To create a robust business strategy, businesses must follow a strategy development process that starts with a agreed upon understanding of its current situation and existing strategic barriers to growth. The next steps include defining what the future vision of the organization is and then going into the details of planning how to get to that state. In order to understand your strategic challenges, you must begin with a complete, end-to-end understanding of your situation. Business strategy is about value innovation, strategy is about competitive selection, and strategy is about business mobility.
Strategy development has evolved through 5 key stages since the early 1900s. Business strategy development started with a focus on financial planning in the 1950s, moving to sustainable business planning in the 1960s, to strategic planning in the 1970s and ultimately to a focus on strategic management in the present day. Shifts in strategic mindset represent a changing landscape, new business leaders, and emergence of disruptive technologies and changes. Much of corporate strategy is also hinged on ideas in the 1970s, where the core theme was around thinking strategically to out maneuver competition and the business frameworks of alternative strategies, portfolio analysis, and the BCG Growth Share Matrix were developed. In the current day, the strategic development theme is on integrating strategic planning and implementation with a stress on the key concepts of core competencies, strategy planning and execution, and balance scorecard analysis.
Today, there are two primary schools of thought around strategy management. Mintzberg opts for an organization, bottom-ups strategy to drive business strategy development that adheres to organizational configuration. Mintzberg also advocates a transformation of business practices, where management recognizes the need and has the ability to manage top-down business operational operational transformation. In organizational configuration, the organization takes on behaviors based on adoption to contexts.
In the strategy development process, it is noteworthy to point out that your company should conduct rigorous market analysis. There are also several market place evaluation characteristics, including market sizing, pricing changes, product development, market place characteristics, market force structure, and current trends. Understanding what is a market analysis involves both supply analysis and demand analysis, which includes segmentation and segment analysis, understanding consumer buying behavior, and historical analysis. Proper market analysis involves creating the market and the study depth, understanding the core industry issues, and planning for the future. It is important to understand what makes a market unique, such as a high degree of regulation, high industry fragmentation, and importance of R&D. There are a number of market environment evaluation traits, including ones that are socio-demographic, economic, political, technological, and current trends.
A critical tool used in strategic planning is scenario planning. Oftentimes, the scenario planning process is performed in a workshop environment, where decision makers, executives, subject matter experts, and third party consultants, are gathered in a 2-3 day off-site location to decide on various future state scenarios. Scenario planning is also called scenario thinking and scenario analysis. It is used to help businesses plan for and make flexible future estate business plans. An important task in the scenario planning framework is choosing the primary axes of uncertainty after building a 2-axis scenario map.
The way business leaders evaluate and analyze strategy within that of contemporary businesses has been built upon a platform of militant strategists since 400BC when Sun Tzu wrote the Art of War. Sun Tzu preached to know and attack the enemys strategy. In Sun Tzus Art of War, he wrote about several fundamental factors in military strategy and each of these factors relates to a popular concept of business strategy. Sun Tzus thoughts about the factor of terrain, in todays business landscape, translates to markets, industry structures, value propositions, and Porters Five Forces. Sun Tzu spoke about indirect strategies when Sun Tzu proclaimed winning without fighting is the highest of skill on the warfield.
Joseph Bower emphasizes the strategic planning and budgeting processes are in the focus of strategy development. Resource allocation based strategy planning and budgeting is a bottoms up driven way to locating and selection of core business opportunities. Organizational context is made up of governance and the organizational structure, definition of performance metrics and rewards, and managements beliefs and strategic frames. Bower defines strategic intent as the observable and communicated official strategy. Capital market context is also evaluated, which is defined as demands and influence of providers, like banks. In the RAP framework, when market context is discussed, we are evaluating the demands of the largest customers, as well as technological development. Bowers set of beliefs is called the Resource Allocation Process RAP business framework.
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