Business priorities change in relation to various factors that include the socio-economic environment and the age of the enterprise. Take a start-up, it will generally prioritise funding and market entry while a more established business will prioritise increased market penetration, new market penetration, change management, innovation and corporate governance. A business can always benefit from expert advice as we all know people are 90% more likely to succeed when working with supportive people. An objective point of view can make all the difference, and because of the ever-changing business environment, it is important to have both a short and long term strategy.
Here are the top 7 reasons why it is important to have a business strategy.
1. Creates Direction Picture a business of 10 employees, generally, there would be a hierarchal structure with everyone having their designated roles and guidelines to work within. However, how does Tom, Dick, Harry, or Jessica know what Lucy, Mary, or Tim are doing to support them? This is why it is important to have a business strategy. It creates a direction for the whole company to work towards that people then know then how, where and when they can support each other. This unified team creates a strong force for continual growth.
2. Goals & Targets
As stated above, a unified direction makes a strong force for continual growth, but what incremental steps are needed to get to the eventual end goal? A business strategy can provide anywhere from yearly to weekly step-wise goals for the team to achieve. As these goals are achieved the business approaches closer and closer to the end goal. Additionally, let's say the goals are not being achieved. Well, it then provides an opportunity for re-evaluation to determine what went right and what went wrong. In performing this process, it can create what is called the emergent strategy, which is a stronger and more fruitful strategy than what was previously thought of.
3. Cohesion with Marketing as a Science
Business strategy is complex in design and considers many moving parts, which includes marketing. With Emergent Works, we have consultants that have paired their knowledge to provide both a management strategy and a marketing strategy. This is very important because one is inwards thinking and the other is outwards thinking, and they must be cohesive in the way in which the business is headed. This helps the unified approach discussed in 1 & 2, and helps to unify business outside as well (typically called the brand story, what do they represent and what do they offer).
Additionally, marketing has become very very competitive over the last 20 years due to digital marketing. All conventional offline marketing is still available, but with digital marketing, it is now viewed as "easier" to reach your customers. This is not true as although it is easier to be seen, it is harder for a sale to be converted from being seen. What use to be in the 2000s, a customer needed to see your business 7 times before they made a purchase, it is now more than 30 times before they will make a purchase. Marketing is very competitive and has changed from a creative industry to more of an industry where creativity meets science. Now marketing needs a comprehensive marketing strategy, which includes big data, automation, algorithms, and enhanced software which helps to analyse the customer demographic and how best to reach them.
4. Myopic Thinking
It is exceptionally common for a business to be operating and "fine" this year, but then one month later has gone into liquidation. This is because the business had created a mindset of Myopic Thinking. This shortsighted thinking did not account for fluctuates in the market, cash flow, employee turnover, and so much more.
One of the most devastating myopic thinking thoughts is when it has been a bad year financially, but everyone believes next year will be better (or worse we achieved the same revenue). Without action, without change, it is most likely that next year will be another bad year. This can go on for years until the business becomes insolvent. If the business does not have an average growth rate across the years that is not higher than the inflation rate, then it is in decline and in trouble ($1 made last year is not worth the same as it this year; this year it's worth 97c). A business strategist will see this and devise a business strategy to help turn the business around before it is too late.
5. Businesses Have a Limited Lifetime
Businesses will inevitably come to an end and will no longer be profitable, but depending on the industry it can have lifetimes anywhere from months to centuries. Usually, the lifetime is affected by if it is a fad, disrupted by new technology, or culturally imposed, but every business will eventually die. We have already seen Blockbuster video disrupted and closed by the innovation of Netflix, and Kodak film being disrupted by the invention of the digital camera. These examples demonstrate that no matter how big the business it can be taken over by a newcomer.
This disruption has ultimately occurred because of the competitive strategies of other businesses to both compete for the market but to also innovate and take more of the achievable market. This is why a business strategy is important as the business needs to "fight back" as well as grow further. This is why from Emergent Works, a business strategy includes a pre-mortem evaluation (how could your business die), and a horizon strategy (how can the business reinvent itself to grow again and again).
6. Leveraging Opportunities
Similar to what has been written in 5, how can a business grow further utilising its current resources to grow even further? A business strategist will determine what resources the business has (even ones not previously thought of caused by myopic thinking) and then how best to use them to grow financially further. This could be through strategic partnerships, joint ventures, diversification opportunities and more. It is very easy to financially grow a business utilising its resources. A business strategy will determine how, who with, and how best to go about it.
7. An Emergent Strategy Will Appear
A business strategy projects into the future and requires continual assessment on how it is working, but also pockets of unexpected outcomes occur that needs to be observed by the strategist to determine if it is a stronger strategy or if it is best to continue as is. These small events are also referred to as the Emergent Strategy.
Take Kodak film, for example, they were actually the first inventors of the digital camera, however, did not take action on this potential and use it to create an Emergent Strategy. Instead, their competitors saw the potential and displaced them from the market.
What does your strategy look like? Does your business even have a strategy? It is best to act now and contact Emergent Works to get your business strategy devised or updated so you can continual grow without fear of disruption or lose the entire business.