Here's What Industry Insiders Say About Economic Strategy Disclosures

The strategic move, and not the company or the industry, is the right unit of analysis for explaining sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering.
Tacit knowledge should be gathered selectively. You must consciously focus on the knowledge that makes you distinctive. When people are asked what they do at work or what others should learn from them, the first things they say are probably not the most important. You need to probe more deeply, to get past their ordinary perceptions, and to codify not just what people consciously recognize as their work knowledge, but what has been ingrained into unconscious habit.
Managing costs carefully moves you to a new level of financial discipline, redirecting your resources from the projects that distract you to the core capabilities that drive your profits. It brings new life to financial practices (for example, to your annual budgets). When times are good, you don’t dilute your investment dollars by making bets on dozens of new projects. Instead, you figure out the areas where you are most likely to succeed, and focus your investments there.
What are your most profitable products and services? What are they today? What could they be tomorrow? Who are your most important and valuable customers today? Who could be your best customers tomorrow, and how could you attract and keep more of them?

The Right Combination

The corporate level is the highest and most broad level of the business strategy. It is the business plan which sets the guidelines of what is to be achieved and how the business is expected to achieve it. It sets the mission, vision, and corporate objectives for everyone.
A design-type strategy is an adroit configuration of resources and actions that yields an advantage in a challenging situation. Given a set bundle of resources, the greater the competitive challenge, the greater the need for the clever, tight integration of resources and actions. Given a set level of challenge, higher-quality resources lessen the need for the tight integration of resources and actions.
Today, we live in a world where we have to specialize and do a few things exceptionally well. Your chosen area of specialization largely determines the future of your business. You can specialize in a product or service, a customer segment, or a market area. When you specialize in a product or service area, your specialization is easy to describe.
Strategic planning must focus individually on each SBU to define clearly targeted goals and actions. The approach to the development (or disposal) of each SBU is likely to be different, reflecting the specific nature of the customer relationship, the competitive environment and the key factors for successful development.

Principles Of Effective Strategy

Business-Level Strategy theory states that there are essentially three strategies you as an organization can use to win in the marketplace: cost leadership, focus, or differentiation. Which one you choose with depend on market conditions and your unique set of core competencies.
A number of pillars of business ortho-doxy are being eroded. Many attitudes and beliefs that were relevant thirty, ten or even only five years ago, are now less significant or of noconsequence. If business decisions are to be effective, workable and sound, they must be grounded in the present and the likely future.
Competition should not occupy the center of strategic thinking. Too many companies let competition drive their strategies. This focus on the competition puts the competition, not the customer, at the core of strategy. As a result, companies’ time and attention get focused on benchmarking rivals and responding to their strategic moves, rather than on understanding how to deliver a leap in value to buyers—which is not the same thing.
The principle of maneuver applied to business refers to innovation and creativity in finding better, faster, cheaper ways to serve customers, make sales, and achieve higher levels of profitability. To maintain this kind of flexibility in business, you must always be willing to stand back and question the status quo.

Getting The Right Work Done

To translate strategic priorities into everyday execution across a large and incoherent enterprise might seem daunting, but it doesn’t have to be. You can draw on multiple practices, some of which are familiar and some of which involve thinking and talking in new ways. As you turn distinctive cross-functional capabilities into habitual behavior across a global enterprise, you develop the kind of culture that fosters coherence and collective mastery.
In some industries, the basis of competition can remain unchanged for decades, and leaders who stick to their strategy through downturns as well as upturns and ignore surface noise do very well. It is precisely when long-held assumptions about an industry are challenged that strategic changes happen. And you will need to make those changes very quickly. Thinking about strategy as a long-term commitment can blind you to that need.
Cost leadership means you can still make a profit even after your competitors have competed away their profit. Cost leaders can absorb bigger cost increases before those costs need to be passed on. In a competitive market, powerful customers can force you to sell products at a lower and lower price. However, this can force your competitors to exit the market. If this happens, then your customers lose their buying power, and you end up in a monopoly position.
Employees are changing their attitudes to work, and the nature of loyalty and duty in society is changing. The impact on strategic decisions requires an understanding of the forces driving these trends and an acceptance of the responsibilities and priorities that emerge.

Reconstruct Market Boundaries

The most difficult thing about opportunity is recognizing it. The old adage about opportunity knocking once does apply in many cases, so we need to see it—and be able to act on it—when it comes. What are our greatest challenges in the changing environment of the industries we serve? How will new technologies help us? What will our customers need in the future that we can supply? What opportunities will open up globally?
Closing the gap between strategy and execution often involves telling new stories that are deliberately chosen to reinforce coherence: stories about the capabilities that make this company special, the reasons why we do the things we do, events that have challenged the enterprise, the things people did to meet those challenges, and the evolution of the company’s capabilities and attitudes.
Even when things are going well, you have to be absolutely dedicated to decreasing costs. It is not something you have to do when things are difficult, it is something you have to do all the time and everywhere. Also, it is easier to reduce costs relatively and improve margins when you have a growth strategy, because you gain maximum efficiency from fixed costs.
Some technological changes are happening so rapidly that most companies have not yet taken advantage of the opportunities they provide. Every company still has a great deal to learn through prototyping and experimentation. But when translating the strategic into the everyday, be careful not to experiment for its own sake. The most successful companies link their technologically driven interventions closely with their strategy.

