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Thinking strategically about your business print Print

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It’s easy to get so caught up in the day-to-day running of your business that you lose sight of larger objectives. This guide stresses the importance of strategic thinking and offers some tips on effective strategic thinking.

Strategy and tactics

Many people get confused about the difference between strategy and tactics. The difference is one of scope and intention. Strategy is conceptual, tactics are practical.

Strategy is concerned with the broad (and typically medium to longer term) vision for a company. Strategy involves thinking about the direction you wish your business to take and what you'd like it to look like in five years' time.

Tactics involve planning how you're going to get there. Tactics are the specific means and steps you need to take to achieve your broader strategic vision.


Why a strategy is important

A business without a strategic vision lacks direction and can therefore hardly hope to inspire its workers. Everyone likes to feel that they are going somewhere rather than just consolidating or marking time. People work better when they are aware of what the common goals are for the business.


Steps in strategic thinking

Your current position

Strategic thinking starts with analysing your current position as clearly as possible. This includes your market positioning and your current marketing and operating strategies.

For example, your present distribution channels and your strategic alliances or joint venture partners.

Where you'd like to be

The next step is to analyse what you'd like the business to look like in a set period of time. For example, your current market share might be 10% of the total market and your profit margin might be 34%. You might decide to set two targets to achieve your strategic vision. 'Within the next three years we will grow our market share to 20% and increase our gross profit margin to 40%.'

To get where you'd like to be, you'll now need to take some decisions and some steps to achieve those decisions. In other words, both some more strategic thinking and also some tactical planning. The decisions might include:

  • Forming new alliances or joint ventures.
  • Re-positioning your business in the marketplace (for example from low priced products and services to top of the market).
  • Differentiating your business and developing your competitive advantage.

These decisions are all strategic in nature. In each case you'll need to develop a list of actions and steps to implement the new strategic directions.

These steps are all tactical - they are the practical means by which you reach your strategic goals.

Clear and unambiguous

It's important that your strategy is clear and unambiguous. Everyone should be able to understand it. A strategy open to various possible interpretations leads to confusion. Think of a roadmap and think of the confusion if everyone is heading to the same country, but different towns. No one will be aiming at quite the same place.


Standing back from your business

Strategic thinking involves distancing yourself from working in your business in order to get a better perspective of what's going on. Think of trying to get a full picture or map of a town on foot (working in your business) and how much easier this would be if you could ascend in a helium balloon (distance yourself) and see the whole town and its network of streets and buildings spread out below you. That's why taking a weekend to do some quiet thinking somewhere away from your business can be so productive.

Sometimes you just have to force yourself to take this break. It's all too easy to get entangled in the day-to-day processes of business. If you're very busy, it's also easy to convince yourself that things are going well and there's no need for any larger strategic picture. After all, you're busy. In other instances, small business owners just become too exhausted by the daily grind to think beyond the next few days of months at most.

But these instances merely reinforce the need for you to stand back and look at your business. Caught up in the bustle of daily activities, you may be missing important trends or signs that the marketplace is changing. In addition, it may not be healthy to work at full stretch all the time. How long can you sustain this pace without suffering some health or stress problem? Part of strategic thinking should also be about reducing the burden on yourself by transforming your business into an independent unit capable of running without you.

As the business becomes less dependent on you, you gain more time to think about its strategic direction. This allows you to become a leader, not just a manager.


The difference between management and leadership

Business management involves the daily business processes. As a manager you oversee the administration and organisation of your business to keep it working at optimum levels and provide good short and medium term results.

Leadership includes management skills but also something more: it involves providing a vision and getting staff to buy into that vision. Good leaders have the capacity to transform the business and carry staff along with them: 'This is what I want the business to look like in seven years time - this is where we're heading.'

The two keys to this process are commitment and passion. Good leadership is measured in the staff's willingness to change and accept change.


Who should have input into strategy?

The strategy for your business - your vision for the business - is your prime responsibility as owner and leader. But that doesn't mean that others shouldn't have input. The two main benefits of allowing staff input into strategy is that:

  • It allows them some ownership of the strategy and thus increases their commitment to reaching joint goals
  • It allows you to tap into their knowledge.

Knowledge is everywhere in your business - the key is to unlock it. People working in your business often know more than you realise. For example, if your staff deal with customers more frequently than you do, they are probably more tuned to what customers actually need and like or want than you are. That means they could make a positive contribution to your strategy - if your business culture encourages such participation.

Case study: Sam Walton and truck drivers

Sam Walton, who founded the giant Wal-Mart chain in the USA, made a point of riding with his delivery truck drivers across America. He knew that these people often gathered important feedback in the course of their deliveries about what customers liked and disliked. Such knowledge often remains 'locked in' by traditionally hierarchical business structures that emphasise rank. Feedback from sources so low down on the pecking order is not expected or encouraged. More modern teamwork structures are better at extracting knowledge value from everyone.

In addition, your staff are probably making strategic decisions in their everyday dealings anyway. For example, a representative of a large insurance broking firm found that the phrase 'insurance services' nearly always got a lukewarm or negative reaction from prospective clients. She decided she had to differentiate herself from the traditional image of the insurance agent. As soon as she emphasised that she offered cost-effective financial solutions, clients started listening. Based on her success her company has repositioned itself from a service provider to a solution provider. The employee's decision involved differentiation and market positioning: both strategic decisions that impacted positively on the company's own marketing strategy.

Gaining staff buy-in

This provides an excellent example of how input from an employee who has enjoyed more success in the field can assist or modify the strategy of a business. Getting input from your staff is therefore a key way both to sharpen and enhance your strategic vision and to gain employee buy-in. Some questions you might consider at a staff meeting are:

  • What has changed over the last 5 years?
  • What will happen in the next 5 years?
  • What trends should the business discuss?

Consult your advisors too

Another very important input into the strategic planning phase should be your advisors and stakeholders (such as your bank and other lenders).


Why your strategy will always need to be adjusted

Strategic thinking is always hypothetical to a degree. You have to make assumptions about what the future will be like, or how you would like it to be. To an extent it's gazing into a crystal ball. But the future can change in two ways:

  • Marketplace changes and unexpected events may alter the future.
  • Implementing a strategy may change your business in unanticipated ways.

These two changes might happen independently, or in a linked fashion. So although the broad terms of your vision may remain true your thinking may need to be adjusted along the way. In the first moon landing expedition, for example, the rocket carrying the astronauts and the lunar module was off course for 90% of the time. The NASA command centre had to make continual adjustments to the course to keep the rocket on track to success.



Creating a strategic vision for your business involves:

  • Analysing where you are now.
  • Determining where you want to be.
  • Encouraging staff input to unlock their knowledge and gain buy-in so the whole team ends up working towards shared goals.


Further information:

To talk to an ANZ Business Specialist:
Call 0800 269 249
Visit your nearest ANZ branch


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