Business strategy: from analysis to execution
The process, the models and the choices behind a strategy that steers your business, for small firms and large organisations.
In this topic: Knowledge base 7
Strategy is choosing what you will not do
From analysis to execution: the models, the process and the choices behind a strategy that steers a business, whether it employs five people or five thousand.
Most businesses have plans. Fewer have a strategy: a small set of choices about where to compete, how to win there and what to leave alone, backed by a budget that follows those choices. This theme helps owners, management teams and their advisers get from analysis to execution, step by step, with the models explained by the people who developed them and worked examples from different industries and countries.
What strategy is, and what it is not
A goal is not a strategy, and neither is a list of good intentions. Michael Porter argued that operational effectiveness, doing the same things better than rivals, is necessary but not enough: strategy means performing different activities, or similar activities in a different way, and accepting trade-offs. Richard Rumelt describes the core of a good strategy as a diagnosis of the real problem, a guiding policy for dealing with it and coherent actions that carry it out. Both point to the same test: a strategy says what you will stop doing.
| Strategy is | Strategy is not |
|---|---|
| A few choices about markets, customers and how you win | An ambition, a revenue target or a mission statement on its own |
| A reason to say no to attractive work that does not fit | A list of everything you would like to do |
| Visible in the budget, the diary and the hiring plan | A document that is presented once and then filed |
| Based on what your industry and your capabilities allow | A copy of what the market leader does |
Does it pay to put strategy in writing?
Industry matters, but it does not decide everything. McKinsey's research into the world's largest companies found that about 50 percent of a company's position on the profit curve is driven by its industry (source: McKinsey, February 2018). The other half is the result of choices: where to compete within that industry, how big the moves are and how consistently they are carried through.
Execution is where value leaks away. In a well-known study, companies realised only about 60% of their strategies' potential value (source: Harvard Business Review, July 2005). The losses came from familiar causes: too few resources, poor communication, unclear actions and nobody accountable. A written strategy does not prevent all of that, but it makes the gaps visible, because everyone can see what was agreed and who owns it.
The claim that most change programmes fail is repeated often, but a review in the Journal of Change Management found no valid and reliable empirical evidence for the popular 70% failure figure (source: Journal of Change Management, December 2011). The useful lesson is narrower: strategies fail in predictable places, mostly in execution, and those places can be managed.
How this theme is organised
The theme follows the route from question to result in seven parts. Each part has an overview page that ties its articles together.
Small business and large organisation: the same craft at a different scale
The questions are the same whatever your size: where do we compete, how do we win, what do we stop doing? The difference lies in time, data and the number of people who have to carry the choice.
Small business
The owner usually is the strategy process. Time is the scarcest resource, so keep it light: one sharp question, a short SWOT backed by your own figures and the industry figures, two or three choices and a one-page plan you review every quarter. The biggest win is often saying no to customers or products that cost more attention than they earn.
Larger organisation
Here the risk is not too little analysis but too little choice. Planning rounds can turn into budget negotiations, and strategies into lists of every department's wishes. Decide who makes which choice, link the strategy to capital allocation and keep a rhythm in which the board reviews progress and moves money when the facts change.
Where do you start?
Route for small businesses
- Read strategy for small businesses to set the scope.
- Do a short SWOT analysis with evidence for every point.
- Choose your competitive route with Porter's generic strategies.
- Write it down in a one-page strategic plan.
- Track a handful of KPIs every month.
Route for larger organisations
- Frame the question in step 1 of the strategy process.
- Run the external and internal analysis.
- Develop and score options with the TOWS matrix and step 5.
- Translate the choice with OGSM or the Balanced Scorecard.
- Plan the rollout with change management.
Back up your strategy with figures
Industry figures
Turnover, margins and cost structure per industry, as EU averages per sector. A useful outside view for the external analysis. Find your industry.
Profit and cost benchmark
Put your own figures next to the industry and see where you differ. The differences are where the strengths and weaknesses in your SWOT come from. Start the comparison.
Business Planner
The strategy chapter takes you through a SWOT analysis and a confrontation matrix to your choices, and links them to your forecasts. See the Business Planner.
What is the difference between a strategy and a business plan?
How often should I review my strategy?
Does a small business or a freelancer need a strategy?
Which strategy model should I start with?
Sources
- Harvard Business Review: Porter, What Is Strategy? (November 1996)
- McKinsey Quarterly: Rumelt, The perils of bad strategy (June 2011)
- McKinsey: Strategy to beat the odds (February 2018)
- Harvard Business Review: Mankins and Steele, Turning great strategy into great performance (July 2005)
- Journal of Change Management: Hughes, on the evidence for change failure rates (December 2011)