Article published in Auckland Today, September 2014
By Leigh Paulden, 11 September 2014
What does strategy drive in a business? Revenue growth. If your bottom line is not growing then your strategy is wrong.
And if your company is not growing, or growing as fast as it should be, it is most likely time to revisit your company’s strategy. This decade, across the globe, strategy is the number one focus of high-growth companies.
If your company is growing, but at a slow rate, was the growth rate the same as the price increase in this period?
The challenge is balancing all the complexities of strategy while keeping it coherent and simple. Strategy does not, and should not be complex, but it does have to reflect what your company does best – this will then drive the revenue growth. Simple and consistent is the key.
Strategy must also be adaptable to changing circumstances and needs to encompass the values, the purpose and competencies of your company. Strategy, once clear and set, is something you need to readdress on a regular basis. High growth companies address their strategy on a quarterly basis to stay abreast of constant change. Company leadership teams really need to have a meeting structure or rhythm in place for reviewing the strategic priorities. The strategic meetings should be part of the monthly meeting, then quarterly strategic reviews and an annual strategic planning.
Strategy is not an action plan
Strategy is an evolution, a concept summed up well by Jack Welsh, past CEO of General Electric who says strategy is not a lengthy action plan. “It’s the evolution of a central idea through continually changing circumstances.”
Think of strategy as being like a river, it has to wind its way across flats and through valleys to get to the sea. So too does a company have to wind its way like a river with strategy continually changing as circumstances change. After all, the only constant in business is change.
Understanding trends is part of the strategic thinking process when looking medium to long-term. Companies also need to understand what significant changes in technology, distribution, product innovation, markets, consumer, their customers, social, regulatory, environmental trends can impact the business.
SWOT is not an executive tool
The SWOT process used traditionally in strategic planning does give some clarity to executives but tends to keep the focus too narrow and short term for today’s fast-paced world.
SWOT however, is an excellent tool for gathering ideas and input from middle managers.
SWOT can be a trap that pulls executives into operational issues, distracting them from the much bigger forces around the globe that can contribute to being blindsided.
Last year, Management Research Group (MRG) did a global study evaluating the leadership practices and effectiveness of 60,000 managers and executives in 140+ countries and 26 industries.
The leading observations were that a strategic approach was, on average, 10 times more important to the perception of effectiveness than other behaviours studied. It was twice as important as communication (the second most important behaviour) and almost 50 times more important than hands-on tactical performance.
The MRG study found that:
- Strategic leaders take a broad, long-range approach to problem solving and decision-making that involves objective analysis, thinking ahead, and planning.
- They are able to think in multiple timeframes, identifying what needs to be accomplished now; in six months; in a year and in three years, to achieve those goals.
- Strategic leadership is also about thinking systemically, being able to identify the impact of decisions on various segments of the business and on customers.
Does your strategy need changing or tweaking to drive the revenue growth your organisation seeks? And an even bigger question – is your strategy exactly that, or is it simply an action plan, or worse, just a set of goals?
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