When we first started strategic planning work over 20 years ago, a client and good friend said that succeeding in strategy management is hard work. It takes time, resources, and distracts from the urgency of running the day-to-day business. Today we would totally disagree. After working with over 200 clients on a wide range of strategy management projects, we have confirmed that there are a multitude of benefits to having and working a strategy in organizations. Those CEOs and owners that recognized the value of having a strategy and made the commitment of time and resources to manage its execution consistently improved their performance.
Here are five reasons why strategy plays such an important part of any company’s success.
1. Planning – Creating and tracking progress against an annual operating plan is an essential management tool for any company. What is often missing is the relationship these plans have to the future. Too often annual operating plans are created from the rear view mirror. What happened last year and where should we go in the coming year? These are all good intentions. However, without a clear picture of what you want the future to look like, it will always be more reactive than proactive. A well-articulated 3 to 5 year long term view of the company should serve to inform the annual operating plan. The annual plan then becomes the stepping stone toward the achievement of the longer term goals.
2. Strengths and Weaknesses – At first glance this seems too obvious and you are saying to yourself, “Of course we know what our strengths and weaknesses are!” We cannot disagree. No one knows your business better than you. On the other hand, are you leveraging strengths (competitive advantages) and do you have plans to close capability gaps in your organization (weaknesses)? Strategy creates a higher level of awareness and provides greater focus on activities that will make the organization more successful.
3. Skills & Knowledge – If you know where you want to take your business over the long term, you will have a much better idea of the kinds of capabilities you will need to achieve your goals. Strategy defines and drives decisions in organizational design. Therefore by proactively pursuing new skills and knowledge, you prepare the organization for the intended future state and your odds of success increase.
4. Resource allocation – One thing is clear about any company, large and small—resources are finite. We wish they were infinite, but that will never be the case. Strategy is about making choices. What products, services and markets will be a part of the future and what we should not do? These types of decisions are critical to ensuring that limited resources are being deployed to the most promising opportunities that will provide the greatest return.
5. Environmental Scan – Too many CEOs don’t take the time to truly know the external environment that can have a positive or negative impact on performance. This is not to say that leaders are not in tune with their customers, or not aware of their competition. The question is, how thorough an analysis are they doing? Jack Welch had it right when he asked his division leaders to dig deep to understand how things might change before they really happened. Being aware and prepared for potential shifts in your market or industry provides the opportunity to take action before it happens.
There is a huge opportunity for CEOs/Owners to excel in performance with a well-crafted strategy. Bottom line, execution without strategy is aimless. Let us know what you think of these five reasons strategy is important and share with us some of your own experiences. We would love to hear from you.
Posted in Newsletter, Strategy Development, Strategy Execution, Strategy Management.
FAQs
Strategic management is crucial for organizations as it provides direction, helps adapt to changes, optimizes resource allocation, improves performance, and ensures long-term sustainability.
What are the 5 strategic strategies? ›
Summary : There are only five business strategies: cost, quality, distribution, technology, and intellectual property (IP). All business strategies break down into these five, or some combination of them. As a general principle, focusing your organization on one is the easiest to execute.
Why are the 5 P's of strategy important? ›
Mintzberg's 5 P's offer a powerful framework for analyzing and developing strategy. By considering each aspect - plan, ploy, pattern, position, and perspective - you can craft a more comprehensive, effective approach.
What are the 5 concepts of strategic management? ›
Strategic management involves setting objectives, analyzing the competitive environment, analyzing the internal organization, evaluating strategies, and ensuring that management rolls out the strategies across the organization.
What are the 5 main strategic processes in management? ›
Upper management must first plan strategically, then put that strategy into action. When everyone in the company understands the strategy, the strategic management process works best. The five stages of the process are goal-setting, analysis, strategy formation, strategy implementation and strategy monitoring.
What are the 5 elements of a good strategy? ›
These five elements of strategy include Arenas, Differentiators, Vehicles, Staging, and Economic Logic. This model was developed by strategy researchers Donald Hambrick and James Fredrickson.
What are the 5 C's of strategy? ›
As a good guideline for marketing strategies, this mnemonic consists of five terms, and it typically includes: company, customers, competitors, collaborators and climate.
What are the five key points of strategic management? ›
5 steps of the strategic management process
- Define the direction. Identifying the direction and specific goals is the initial stage of the strategic management process. ...
- Analyze the current situation. The second step is analysis and research. ...
- Outline the strategy and plan of action. ...
- Execute the plan. ...
- Evaluate the plan.
The Mintzerg 5 P's of strategy is five alternative definitions of, or methods of formulating, strategy. In 1987, Mintzberg published his first article on the 5 P's of Strategy. Each of the five P's represents a distinct approach to strategy. This includes Plan, Ploy, Pattern, Position and Perspective.
What is the need and importance of strategies? ›
Firstly, strategy offers direction and control. This means that there are clear goals to strive towards, and the rewards and risks for achieving such goals are understood. The alternative to implementing a clear strategy is an unfocused business where employees are uncertain of their goals and motivations.
People, Process, Platform, Partnership, and Problem Solving: The 5P Approach to Strengthening Knowledge Management Capacity and Culture.
What are the 5 importance of strategic management? ›
Strategic Management in an organisation guarantees that objectives are set, essential issues are laid out, time and assets are rotated, working is united, the inside condition is set towards accomplishing the targets, outcomes and results are agreed upon, and the organisation stays adaptable towards any outside changes ...
What are the 5 key benefits of business strategy? ›
5 key benefits of business strategy
- 1 – Establishing direction. A business strategy will first and foremost set the direction for your company. ...
- 2 – Making wise decisions. ...
- 3 – Avoid competitive convergence. ...
- 4 – Measure success. ...
- 5 – Increase satisfaction.
There are five essential tasks of strategic management. They include developing a strategic vision and mission, setting objectives, crafting tactics to achieve those objectives, implementing and executing the tactics, and evaluating and measuring performance.
What are the 5 dimensions of strategic management? ›
A strategy consists of an integrated set of choices. These choices relate to five elements managers must consider when making decisions: (1) arenas, (2) differentiators, (3) vehicles, (4) staging and pacing, and (5) economic logic.
What are the five points of importance of management? ›
The five points of importance of management are achieving organization goals, achieving individual goals, creating a dynamic environment, developing society, and improving efficiency. Management refers to the process of performing tasks efficiently and effectively while achieving personal and organizational goals.
