Strategy: What Is It and How Do You Build It?

Strategy is one of the most overused yet misunderstood terms in the business world. At its core, strategy is about making deliberate choices to achieve specific goals. It involves defining what you want to achieve (the what) and determining the actions and resources required to achieve it (the how). A well-crafted strategy provides a clear roadmap for decision-making and resource allocation, aligning efforts across a business toward common objectives.

In this article, we’ll delve into the concept of strategy, its importance for small-to-medium enterprises (SMEs), and the steps to develop an effective one.

What Is Business Strategy?

Business strategy is a long-term plan that outlines how a company intends to achieve its goals and create value. It answers fundamental questions like:

• What do we want to achieve?
• How will we achieve it?
• What resources will we need?
• How will we measure success?

A successful strategy aligns with the business’s mission and vision, takes into account external market conditions, and leverages internal strengths while addressing weaknesses. It’s not a static document but a dynamic framework that evolves as circumstances change.

Building a Strategy: Start With the End in Mind

A good strategy begins with clarity about your ultimate goals. Here’s a step-by-step guide to building a robust strategy for SMEs:

1. Define Goals

Start with the end in mind. What do you want to achieve? Goals provide direction and focus. They should be specific, measurable, achievable, relevant, and time-bound (SMART). For example:

• Increase market share by 10% within two years.
• Launch a new product line that generates $1 million in revenue by next year.

Defining clear goals ensures everyone in the business understands the desired outcomes and works toward them.

2. Break Goals Into Objectives

Goals can often feel abstract and overwhelming. Breaking them into smaller, actionable objectives makes them more manageable. For instance, if the goal is to increase market share, objectives might include:

• Expand distribution channels.
• Enhance marketing efforts in key demographics.
• Improve product features based on customer feedback.

Objectives serve as milestones that keep you on track toward achieving your overarching goals.

3. Assess Current Capabilities and Expertise

Understanding where your business currently stands is crucial. Conduct a thorough assessment of:

• Strengths: What does your business excel at? What resources or skills give you a competitive edge?
• Weaknesses: Where do you lack expertise or capacity? Are there inefficiencies that hinder performance?

Tools like SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) can help identify internal and external factors that impact your strategy.

4. Identify Deficiencies and Areas for Improvement

Once you’ve assessed your current capabilities, pinpoint gaps that need to be addressed. For example:

• Do you lack the technical expertise to develop a new product?
• Are your customer service processes outdated?
• Are you failing to capitalise on emerging market trends?

Understanding deficiencies allows you to prioritise actions that will strengthen your business and set the foundation for success.

5. Develop Tactics to Achieve Objectives

Tactics are the specific actions you’ll take to achieve your objectives and address areas for improvement. For example:

• To expand distribution channels, you might partner with new retailers or invest in e-commerce platforms.
• To enhance marketing efforts, you could launch a social media campaign targeting a specific audience.
• To improve product features, you might conduct focus groups or invest in R&D.

Tactics should be practical, actionable, and aligned with your overall strategy.
________________________________________

Key Considerations When Developing a Strategy

Building a strategy requires more than just setting goals and tactics. It involves understanding the broader context in which your business operates. Here are critical factors to consider:

1. Market Alignment

Your strategy must be appropriate for your target market. For example:

• A premium market values exclusivity and quality, so offering discounts might undermine your brand.
• A cost-conscious market might prioritise affordability over other factors.

Understand your market’s needs, preferences, and behaviours to ensure your tactics resonate with your audience.

2. Financial Resources

Do you have the financial capacity to execute your strategy? Assess your budget and identify funding sources if necessary. A strategy that exceeds your financial limits is unlikely to succeed. Ensure you:

• Prioritise high-impact initiatives.
• Allocate resources efficiently.
• Plan for contingencies.

3. Research and Customer Insights

Understanding your customers is essential for developing a strategy that meets their needs. Conduct market research to answer questions like:

• Why do customers buy your products or services?
• What problems are they trying to solve?
• Are there unmet needs or gaps in the market?

Customer insights can reveal opportunities to differentiate your offerings and create value.

4. Staffing and Skills

Do you have the right team to execute your strategy? Consider both skills and attitudes:

• Are your employees equipped with the necessary expertise?
• Do they embrace change and innovation?
• Do you need to hire new talent or invest in training?

Your team’s capabilities are critical to turning your strategy into reality.

5. Market Size

Ensure your market is large enough to support your goals. A small, saturated market may limit growth potential. Evaluate:

• Market demand for your products or services.
• Trends and growth projections.
• Competitive landscape.

6. Risks

Every strategy comes with risks. Anticipate potential challenges and develop contingency plans. Common risks include:

• Economic downturns.
• Regulatory changes.
• Competitive threats.

Mitigating risks increases your strategy’s resilience.

7. External Opportunities and Threats

Keep an eye on external factors that could impact your strategy, such as:

• Technological advancements.
• Shifts in consumer behaviour.
• Industry disruptions.

Adapting to external changes can create new opportunities or help you avoid potential pitfalls.

8. Supplier Support

If your strategy involves scaling production or expanding offerings, ensure your suppliers can support your growth. Strong supplier relationships are vital for maintaining quality and reliability.

9. Internal Weaknesses and Threats

Be honest about internal vulnerabilities that could hinder your strategy. Addressing these issues proactively can prevent them from becoming roadblocks. Examples include:

• Inefficient processes.
• Low employee morale.
• Outdated technology.

Putting It All Together

Developing a strategy is a complex but rewarding process. Here’s a recap of the key steps:

1. Start with clear goals that align with your vision.
2. Break goals into actionable objectives to create a clear path forward.
3. Assess your current capabilities to identify strengths and weaknesses.
4. Address deficiencies to build a solid foundation.
5. Develop tactics to achieve your objectives and overcome challenges.
6. Consider market alignment, resources, research, staffing, and risks to ensure your strategy is realistic and robust.

A well-crafted strategy is more than a plan—it’s a guiding framework that enables your business to navigate challenges, seize opportunities, and achieve long-term success. Regularly review and adjust your strategy to ensure it remains relevant in an ever-changing business environment.

By taking the time to build a thoughtful, comprehensive strategy, you’re setting your business up for sustainable growth and success.

If you’re ready to take your business strategy to the next level, Alluvion Business Coaching is here to help. Our experienced coaches specialise in guiding small-to-medium businesses through every step of the strategic planning process. Contact us today to start building a customised strategy that drives results and unlocks your business’s full potential.