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A key question that every business needs to able to answer is "What is our strategy?"
'Strategy' is part of everyday business language and is often used in the wrong context (e.g. 'Operational Excellence' is not [read more]
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Almost every organization strategizes in the hope that it will lead to successful outcomes set by the management. In several cases, strategies fail or are not as successful as they were hoped to be.
Strategy is innately complicated, explaining it necessitates intricacy, however executing it demands simplicity. Strategies should essentially be simple enough, for leaders at each echelon of the organization, to comprehend, communicate, and bear in mind so as to impact everyday activities.
Strategy, in essence, is about choices. Hardly any company prospers by making one big bet. Almost all successful strategies are founded on a bunch of choices.
Most companies try to condense their strategies into concise statements that are vague, do not tell the employees what to prioritize, or what choices to make in order to achieve set objectives.
Decoding strategy into a handful of “actions” that the company should take to implement it, in the medium-term, is a more effective way and is termed as setting “Strategic Priorities.”
Such actions should be measurable or be able to show progress concretely to the employees so their confidence in the actions builds up.
Numerous multifaceted organizations that vie across more than one industry, product lines, and customer segments bank on Strategic Priorities to move their strategy forward.
Almost all S&P 500 companies use Strategic Priorities to advance their strategies and greater than 2/3rd of them make their specific mid-term objectives public.
S&P 500 companies give various labels to their Strategic Priorities, vacillating between the commonplace to the interesting e.g., (Areas of Focus, Interconnected Ambitions).
A study conducted of 494 S&P 500 index companies, over a 4–5-year period, highlights the reasons for failure of Strategies through empirical research. The study points towards lack of clarity in the objectives set by companies as one of the major reasons for failure.
The study discovered that successful companies among the ones studied, set Strategic Priorities that were specific, actionable, and quantifiably displayed progress. The study synthesized the following 7 principles for setting Strategic Priorities:
- Curtail the total priorities to a few.
- Concentrate on intermediate term actions.
- Keep sights toward the future.
- Take the difficult decisions.
- Tackle significant weaknesses.
- Offer tangible direction.
- Bring the top leadership on one page.
Strategy unless translated into effective actionable items remains flowery language merely for show purposes.
Let us delve a little deeper into some detail of a few of the principles.
1. Curtail the Total Priorities to a Few
Engulfing employees with complete set of choices and linkages that form a company’s Strategy is counterproductive. Limiting the priorities to a handful sets the parameters for employees to work within and enables focus.
Communicating a handful of Strategic Priorities can focus attention, energies, and resources on matters that are of vital consequence. Confining the number of Strategic Priorities to 3 to 5 has numerous benefits.
2. Concentrate on Intermediate Term Actions
Strategic Priorities serve as a conduit between long-term desires—represented by a vision or mission statement—and yearly or quarterly goals.
Bringing about meaningful change or progress requires time. A good rule of thumb is to set 3 to 5 priorities that can be achieved in 3 to 5 years.
3. Keep Sights toward the Future
Strategy should show how a company will generate and encapsulate value in future rather than how it earned revenue in the past.
Employees innately prefer processes and behaviors that they are accustomed to and that yield expected results.
Strategic Prioritization ensures that forward-looking activities necessary for future vitality, that will collapse without continued effort, are given importance.
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