Formulate the Winning Business Strategy Choose, Prove, and Capitalize on the Best Business Strategy, Step by Step

Strategy in business—like strategy in chess—must have tangible objectives, a realistic plan for reaching them, and accurate knowledge of strengths and vulnerabilities. [Photo: Battle of the Somme, soldiers on break playing chess. Querrieu, France, October 1916]

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What is a business strategy?

A business strategy is an outline of the actions and decisions a company plans to take to reach its goals and objectives. A business strategy defines what the company needs to do to reach its goals, which can help guide the decision-making process for hiring as well as resource allocation. A business strategy helps different departments work together, ensuring departmental decisions support the overall direction of the company.

Strengths and weaknesses: The process of creating a business strategy allows you to identify and evaluate your company’s strengths and weaknesses so you can create a strategy that optimizes your strengths and compensates for or eliminates your weaknesses.

Efficiency: A business strategy allows you to effectively allocate resources for your business activities, which automatically makes you more efficient. It also helps you plan ahead for deadlines, allocate job roles and stay on track for your project goals.

Control: Creating a business strategy gives you more control over choosing the kinds of activities that will directly help you reach your goals, as well as allows you to easily assess whether your activities are getting you closer to your goals.

Competitive advantage: By identifying a clear plan for how you will reach your goals, you can focus on capitalizing on your strengths, using them as a competitive advantage that makes your company unique in the marketplace.

Components of a business strategy

1. Vision and business objectives

A business strategy is intended to help you reach your business objectives. With a vision for the direction of the business, you can create clear instructions in the business strategy for what needs to be done and who is responsible for completing each step.

2. Core values

A business strategy guides top-level executives, as well as departments, about what should and should not be done, according to the organization’s core values. It helps everyone stay on the same page and with the same goals.

3. SWOT analysis

SWOT stands for strengths, weaknesses, opportunities and threats. This analysis is included in every business strategy, as it allows the company to rely upon its strengths and use them as an advantage. It also makes the company aware of any weaknesses or threats.

4. Tactics

Many business strategies articulate the operational details for how the work should be done in order to maximize efficiency. People who are responsible for tactics understand what needs to be done, saving time and effort.

5. Resource allocation plan

A business strategy includes where you will find the required resources to complete the plan, how the resources will be allocated and who is responsible for doing so. In this regard, you will be able to see where you need to add more resources in order to complete your projects.

6. Measurement

The business strategy also includes a way to track the company’s output, evaluating how it is performing in relation to the targets that were set prior to launching the strategy. This helps you to stay on track with deadlines and goals, as well as budgetary concerns.


Strategies and the Meaning of Success

Corporate officers and other high level management responsible for strategy

The firm’s initial top-level strategy stems from the founder’s vision statement for the business. The corporate officers are responsible for measuring and tracking strategic success over time, and adjusting or changing strategy when necessary. [Image: High-level management meeting. Photo by H. Armstrong Roberts, February 1930.]

Corporate officers and other high level management responsible for strategy

The firm’s initial top-level strategy stems from the founder’s vision statement for the business. The corporate officers are responsible for measuring and tracking strategic success over time, and adjusting or changing strategy when necessary. [Image: High-level management meeting. Photo by H. Armstrong Roberts, February 1930.]

B usiness strategies succeed when they lead to business growth, strong competitive position, and strong financial performance. Many different approaches are possible, but all are meant to bring improvements in these areas.

In highly competitive industries, the firm’s officers and other senior managers take a keen interest in knowing precisely how well their strategies succeed in serving this purpose. Interest is especially keen immediately after the company changes or adjusts plans.

Dominos Pizza Changes Strategies. Was the New Strategy Successful?

In 2009, for instance, managers and owners of Domino’s Pizza, Inc. were distressed because the firm had just had three years of negative sales growth and shrinking market share. The firm was, in particular, losing market share to two significant competitors, Papa John’s and Pizza Hut.

Domino’s operates in the "Quick Service Restaurant" (QSR) industry. Many people call this industry, unkindly, the "Fast Food" business. The firm competes not only with other Pizza restaurants, but also with restaurants with different menus such as Subway, McDonald’s, and Chick-Fil-A. This segment of the Restaurant industry defines itself not by menus, but instead by the words "Fast" and "Quick." Understandably, therefore, Domino’s started with a strategy based on "Quick Service Delivery." The firm excels in fast delivery, a point that separates Domino’s from its competitors. Nevertheless, in 2009, the strategy seemed to be failing.

