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Innovative ideas, high ambition, and winning personalities are all great attributes for a new business, but they alone will not lead to business success. In today's competitive environment, companies must have a robust business strategy—one that combines strategic planning, solid organization, and a template for decision-making into one coherent plan.
3 Components of a Successful Business Strategy
A business strategy is the synthesis of three components: a company's stated business objectives, target market-identification, and strategic management plans. These elements align to place the company in a competitive position to achieve its immediate and long-term business goals.
- Business objectives: If the overall business strategy is a roadmap, then business objectives are milestones along the route to success. A company's business goals can be short-term, medium-term, or long-term. Short-term goals include formally incorporating, hiring a corporate-level team, drafting a vision statement, and selling the first batch of products or services. Medium-term goals might include launching a new technology or new products, claiming a certain percentage of market share, developing a smartphone app, or topping customer satisfaction surveys. Long-term goals might include objectives like an initial public offering (IPO), hitting a specific revenue target, purchasing a competitor, or being acquired by a large firm.
- Target market identification: This component of corporate strategy involves identifying the type of people who will consume your service. In a well-crafted business strategy, a company will identify whether these potential customers are currently being served by another brand, how they might be peeled away from that brand, and what they would need in return for their customer loyalty. These will inform your marketing efforts down the line.
- Strategic management plans: These represent the business plans that your company will use to achieve its business objectives with the target market you've identified. Contained within this category is a brand's marketing strategy (how will it communicate to new customers?), its competitive strategy (what are all the possible revenue streams?), and its growth strategy (how will it claim existing markets and then reach target customers in new markets?). The goal is to chart a strategic direction such that all business activities serve the fulfillment of the brand's business objectives.
Why Is a Business Strategy Important?
A business strategy is important because successful companies must merge the idealism of a mission statement with the decision-making realities of everyday operations. Entrepreneurs who invest plenty of creative energy in innovation may still fail if they fall back on generic strategies to manage their business, rather than formulate the types of strategies that are customized to the unique conditions of their competitive market. If you are going financially and emotionally invest in your small business, you owe it to yourself to develop a business strategy worthy of that investment.
How to Develop a Business Strategy
The key to developing a good strategy for your business is to fully understand your business, your products, and your market realities in cold, objective, unbiased terms. Here's how you can do that:
- Identify your objective and your core values. Your objective is your goal for the business; it’s centered on the problem you’re aiming to solve with your products or services. Your company values will run hand-in-hand with your objective. What ethical guidelines will you employ as you strive for your business goal?
- Conduct a self-assessment. Part of the strategic planning process is taking a hard look at the organization as it presently exists. Do you have the cash flow and human resources needed to see your plan to fruition? What competitive advantages do you enjoy over other brands? Business professionals often call this a SWOT analysis, which stands for "strengths, weaknesses, opportunities, threats." Note that your company's strengths and weaknesses are internal factors (that you, as business leader, can control), while its opportunities and threats are external factors (that you cannot control).
- Assign a team. Decide who in your organization will be heading up the efforts to achieve each aspect of your strategy. It's important that whoever you deputize be given leeway to make strategic decisions in a nimble fashion. Micromanaging from a CEO or board members can hurt morale and grind a process to a halt, so deputize people whose judgment you trust. The strongest teams consist of upper management (who set the holistic goals and objectives), middle management (who oversee execution of goals and monitor specific departments), and functional operators (who perform the on-the-ground duties of a business, like making sales or providing a service).
- Research your market and past success stories. Find out how similar brands claimed market share, grew brand awareness, and managed a happy and productive workforce. It's okay to borrow their most effective strategies; in all likelihood, they once borrowed from other brands.
- Lay out a roadmap to success. Once you have a thorough self-assessment, a carefully chosen team, and the proper data, you're ready to lay out your plan in detail. Declare business strategy goals and space them out at realistic intervals. Push your organization to be its very best, but set goals that can be reasonably met. With time, you will find the balance between ambition and fulfillment; maintaining that balance will be crucial for a long, fruitful existence as a business.
- Stay focused. Once a business identifies its role in the marketplace and develops a business strategy around that role, it's important to stay faithful to that strategy. Brands that stray from their core business can lose their strategic focus. It tends to be more fruitful to limit your ambitions to what you know you're the best at.
Remember that all successful businesses, from large companies to brand new start-ups, need a business strategy to focus their efforts and claim the greatest possible market share. CEOs who innovate and charm win a lot of initial fans, but those who carefully plan and stand by their business strategy are the ones who truly thrive.
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