Overcoming The Fear Of Risk

Every business needs a safety net of protocol to help them make those tough decisions. What a documented strategy can do is give your business the extra support and guidance it needs if put to test.
Local responsiveness refers to how companies serve a specific market’s needs — essentially, how much do they change from market to market? This isn’t just about translating the website or mobile app into a different language, but about the entire customer experience, from payment processes to imagery and product choices or specifications.
If you asked your employees, “How do we create value for our customers?” would you get a clear answer? And would different people within your company hold the same view? This question — how do you create value? — is the most fundamental inquiry about strategy that anyone could ask. Instead, many people think strategy has to do with choosing a direction: where are we going to grow next?
Clearly, the kinds of strategies that would work in the oil industry have practically no hope of working in the far less predictable and far less settled arena of internet software. And the skill sets that oil and software strategists need are worlds apart as well, because they operate on different time scales, use different tools, and have very different relationships with the people on the front lines who implement their plans.

Overcome Key Organizational Hurdles

The structure of the industry will significantly effect the profit potential of the business operating in that industry. The strategy and actions of a business operating in the industry may improve or destroy the industry structure. Each business (and the relevant decision takers) must recognize and evaluate the impact, short term and long term, of actions taken on the overall industry structure and attractiveness.
A good mission statement contains both a method and a measure. Just as a mission is something that can be accomplished, you must have clear measures and standards that you can use to determine how close you are to achieving your mission.
A defensive business strategy, meanwhile, protects an organisation from its competitors. It aims to inspire customer loyalty and safeguard its market share, and will use tactics such as incentives, exclusive products – or exclusive arrangements with suppliers or partners – as well as above-average customer service, to entice and retain customers and maintain its competitive position.
By thinking and acting strategically, you will increase your profitability and the level of satisfaction that you get from your company and your career. You will increase your overall levels of quality and market penetration. More than anything else, you’ll have a tremendous feeling of being in control of your personal and business destiny. You will be able to look back every year or two and say, “This is exactly where we wanted to be.”

Conceiving New Market Space

You must be willing to accept more uncertainty as you continually recalibrate your organization’s vision for the future. A company’s vision cannot include every detail, because there are still many unknowns. Leaders can articulate a strong vision for 10 to 15 years in the future while being open to iterating on the strategy and tactics categories as they encounter new tech trends, global events, social changes, and economic shifts.
A mission statement is often referred to as your “umbrella statement.” It is the organizing principle under which everything in the company is done. The mission statement tells people what the company does, and also what the company does not do.
One of the unfortunate consequences of successful management is that it often leads to imitation or entry into the market by other firms. Of course, entry by competitors adversely affects the profits of existing firms. Faced with the threat of entry, a leader might consider a strategy like limit pricing. Limit pricing changes the business environment by reducing the number of competitors.
What markets are you going to enter? How are you going to penetrate these markets? Are you going after geographic markets, horizontal markets, or vertical markets? Who are your competitors in these markets? How do you need to advertise, promote, sell, and otherwise penetrate these markets?

Adding New Value

How well does your business strategy support the fulfillment of your company’s purpose? Purpose is what the business is trying to achieve. Strategy is how the business will achieve it. Purpose is enduring — it is the north star toward which the company should point. Strategy involves choices about what products and services to offer, which markets to serve, and how the company should best set itself apart from rivals for competitive advantage.
When a leader characterizes the challenge the business faces as underperformance, it sets the stage for poor strategy. Underperformance is a result. The true challenges are the reasons for the underperformance. Unless leadership offers a theory of why things haven’t worked in the past, or why the challenge is difficult, it is hard to generate good strategy.
Competition-based strategies will continue to dominate companies’ strategic agendas even as the business imperative for creating value added strategies takes on new urgency. Perhaps this explains why, despite prior calls for companies to go beyond existing industry space, companies have yet to act seriously on these recommendations.
One important priority in business strategy formulation is to identify significant risks within and outside the organisation and allow these to inform decisions. This makes it easier to avoid unnecessary surprises. Examples of significant risks might be the loss of a major customer, the failure of a principal supplier or the appearance of a significant competitor.

Build Purpose And Creativity Into Your Strategy

Resources and internal capabilities can be a constraint on your choice of strategy, especially if you are start-up with few employees and fixed-assets. A strategy can succeed only if it has the backing of the right set of people and other resources.
Business-Level Strategies are a mechanism for a business to achieve a competitive advantage. According to the Business-Level Strategies theory, there are two types of competitive advantage that an organization must choose between: Cost Leadership (ensuring you cost less than your competitors) and Differentiation (ensuring you are different from your competitors).
A mission statement is qualitative, not quantitative. A mission statement is not to “Earn a lot of money” or “Increase profitability.” A mission statement is directed outward, toward what you want to do to help and improve the lives of your customers.
A business strategy streamlines your business and ensures every dollar and minute you spend on the business is in the direction of your sustained success. While strategy is can be difficult for many organisations to commence, its benefits are far-reaching and many. From creating new business opportunities, to streamlining the operations and engaging staff, a well-formulated strategy will enable increased growth, productivity and profit both now and into the future.

Comments

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