Organizational Strategy: Definition, Types & Importance
Published: 07 December, 2022
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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.
We firmly believe that effective Strategic Planning is the linchpin of long-term corporate success. While some organizations may achieve short-term success through luck or sheer determination, sustainable growth hinges on well-considered and perceptive Strategic Planning. Our team of Agile Consultants is dedicated to cultivating a corporate culture characterized by swift adaptability, seamless cross-functional collaboration, and an unwavering commitment to continuous enhancement. These are fundamental pillars for attaining enduring prosperity in the ever-evolving contemporary business terrain.
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 therefore 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.
We recommend developing and implementing a Change Management Plan. That helps ensure the 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, that 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 a 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 in 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 identify 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
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, the business-level strategy includes the management of specific resources to face competition and customer expectations.
Business Level Strategy typically involves many teams, each with its 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.
For a deeper exploration of the three levels of Organizational Strategy and how they synergize to drive innovation and success, we invite you to explore our book, “How to Create Innovation.”
Key Elements of an Organizational Strategy
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.
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.
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.
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
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 by 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.
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.
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.
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 to 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.
Organizational Strategy Connecting The Dots With Business Model Canvas
Organizational Strategy and the Business Model Canvas are two complementary frameworks that, when interconnected, provide a comprehensive approach to strategic planning and execution.
businesses often use these frameworks in conjunction. They start with Organizational Strategy to set the strategic direction and overarching goals. Then, they use the Business Model Canvas to translate those high-level goals into actionable components of the business model. You can download it now.
This integration ensures that the entire organization understands how their day-to-day activities contribute to the broader strategic objectives, fostering alignment and a shared sense of purpose. It also allows for more agile decision-making as market conditions evolve, ensuring that the business remains resilient and competitive.
- Strategic Alignment: Organizational Strategy establishes the overarching goals and objectives of a business. These strategic objectives should closely align with the various components of the Business Model Canvas, such as customer segments, value propositions, distribution channels, and revenue streams. When these elements are in sync, the entire organization collaborates effectively to achieve the business model’s objectives.
- Customer-Centric Approach: Both frameworks share a common emphasis on comprehending customer needs and preferences. Organizational Strategy places customer-centricity at the core of its strategic approach. Meanwhile, the Business Model Canvas enables businesses to articulate precisely how they deliver value to specific customer segments and outline their strategies for capturing that value.
- Resource Allocation: Organizational Strategy provides guidance for allocating resources based on strategic priorities. Simultaneously, the Business Model Canvas offers insights into where resources are most needed within the business model. It aids in the identification of critical activities, necessary resources, and potential partnerships required to deliver value to customers.
- Innovation and Adaptation: Organizational Strategy promotes a culture of innovation and adaptability to respond to evolving market conditions. The Business Model Canvas serves as a practical tool for experimenting and iterating on various aspects of the business model, ensuring that it remains competitive and relevant.
- Risk Management: Both frameworks address the critical aspect of risk management. Organizational Strategy involves identifying strategic risks and devising mitigation strategies. The Business Model Canvas, on the other hand, empowers businesses to explore alternative revenue streams and customer segments, reducing the risks associated with relying solely on a rigid business model.
- Measuring Progress: Organizational Strategy establishes key performance indicators (KPIs) and metrics for tracking progress toward strategic objectives. In tandem, the Business Model Canvas assists in pinpointing specific metrics related to customer acquisition, revenue generation, and cost management, enabling businesses to gauge the success of their business model.
- Long-Term Sustainability: Organizational Strategy is primarily concerned with ensuring the long-term sustainability and competitive advantage of the business. The Business Model Canvas encourages a continuous evaluation of the business model, fostering adaptability and agility to secure long-term viability.
Frequently Asked Questions
1- What are the 4 Organizational Strategies?
The four Organizational Strategies are Product/Innovation, Revenue/Sales, Service, and Process.
2- 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
3- Why is Organizational Strategy Important?
An Organizational Strategy is important because it helps businesses arrange their resources most effectively in relation to their goals. Here’s why it’s critically important:
- Alignment of Efforts: An effective Organizational Strategy aligns the efforts of every individual, team, and department within a company toward common objectives. It ensures that everyone is pulling in the same direction, maximizing efficiency and productivity.
- Goal Clarity: It provides clarity on the company’s long-term goals and short-term objectives. This clarity enables employees to understand their roles in achieving these goals, fostering a sense of purpose and motivation.
- Resource Optimization: Organizational Strategy helps in allocating resources, including financial, human, and technological, in the most efficient and cost-effective manner. This optimization prevents wastage and enhances competitiveness.
- Risk Mitigation: By assessing potential risks and challenges, Organizational Strategy allows a business to develop contingency plans and risk mitigation strategies. It prepares the company to navigate uncertainties and adverse market conditions.
- Competitive Advantage: A well-crafted strategy identifies a company’s unique strengths and opportunities, allowing it to differentiate itself in the market. This differentiation can lead to a sustainable competitive advantage.
- Innovation Promotion: Organizational Strategy can foster a culture of innovation by encouraging the exploration of new ideas and approaches. It provides a framework for experimentation and adaptation in response to changing market dynamics.
- Adaptability: In today’s rapidly evolving business landscape, adaptability is crucial. Organizational Strategy equips companies with the ability to adjust and pivot in response to market shifts, technological advancements, and customer preferences.
- Measurable Progress: It establishes key performance indicators (KPIs) and metrics to measure progress towards goals. This data-driven approach allows for ongoing assessment and refinement of strategies based on real-time feedback.
- Resource Allocation: Effective strategy prioritizes where resources should be allocated, whether it’s investing in research and development, expanding into new markets, or enhancing customer service. This ensures that resources are directed to initiatives that align with the company’s overarching goals.
- Long-Term Sustainability: Organizational Strategy is vital for long-term sustainability. It enables businesses to think beyond short-term gains and focus on building a resilient and enduring presence in the market.