Strategy statement

 

A strategy statement communicates the company’s strategy to everyone within the organization. The statement consists of three components: objective, scope and advantage. All three components must be expressed as clearly as possible. A well-written strategy statement will help employees and the organization to understand their roles when executing the company’s strategy. Without this understanding, the company may be pulled in different directions and lose its focus. The purpose of the strategy statement is to ensure that employees have a clear understanding of the company’s strategy.

Hierarchy of company statements

The strategy statement is the fourth level in the hierarchy of company statements. It is more concrete, practical and unique than the mission statement.
Mission: Why we exist
Values: What we believe in and how we will behave
Vision: What we want to be
Strategy: What our competitive game plan will be
Balanced scorecard: How we will monitor and implement that plan

Elements of a strategy statement

There are three basic elements of a strategy statement:

• The objective defines the ends that the strategy is designed to achieve within a specific time frame.
• The scope is the domain of the business—the part of the business landscape in which your company will operate.
• The competitive advantage is the essence of your strategy. It determines what you will do differently or better than the competition to achieve your objective.

Defining the objective, scope and competitive advantage requires trade-offs, which is fundamental to strategy. For example, if a company decides to pursue growth, it must accept that profitability will not be a priority. If it decides to serve institutional clients, it may ignore retail customers.

Defining the objective

The strategic objective is the single, specific objective that will drive the business over the next few years. It is based on the maxim:“If you don’t know where you are going, any road will get you there.” Do not confuse it with the company’s mission, vision or values, which are not useful as strategic goals. The objective must be specific, measurable and time-bound. It must also be a single goal (i.e., growth or profitability), although subordinate goals may follow from the strategic objective.

Maximizing shareholder value is one strategic objective. However, many strategies are designed to achieve this goal. When creating a strategy statement, you must answer the question: Which objective is most likely to maximize shareholder value over the next few years?

Defining the scope

The company’s scope encompasses three dimensions—the target customer or offering, geographic location, and vertical integration (i.e., whole product). Each dimension may vary in relevance (e.g., the customer may have more importance than geographic location). Defining the boundaries clearly in each area should make obvious which activities to concentrate on (and which ones to avoid). The company’s scope does not determine exactly what should be done within those boundaries, as there remains room for experimentation and initiative. However, it should specify where the company or business will not go. This will prevent employees from wasting resources on projects that do not fit the corporate strategy.

Defining the competitive advantage

The competitive advantage comprises the most important part of the strategy statement. It describes the logic of why you will succeed, how you differ, or what you do better than the competition. To define the competitive advantage:

• State the customer value proposition. Explain why customers should buy your product or service. Map your value proposition against those of your competitors to identify what makes yours distinctive.
• Outline the unique activities, or complex combination of activities, that allow your company to deliver the customer value proposition. Create an activity-system map that connects the activities that deliver your company’s competitive advantage to your customer value proposition. 

Developing a strategy statement

First, create a great product strategy based on careful evaluation of the industry landscape. Then, develop a strategy statement that captures the strategy’s essence in a way that makes sense to everyone at the company. The process should involve employees in all parts of the company and at all levels. Work through the wording of the strategy statement in as much detail as possible. The end result is a brief statement that reflects the three elements of an effective strategy and makes sense to everyone in the company. It may include explanatory notes to clarify issues and implications.

 

References

Collis, D.J., and Rukstad, M.G. (2008, April).Can You Say What Your Strategy Is?Harvard Business Review, 1-10.

Tags: business-analysis, market-strategies