Richard Coates, Managing Director of Whitecap Consulting, talks about the challenges of developing and implementing strategy within a business.
Strategy development and execution is a potentially complex territory, partly due to the fact that is it all about choices and priorities which are set in a fluid environment of competitive and market forces. Successful implementation also relies on effective organisational alignment, direction setting, management and communication.
As if this is not complex enough, a major element in strategic management is the decision making process and the factors influencing strategy choices for leadership teams. Here are a few that we believe help shape the pace and nature of ambition within a company.
Type of business are you really in
Understanding key characteristics of the business and the changing competitive characteristics of the industry are fundamental foundations to strategy and growth. This holds true whether the company’s strategy is based on cost leadership, responding to increasing commoditisation or the degree of differentiation to develop a premium proposition.
Level of ambition
A critical factor impacting the rate and extent of strategy development is the level of ambition demonstrated by the leadership team. Often this is higher in entrepreneurial, owner operated businesses, or those backed by private equity firms seeking a higher return on capital. This is typically linked to the risk profile and the expected levels of financial return.
Assessing and quantifying risk is a valuable discipline in all investments and strategic choices. Pursing emerging and evident commercial opportunities is central to good board governance and critically assessing alternatives and considerations is vital to mitigating risk and giving confidence.
Return on investment
Expected returns, either based on historic performance, parent company or shareholder expectations can dramatically influence strategic decision making and annualised growth rates.
Nascent markets can generate strong growth rates facilitated by effective innovation, whilst more mature markets offer lower growth rates with attractive strategic opportunities including consolidation, M&A and diversification.
Many businesses define themselves based on the products and services they offer to the markets they serve. Of course this will offer growth opportunities, but understanding and leveraging the core competence and capability of the company can also create new growth opportunities.
Leadership team style
Some leadership teams display a predominately ‘operational’ style, characterised with a focus on tasks, actions, deadlines and a management orientation. Whilst other leadership teams function with more of an ‘executive’ leadership style likely to have a visionary leader, strong individual and functional accountability in pursuit of the strategic aims. These styles can impact the approach to strategy planning and prioritisation.
These factors are individually and collectively highly influential as strategy is about how a company will grow, how fast it will grow and in what direction will it grow. They are not of course, mutually exclusive and will evolve through the course of a financial year. Although, having a structured and robustly developed annual strategy development and review process helps mitigate major business, market and confidence fluctuations.