identifying your competitive advantage, setting clear business goals, and developing effective strategies that will help you achieve them.

As you navigate the critical steps to achieving your business goals, our partners at Digital Leadership AG can provide valuable support and guidance. Their expertise in innovation and digital transformation has helped numerous businesses execute successful strategies and stay ahead of the competition.

What is a Business Strategy?

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 a Successful Business Strategy

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

An effective 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.

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?

The Strategic Planning Process will take you through the steps involved in developing an effective 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].

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?

A Business Goal is a target an organization wants to hit either in the short term or in the long term. You can think of a Business Goal as an endpoint or accomplishment the organization sets for itself in a given timeframe.

General goals, such as “increase revenue,” may not provide enough direction for your team to make progress. Instead, consider setting goals that include key performance indicators and align with your company’s core values.

For example, a more effective goal might be to “increase revenue by 15% in the next quarter while maintaining our commitment to sustainability.” It’s also important to establish a set of five goals to keep your business focused and moving forward without becoming stagnant.

Step (3): Defining your Competitive Advantage

One of the key steps in developing a successful business strategy is identifying your competitive advantage. This involves pinpointing what sets your business apart from the competition, including your unique knowledge and capabilities.

By understanding what you can offer that others can’t, you can create a competitive edge and achieve your business goals. Developing and leveraging your competitive advantage is essential for innovation and success, but it requires effort and careful consideration.

By recognizing and capitalizing on your company’s unfair advantage, you can improve your chances of achieving your business goals and outperforming the competition.

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 Business Strategy Execution Framework

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

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

• How will you integrate your core values into your Business Strategy Execution Framework?
• Which resources need to be allocated differently to achieve your competitive advantage?
• Which resources can be used in new ways to support your business strategies?
• Where are you likely to find reluctance to implement your strategies?
• How will you assign responsibilities to ensure alignment with your business goals?
• What is your plan for communicating goals, objectives, tasks, and feedback while also upholding your core values?
• How can you minimize disruption while executing your strategies and maintaining your core values?
• What is your time table for achieving your various business goals and objectives?
• Who is doing what to support 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

In order to achieve your business goals and maintain a competitive advantage, it is crucial to be flexible in executing your business strategies. This is where the “Fail Fast” motto comes in handy. Once your Strategy Execution Framework is put into practice, be prepared to change it as necessary.

If something isn’t working or if market conditions shift, it is important to pivot your business strategies accordingly. Don’t be afraid to allocate more resources towards a particular goal or objective if needed. Remember, being flexible and adaptable is key to long-term success in the business world.

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.

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 Strategies.

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 Business 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 Business 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 Business 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 Business Strategy, you’re boldly announcing that you intend to be a winner.

Functional Business 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 Business 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 Business 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 Business Strategy can have a remarkable impact on what a company is able to produce.

Operating Business Strategy

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

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 its 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 Business Strategy, Competitive Business Strategy, Functional Business Strategy, and Operating Business 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.