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  • Organizational Strategy: Definition, Types & Importance

    12 min read

    Innovation

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    There are many ways you can encourage innovation in your business, though one of the most profound initiatives you can undertake will be the development of an Organizational Strategy.

    Organizational Strategy gets to the heart of your business: what it does, what it wants to do, and how it does the things it does. Organizational Strategy determines the literal and metaphorical shape of your business. Your corporate culture determines and is determined by how you build your organization and place the people and responsibilities that encompass your business activities. Organizational Culture—your business’s values, priorities, practices, and expectations—will be reflected in your Organizational Strategy.

    In our experience, proper Strategic Planning makes the difference in a company’s long-term success. While many companies can be successful in the short-term by luck or mere willpower, sustained growth is only possible with reasoned and insightful Strategic Planning.

    In this article, we explore how you can develop your Organizational Strategy to best reach your business goals and incite positive change within your organization.

    What is Organizational Strategy?

    Organizational Strategy lies at the intersection of a business’s goals and its structure. The organizational structure of every business dictates the relationships between the various resources the business has at its disposal. Therefore, Organizational Strategy is the explicit arrangement of a business’s resources in relation to the organization’s long-term goals.

    The Organizational Design will place people physically in your facilities. Consider: where people sit—literally, just sit—has a direct impact on how they do their work. How they collaborate. Where their ideas originate and get vetted. Organizational Design, too, will place people and their work within and organizational framework of your business hierarchy. Your business goals help determine which offices or business units gain precedence over the others. Investment—in terms of time, money, and effort—says a lot about what you think is important.

    In other words, your Organizational Strategy is the framing of your overall business model execution through the interactions of your organization’s components. It becomes an element of your overall strategy for business growth. Because it plays such an outsized role in the fabric of your organization, Organizational Strategy therefor influences nearly all of your business activities.

    Organization Change Management

    Another key misunderstanding is to want to bring everyone in the company on board with a transformation before Change Management happens. That is simply not required. Many people will not be willing, and that is perfectly ok. Those that are willing will typically be more than enough. You do not need to change everybody’s job description and position to achieve a transformation. In our experience, transforming 10% to 20% of the organizational unit concerned is sufficient (regardless of the size of the organization). So, focus on creating more momentum rather than more agreement. Sufficient momentum will help resolve any such issues over time.

    8 Step Management Change Process
    The UNITE 8 Step Change Process
    Designed by: Digital Leadership AG – Based on the work of Dr. John P.Kotter

    We recommend developing and implementing a Change Management Plan. That helps ensure smooth implementation of any changes your organization initiates. We have many experts on staff ready to help you create a Change Management Plan that works for your business, and we invite you to reach out through our Contact Us page.

    Why is Organizational Strategy Important for your Business?

    Your Organizational Strategy is one of your company’s guiding documents, and its development should reflect its importance to the overall health of your organization.  An Organizational Strategy is important because it helps businesses arrange their resources most effectively in relation to their goals.

    The truth is, change is going to happen whether we want it to or not. A planned change helps leverage new developments without being caught flat-footed. When your organization has a culture that expects and anticipates change, planned change becomes a part of your overall strategic planning. Your business goals are then shaped around the adjustments you make to your business activities.

    We can consider more specifically how an Organizational Strategy is put into action for businesses:

    (1) Provide Framework for Better Decision-Making Process

    Because an Organizational Strategy describes the flow of responsibility and information, it makes the decision-making process clearer and establishes the final arbiter of all controversies.

    Implementing an Organizational Strategy won’t make decision-making easy, necessarily. The challenges won’t disappear because you sketch-out your company’s hierarchy. But you will have in place a mechanism that facilitates clear authority that ultimately saves time and removes doubt over who gets a final say.

    (2) Aligning Departments & Teams Towards Business Goals

    The process of creating an Organizational Strategy reinforces the business’s goals into the context of teams and departments.

    More importantly, Organizational Strategy ensures that resources are being used efficiently. It helps recognize redundancies and opportunities for collaboration, as well as identifying areas of deficiency within the business’s current structure and staffing.

    (3) Clarifies Direction & Priorities

    By clarifying the hierarchies of responsibility, the organization endorses a direction and power structure that dictates the paths it will take going forward.

    A lot can be surmised from the stacking of different departments and interests within a company’s hierarchy. Priorities are clearly staked-out when given primary places of honor within an organization’s structure.

    The 3 Levels of Organizational Strategy

    Organizational Strategy

    Part of Organizational Strategy includes understanding that there are multiple levels to a company’s hierarchy. Each level has its own priorities and labor, but each level must still be working with the others toward achieving the overall goal.

    Understanding these levels makes Organizational Development much easier, because planned change can be targeted. You can also make Organizational Development an assumed aspect of ongoing structural change. Make clear that you have an expectation that the organization will often be in the process of implementing or evaluating change, not just for change’s sake, but because your Organizational Strategy requires consistent reflection and the identification of innovation opportunities.

    Indeed, simply the establishment of an organization’s goals is an excellent example of work that’s done at one level, but not so much at another. The president of an organization is less concerned about the brand of pens a business unit uses and more concerned about how what is written impacts shareholders, for example.