In late 2009, therefore, the firm’s new CEO chose to "re-center" strategy on pizza quality. Market research showed that customers rated Domino’s pizza taste as very poor ("tastes like cardboard"). As a result, by the end of 2009, the firm had substantially improved the pizza recipe and launched a marketing program to bring this news to the market. The question on January 1, 2010, was: Will the new strategy work?

The Results Are "In." Strategy Change Succeeds.

Anxious for an answer, the firm began in Q4 2009 detailed tracking of the growth, competitive, and financial metrics that appear in the next section. By the end of Q1 2010, the first results were "in." The measures in all three categories showed remarkable improvement. Domino’s took this as confirmation the new strategy was succeeding.

Now in 2021, the firm continues to research and improve the pizza recipe, while adjusting its marketing strategy at the same time. For this, the firm relies on its 11-year tracking history with these metrics.

Measuring Success With Strategies

Firstly, Business Growth. Growth Means Increasing:

Secondly, Strong Competitive Position, Which Means Increasing:

Thirdly, Strong Financial Performance, Which Means Increasing:

Measure Strategic Impact Precisely

Domino’s, for instance, prefers to measure strategic impact with EBITDA—Earnings before interest, taxes, depreciation, and amortization. Domino’s tracks EBITDA because EBITDA and other selective income metrics measure strategic effects more precisely than overall Net Income After Taxes.

The firm’s strategy drives performance in the core line of business, after all, and that is what strategic planners need to measure. "Bottom line" Net income, however, also reflects factors other than core strategy: (1) revenues and expenses from outside the core business, (2) accounting conventions such as depreciation, and (3) taxes. These factors tend to "muddy the waters" when the analyst tries to use Net Income to measure the impact of strategy changes.

Business case templates when you need a real business case

How Do You Formulate a Strategy?
Five Steps to a Generic Business Strategy

S trategy builders can find practical guidance in this definition. Notice that the definition names four kinds of actions. With just a little imagination you can probably see that these actions point rather directly to steps in a strategy building process:

Formulate a winning business strategy in five steps

Formulate a winning business strategy in five steps

Note that businesspeople rightly speak of strategy building as strategy formulation, instead of "writing a strategy." The verb formulate suggests a building process that is orderly or systematic and results that are definitive and precise.

Your business identity (why us)

We have the examples above of the varieties of problems, solutions, and markets related to a bicycle store. To understand identity as a part of strategy, think about the difference between a bicycle retail store owned and operated by a former professional bike racer, and another one owned and operated by a couple with children who like cycling as a family activity.

The first one will gravitate toward stocking and selling expensive, sophisticated bicycles for the racing enthusiast and extreme long-distance or mountain biking hobbyist. The second will probably emphasize bicycles for children, bike trailers, carriers, and accessories for families.

Seth Godin’s book “The Dip” is about being the best at one thing. That’s the point of your focus. Since you can’t do everything and even if you could, your customers wouldn’t believe you, you need to focus on something that you do well, that people want.

Part of your identity is what you want from your business. Some businesses are about your lifestyle or pursuing your passion. Some people want their businesses to grow as big and as fast as they can and are happy to work with investors as owners. Others want to own their own business, even if it has to grow more slowly for lack of working capital.

Roll them up together

Think of the key stories that are foundational in the great religions. Or think about the stories behind the phrases “sour grapes,” “the fox in the henhouse,” and “the emperor’s new clothes.” They all have power because they communicate. They resonate. We recognize their truths.

Using business stories

A strategy that can’t be told as a story is doomed. It could be as simple as a story defining the problem your customers have, the solution your business offers, and the factors that make your business especially suited to offer the solution.

Telling your essential business story

For example:

In every case, there is a story. Think it through. Who is this person ? How did he or she find you, your store, your restaurant, or your website? Was it by answering an email, looking at an ad, talking to a friend, or maybe searching in the Yelp app on a mobile device? What was the problem they had, and how did your business solve it?

For example, to make a bike shop story based on selling bikes to families, you need to add in how your shop will be different from the local box store, and evidence that you understand that target market. And in the software company example, there must be a sense of this company being qualified to deliver useful content in this topic area. That takes us back to the business identity component, but it could also be called simply the secret sauce, or why we’re different and presumably better.


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