Strategy: When does your business need one?

Strategy can be a confusing topic because it’s often misapplied or misunderstood, leading to unrealistic expectations and disappointing outcomes. Adding to the confusion is when a business might need a strategy.

In its simplest terms, strategy identifies a core business challenge and builds cohesion through the coordination of actions, policies and resources to accomplish a desired outcome. The best strategies are straightforward, grounded in reality and focus on solving a significant problem, preferably one that can actually be solved.

Strategy is not

• A business plan

A common misconception among entrepreneurs and business leaders is equating a business plan with a strategy. While both are essential, they serve distinct purposes and function differently.

A business plan describes the foundations of a company, its owners, its capabilities, the industry and market(s) in which it operates, how it generates revenue and its financial projections.

On the other hand, a strategy identifies a core business challenge and builds cohesion to address the issue and achieve the desired outcome. Unlike the linear and static approach of a business plan, a strategy is dynamic, adaptable and focused on solving significant problems. It requires a deep understanding of the current state of the business, its challenges and opportunities, ensuring alignment across all levels of the organisation.

• A financial report

While a financial report offers vital insight into a business’s financial health and performance over a given time, it doesn’t address the core challenges that a strategy is designed to address. Additionally, while performance ambitions are important, they shouldn’t be confused with a strategy and a clear strategy won’t materialise because performance targets exist.

• Vision statements

These often get passed off as a strategy because they sound impressive, but they are rarely achieved because they are either too large in scope or not grounded in reality.

• List of goals

A good strategy has razor-sharp focus and is more about what a business won’t do than what it will. A list of everything a business would like to achieve is not a strategy and will compromise any direction and resources it might have.

Prevalent business culture often tells leaders and entrepreneurs a strategy is needed from day one, but the reality is most don’t and this is actually an advantage.

Strategy needs to be based on learnings and hard business insights, which most businesses do not have from day one.

Additionally, most businesses go through plenty of change in the first few years. Although good strategies are adaptable and responsive to change, they become less effective when the business goes through back-to-back big changes, such as changes in offer or team.

A good time to build a strategy is when a business has reached a state of relative stability, has weathered some challenges and gained valuable insights. This varies from business to business, but overall, it’s when the hustle reaches a manageable pace rather than a sweaty sprint.

A business is also ready to create a strategy when:

The business is spinning its tyres

Perhaps the business has never reached a level of stability or has experienced a period of disruption that has been difficult to recover from. It’s crucial to investigate potential causes, identifying and interrogating challenges objectively but equally seeing those challenges as a path to growth.

The best strategies are honest and uncomfortable for good reason. Starting where a business is today, rather than where it wants to be, is the hallmark of a good strategy that will deliver results.

The business has plateaued

There is a large spectrum of markers that indicate a business is plateauing. Sometimes sales stagnate and clients begin to leave. Other times, costs increase and what used to work no longer does.

Often it’s a combination of factors and it’s often because a business has coasted for a while enjoying its successes. There is nothing inherently wrong with letting off the proverbial accelerator pedal, but putting safeguards in place to ensure a business doesn’t find itself scrambling to regain sales, market position or whatnot is important. A strategy can help a business either recover or resume course when ready.

Change is on the horizon

Broadly, it should be known now that change is the only constant. The only difference is that change is now exponential. Whether change is something much larger than a business, such as the development and implementation of AI or something very specific to it, it’s imperative that a business proactively explores what may or may not impact it today or tomorrow.

Otherwise, it risks exposing itself to numerous threats, the worst being the scenario where change is imposed rather than sought. A strategy can help a business proactively shape its future and take advantage of whatever may come its way.

There are opportunities to be grasped

While most strategies focus on business challenges, there are some that focus on developing opportunities. When an opportunity arises, it often brings with it the potential for transformative impact, whether it's developing adjacent or a breakout business opportunity, forging partnerships or adopting groundbreaking technology.

Capitalising on an opportunity without a strategy can be akin to setting sail without a map. A well-defined business strategy becomes essential in evaluating any opportunity, building alignment within the business and allocating resources effectively.

Additionally, a strategy will allow a business to anticipate any challenges and risks associated with the opportunity, ensuring that enthusiasm doesn’t overshadow practicality. It will provide a framework for responding decisively and adapting to unforeseen variables, thereby turning potential into sustained success.

Strategy will help sharpen focus and turn the fleeting nature of an opportunity into a cornerstone of growth and resilience.

The need for strategy arises at pivotal moments in a business’s journey – whether in times of challenge, transition or opportunity. The best and most effective strategies take place episodically and evolve as a business grows. By recognising when the time is right to embark on this critical exercise, businesses empower themselves to thrive, adapt and seize their full potential.

Relevant resources

• The importance of strategy

• Strategy for small business

• How to create your first business strategy