Importance of Strategy Statement

Strategy

It is found that most of the successful companies are one whose executives clearly understand the company’s strategy in 35 words or less. Hence companies require strategy to be defined in a simple and clear statement.

A well understood statement of strategy aligns behavior within the business. Executives align their work energy and focus according to the organization's strategy.

Three critical component of a good strategy statement are show in the figure below:

Figure: Critical component of a good strategy statement

Note that the definition the objective should include not only an end point but also a time frame for reaching it. Scope or domain implies the part of landscape in which the firm will operate. Mention of what  your business will do differently from or better than others defines the all important means by which you will achieve your stated objective.

• A hierarchy of Company Statements

Figure: Hierarchy of Company Statements

The mission statement spells out the underlying motivation for being in business in the first place.

• Along with specific, measurable and time bound, the strategic objective should also be a single goal.
• There could well be a host of subordinate goals that follow from the strategic objective, and these might serve as metrics on a balanced scorecard that monitors progress for which individuals will be held accountable.
• A firm’s scope encompasses three dimensions: customer or offering, geographic location, and vertical integration. Clearly defined boundaries in these areas should make it obvious to managers which activities they should concentrate on and, more important, which they should not.
• The scope of an enterprise does not prescribe exactly what should be done within the specified bounds. In fact, it encourages experimentation and initiative. But to ensure that the borders are clear to all employees, the scope should specify where the firm or business will not go. That will prevent managers from spending long hours on projects that get turned down by higher-ups because they do not fit the strategy.
• Clarity about what makes firm distinctive is what most helps employees understand how they can contribute to successful execution of strategy.
• The complete definition of firm’s competitive advantage consists of two parts. The first is a statement of the customer value proposition. The second part captures the unique activities or the unique combination of activities allowing the firm alone to deliver the customer value proposition.
• Strategic Sweet Spot of a company is where it meets customers’ needs in a way that rivals can’t.

Figure: Strategic Sweet Spot

Glossary:

"Can you say what your strategy is?" by Collis and Rukstad