Strategy is a word used frequently in the internal and external business world. It describes the way the company develops to gain profit and growth. However, sometimes opinions split about what strategy means. We provide a short overview and explain what strategy actually is.
A strategy is a highly structured and planned roadmap of an organization. It defines the vision, goals, mission, and direction of a firm. The purpose of the strategy is to maximize the organization’s strength while minimizing competitors’ strengths. The main aspects of a good strategy are: Where are we now and Where do we want to be. At the same time, the strategy is the framework that steers companies in a certain direction to guide managers planning initiatives, which then explain the How and Why.
The strategy’s purpose is to establish how the organization will add value to the stakeholders and how it is going to reach the profit and revenue targets. Moreover, the strategy itself does not answer all the questions required for implementation. It is essential to consider that every decision affects the internal and external business world and is likely to be met by a reaction, either from competitors, customers, suppliers or employees.
Furthermore, a strategy also takes uncertainties, knowledge of the goals, and the likelihood of other’s behavior into consideration as it is the blueprint for the next strategy and its adaptation to changes.
Strategy or organizational effectiveness
Even if improvements have been dramatic, many managers have been frustrated that they cannot translate those gains into profitability. Many “strategies”, though, are only improving current procedures minimally and mostly just raising the bar for competitors. Those minimalistic changes are rather a change in the company’s operational effectiveness (OE) than a real strategy.
Operational effectiveness means for an organization to do similar activities as your competitors in a better way, while strategy means to do similar activities in a different way or performing different activities. By raising the bar with operational effectiveness for everyone it actually leads to relative improvement for no one.
To achieve long-term profitability and to create value for the customer, managers have to think outside the box and develop new and different methods.
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