Developing and implementing a business plan demands that you incorporate a sound business strategy as well as a sound corporate strategy.
“The focus of corporate strategy is to satisfy the needs of the shareholders,” says Lisa Fairbairn, a professor and lead faculty at the DeVos Graduate School of Management, Northwood University, Midland. “The focus of business strategy is to satisfy a select group of customer needs better than anyone in the defined competitive marketplace.”
Smart Business spoke to Fairbairn about how to develop the best the business strategy for your company.
Why is the distinction between business strategy and corporate strategy important?
Primarily because head-to-head competition really only exists at the business strategy level. Of course, the two strategies go hand-in-hand, and there’s an assumption that if business strategies satisfy customer needs better than competitors, then shareholder value will be enhanced — which is the underlying premise of corporate strategy.
What constitutes a successful business strategy?
The ultimate measure of success is whether or not it is sustainable in the long term. The key to sustainability is having a forward-looking strategy based on true customer needs (as opposed to products and product attributes) that are differentiated in the marketplace.
In the purest sense, customer needs don’t really change over time. For example, customers didn’t say, ‘Hey, we need cell phones,’ but they did have the need to communicate more efficiently and conveniently. If the aim of your strategy is to be the best cell-phone manufacturer, you will likely become obsolete, as others focus on how to better fulfill customers’ communication needs. Products are not strategies.
This underlying focus on customer needs doesn’t mean that the company should strive to fulfill all customer needs; in fact, the opposite is true. To provide unquestionable focus, strategy should be just as much about which customer needs a company chooses to dismiss.
Finally, execution of the business strategy must focus on the internal alignment of the organization’s activities with customer needs. The goal is for all functions to contribute in harmony to the fulfillment of the selected customer needs. Outcomes that reinforce functional silos should be replaced by outcomes that mandate synergy from people and activities throughout the organization.
Why do many companies not have a sustainable business strategy?
Trying to be everything to everyone inhibits long-term sustainability. Many companies find it difficult to walk away from customers and their long list of needs … after all, they are paying customers! The problem is that it is virtually impossible to be the best at everything for any length of time. In addition to diluting what you do best, it can confuse both customers and employees alike.
Another common problem is that companies tend to conceptualize their business strategy with a 10,000-foot view. Many companies profess that ‘customer service’ is what differentiates them in the marketplace. But what does customer service mean? Most friendly, most efficient, most personalized? If the needs that are driving the strategy aren’t drilled down to a real specific level, there is too much room for individual interpretation by the employees … which likely results in the inconsistent delivery of the intended strategy.
Finally, you can craft the greatest strategy in the world, but if it’s not communicated properly, if there isn’t buy-in, and if there is no accountability for its implementation, it’s just another business exercise without any impact.
Who is responsible for developing business strategy?
While many might think that strategy is a management-only ritual, it needs to be viewed as a company-wide initiative that is constantly revisited. As customer needs are the key ingredient, understanding market data and the ability to respond to it quickly is critical for success. Front-line employees seem to have a better pulse on true customer needs and how adequately they are being fulfilled. As a result, the company is best served by all employees understanding, contributing and embracing the business strategy.
LISA FAIRBAIRN is professor and lead faculty at the DeVos Graduate School of Management, Northwood University, Midland. Reach her at (800) 622-9000 or [email protected].