    Let’s consider each of the strategy levels separately to better understand how these levels work together to help a business reach its goals.

    (1) Corporate Level Strategy

    The Corporate Level is the highest level in any organization, so choices here will impact the main business goal and the smaller initiatives further down the company that make reaching that goal possible.

    Business leaders here identify the actions to take that will best position the organization to meet the marketplace’s needs and leverage competitive advantages.

    At this level, decision-makers will be ensuring that each department or team is working to properly assist in reaching the overall business goal.

    (2) Business Level Strategy

    At the Business Level, managers identify how a company is going to react to a market and bring value to its customers.

    Because this level is closer to the people and products associated with your business, Business Level Strategy includes management of specific resources to face competition and customer expectations.

    Business Level Strategy typically involves many teams, each with their own priorities and goals that tangibly feed into the overall concerns of the company.

    (3) Functional Strategy

    Functional Level Strategy is concerned with the daily operations and ensuring they are aligned with the organization’s higher-level goals.

    Leaders at the Functional Level are often tasked with putting larger goals into motion—this is where the work happens, things are made, and people connect. Functional Level Strategy determines how this comes to pass.

    Understanding the concept of these three levels of Organizational Strategy will help guide you through Organizational Change. The task of adjusting your strategy may seem overwhelming at first, but it’s made far more manageable by dividing it into smaller concerns that target specific elements of your business.

    Key Elements of an Organizational Strategy

    Specific

    It’s not enough to declare that you want your business to “be better.” Consider that: better in what way? Sales? Service? Public perception? Cost savings?

    Make goals that target particular elements of your overall business or business units. The more directly your goals are connected to the people who will bring them into the world, the better your strategy is going to work.

    Measurable

    How will you know you’ve reached your goal? You won’t, unless you establish observable metrics through which you can judge your progress.

    In addition to targeting specific elements of your business, phrase the goals in a way that allows for data collection and analysis. Don’t necessarily limit yourself to quantitative data. With the right approach, you can collect qualitative data to measure progress that’s less likely to appear on spreadsheets.

    Realistic

    We would encourage you to reach for the stars when you set your goals, but making goals realistic and attainable is better for business.

    Realistic goals are more likely to be reached, of course, so a chain of smaller goals that build upon each other is more effective than one big, bombastic goal.

    Limited

    Finally, you should identify an endpoint to your strategy. When are your efforts done?

    Having a moment to reflect upon and celebrate completion is an important aspect of the Organizational Change process. It’s also important to the people who are undertaking these efforts.

    Build-in opportunities to pause, take a breath, and re-center your efforts. Strategic initiatives are not endless. Have a moment of “done” before you start wondering “what’s next?”

    Types of Organizational Strategy

    Product/Innovation Outcome

    Who worries about this the most? Innovation officers.

    When targeting product and innovation outcomes, organize your company in a way that contributes to creative thinking and new perspectives.

    That approach would include breaking down silos through building teams from across the organization. One of the hallmarks of aiming for product and innovation outcomes is a reliance on fast failures: looking for new things to try and going through iterations quickly when it becomes obvious that something isn’t working.

    Revenue/Sales Outcome

    Who worries about this the most? Business leaders.

    When we worry most about revenue and sales outcomes, we are focusing on the bottom line. Critics may argue that such an approach stifles creativity and only produces temporary advantages, but real gains can be had when the focus provides for a deep dive into how your business is reaching potential customers and why some outreach works while some other strategies do not.

    To organize around sales and revenue, be sure every team has someone devoted to either reading sales figures or understanding how their department is contributing to sales and revenue. Then assign specific job outcomes in a way that supports reaching customers.

    Service Outcome

    Who worries about this the most? Service leaders.

    Service outcomes revolve around the customer experience. Service leaders focus on the connection built between the company and its customers. Additionally, service outcomes include the experience of the company’s employees.

    When your business decides to focus on service outcomes, you organize around job positions that provide direct contact to either customers or employees. You establish the internal logistics necessary to properly and efficiently deliver a positive experience.

    Process Outcome

    Who worries about the most? Compliance officers.

    Turning to process outcomes requires introspection of the way your business is doing its work, with an eye particularly to compliance, safety, environmental impact, and social responsibility.

    Organizing around process outcomes requires the company empower people like inspectors and ethics managers so it can prioritize “doing the right things.” In a hierarchical structure, those employees have the ability to declare go/no-go when the process breaks down.

    Frequently Asked Questions

    What are the 4 Organizational Strategies?

    The four Organizational Strategies are Product/Innovation, Revenue/Sales, Service, and Process.

    What is an Example of an Organizational Strategy?

    Organizational Strategy can take many shapes, but here are some examples of Organizational Strategy goals:

    • Become a cost leader in your segment
    • Create differentiation between you and competitors through product innovation
    • Generate goodwill and stronger sales through ethical practices
    • Position your company as a desirable luxury brand

    Why is Organizational Strategy Important?

    An Organizational Strategy is important because it helps businesses arrange their resources most effectively in relation to their goals.


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