Saturday, July 3, 2010

The Importance of Strategy in Business

Recently, I had the privilege of going to Stanford University to study topics in Business at one of the esteemed programs. I was honored to meet so many great leaders, including my professors, managers at Apple, Tapulous, and other Palo Alto luminaries.

Many of these folks I spoke to were very intently focused on the Strategy of their organizations. They wanted to make sure that the right decisions were being made, and the correct paths were being pursued to grow their businesses.

What is Strategy, exactly, and why are the executives of a company so concerned with it ?

Simply stated, strategy refers to a plan of action designed to achieve a particular goal. If a business were continually reactionary in its activities -- simply reacting to daily events, then you can see how the company would only be chasing "operational viability" and not controlling its own destiny.

Strategy for a business is in its simplest form:

1. Knowing where you are NOW,

2. Knowing where you want to BE.

3. Knowing and having a plan on how to GET THERE.

The first part is relatively simple, but not always. A good leader knows his / her company strengths and weaknesses and general capabilities. We'll use the auto industry, and specifically General Motors, as an example.

The GM leadership knows how many cars they can produce, what kind of cars, and the general costs and features of those cars. That's part 1.

Next, knowing where you want to be is tricky. It involves some ability to know where trends are going, and where the marketplace in general is going. To achieve this, Leaders use the skills of Research specialists, and Competitive Intelligence colleagues. They can slice and dice any industry data, generate surveys, and come up with an Answer.

Our GM leader could (for example) hire a Research specialist who would be able to determine that based on research, the world's demand for electric vehicles is coming to a critical tipping point - people are getting ready to spend big time on alternative energy vehicles. The Competitive Intelligence colleague would be able to determine that competing companies like Toyota and Honda are spending considerable money on research as well, clearly indicating an interest within the industry. The decision is born and GM leadership's "aha moment" is to decide to spend money on creating an electric vehicle.

The third component - knowing how to get there - is a straight line role of a project manager. The project manager can bring in Business Analysts, and other team members to lay out the plan to "make it happen". A skilled project manager is critical to any company, and a new discipline called "strategic engineer" is emerging.

GM leadership would hire one (or multiple) project managers to set up a "Program" for creating electric vehicles. The Electric vehicle Program would consist of many different Projects all leading up to an Electric Vehicle STRATEGY for GM !

Strategy for any organization is critical, because it allows leadership to control the destiny of a company, rather than to continually play victim to shifting trends and competition.

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