Why is Corporate Strategy Important?
It is common to find many senior leaders questioning the importance of having a Corporate Strategy. They question how practical it is to their current business and question the value it will create if they invest the time and resources required to develop and execute a Corporate Strategy.
This article will shed light on What a Corporate Strategy is, Why it is Important, and provide insights on How to execute a Corporate Strategy “Fit for the Purpose” of your Business.
“What is Corporate Strategy? Why it Corporate Strategy Important? How to execute a Corporate Strategy Fit for the Purpose of your business?”
What is Corporate Strategy?
In its most simple term, a Corporate Strategy is the Details and Specifics surrounding the Business’s Ultimate Goal, its “North Star”, its “Overarching Goal”; essentially, it is ultimately what the “Business wants to Accomplish”. It is more than ambitious statements citing a Vision or Mission that sounds great. It is the statements that inspire and guide the entire company’s actions.
There are many different formal and informal “versions” of a Company’s Corporate Strategy, “Fit for Purpose” acceptable Corporate Strategy could include:
- The Business Vision & Mission, or
- The Business Purpose Statement, or
- The Business Value Proposition, or
- The Founder’s Vision for creating the Business, or
- The Leader’s Goal – what they would like to accomplish, or
- The Business perceived Competitive Advantage and how they intend to win in the marketplace, or
- Simply, the difference the founder wants to make through the Business;
each of which, provides management with guidance to ensure that they are optimizing their resources toward the same ultimate goals as their peers.
The Business Vision & Mission, or Purpose, are the formal versions of a Company’s Corporate Strategy, from which its Values, Value Proposition, Competitive Advantage, and Company’s Corporate & Annual Goals are defined. Goals designed to achieve the Company’s Corporate Strategy. While the last four are not officially formal Corporate Strategies, they each serve the objective of a Corporate Strategy by guiding the leadership of the Business toward common goals.
Reference: See our book, “Leadership Processes, elevating Critical & Strategic Thinking“, for our proprietary Leadership Process detailing how to unpack a Business Corporate Strategy, extracting actionable yet relevant strategies; business leaders can rally around as they aspire to achieve the Business’s Corporate Strategy. Check our product page for more detail.
Let’s look at each component of the Corporate Strategy in more detail.
The Business’s Vision Statement
The Business Vision Statement communicates the “Aspirational Goals” for the business.
The Business Vision Statement communicates the “Aspirational Goals” for the Business. Because the Vision Statement is aspirational, it is by nature non-specific. It is deliberately designed to be left open for leadership’s creative interpretations while being flexible to remain relevant despite forecasted changes in the micro and macro environment, simultaneously setting the overall direction for the Business.
Apple’s Vision Statement 2023: “To make the best products on earth and to leave the world better than we found it.“
Amazon Vision Statement: “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.”
The leadership at both Apple and Amazon can interpret the Company’s Vision Statement to determine precisely what each phrase means. Apple left its Vision open to venture into any product area as long as it fits the “best product” criteria while executing the Business’s operations with ESG consideration. On the other hand, Amazon set clear guidelines for its leadership to create the most customer-centric company that can sell anything online.
The Business’s Mission Statement
Mission Statement primarily communicates what the business does and for whom.
The Company’s Mission Statement cites more achievable, shorter-term tangible goals the Business can pursue that are aligned with its Vision Statement. It primarily communicates what the Business does and for whom. While there are more complex structures of a Mission Statement encapsulating more details of the Business, the two key characteristics of a Mission Statement are to define what the Business does and for whom.
Apple’s Mission Statement: “bringing the best user experience to its customers through its innovative hardware, software, and services.”
Amazon Mission Statement: “We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience.”
Apple’s Mission statement states clearly that Apple provides innovative hardware, software and services in their products for users who appreciate a good user experience, while Amazon’s Mission statement states that Amazon’s desire to make shopping online on their platform convenient while providing a wide variety of products at the lowest possible prices. Both Apple nor Amazon state in their Mission Statements the specific products or services provided, only what their customers can look forward to.
Apple promises innovative products and excellent user experience, and Amazon promises convenient shopping with the widest variety of products at the lowest possible price.
The Business’s Purpose Statement
The Purpose Statement communicates “Why” a business exists and how its products and services benefit their customers.
It’s a general observation that a business either has a Vision-Mission driven Corporate Strategy or a Purpose driven Corporate Strategy. The differentiating factors determining whether a company is Vision-Mission-driven or Purpose-driven often are 1: The Complexity of the Business and 2: The Persona of the Business.
The Structure of the Organization combined with its Operating Model and type of services provided often dictates whether a business will have a Vision-Mission Corporate Structure or a Purpose driven Corporate Strategy.
Apple and Amazon are often perceived as unreachable by their customer base, who do not need an intimate relationship with the company to reap the full benefits of their goods and services, while Insurance type companies often rely on a more personal connection with their customers to provide excellent services; resulting in Insurance companies opting for a Purpose driven Corporate Strategy.
Allstate Purpose Statement: We help customers realize their hopes and dreams by providing the best products and services to protect them from life’s uncertainties and prepare them for the future.
When planning the Business Corporate Strategy, most Small and Medium size businesses will benefit from a more straightforward Purpose Statement Corporate Strategy; it communicates to the staff and target market what the Business is and who it serves and provides ample information for the target customer to connect with the Business.
Whereas more complex organisations will want to evaluate the pros and cons of each structure before determining which format best fits the needs of the Business.
Corporate Strategy Details
Having established that the Business Corporate Strategy is either Vision-Mission-driven or Purpose-driven, clearly stating what the Business wants to accomplish, what it does and who it serves. The next step is translating the Business’s Corporate Strategy into smaller tangible goals, objectives and actions the Business can execute.
Think of it like this. The Business Corporate Strategy is the destination the Business is hoping to arrive at, why it needs to get to that destination, and the mode of transport it will use to arrive at its destination.
The Corporate Strategy Details – the Values, Value Proposition and Competitive Advantage – are the details necessary for the Business operators to work in lockstep to achieve its Corporate Strategy. Think of it like this; the details are the plannedrequiredcessary for the Business to get to its final destination as efficiently as possible, with the best possible experience for itself and its customers, while building trust and loyalty throughout the journey.
Values are essential because values set expectations for the quality of the experience for staff and customers with every business transaction.
Theoretically, “Values” define how employees ought to behave in the daily execution of their duties and are the building blocks of the Company’s Culture.
Practically, “Company’s Culture” is the sum total of the collective behaviours of the workforce, whether the behaviours are sanctioned or not by management.
Realistically, “Values” listed in the Company’s Corporate Strategy alone do not determine Company’s “Culture” and often, in reality, the Company’s Culture is not a reflection of the Company’s Values.
The Company’s Brand is a reflection of the general public’s judgement. It’s a “sum-total” of how the staff and customers feel about their interaction with the company.
Theoretically, “Brand” is the image the Business wishes to create for the public.
In Practice, “Brand” is the Public Image the Business has because of the experience its staff and customers collectively form based on their experiences with the Business.
Realistically brand isn’t determined by a branding exercise. A branding exercise will shed light on what Brand the company should curate, with insights on how to create the desired image. However, the Company’s Brand is formed by how well the operators of the business behaviours are aligned with the image it wants to project.
The reality is most businesses’ Planned Brands, and their Actual Brand are not aligned.
Theoretically, “Value Proposition” is the value leadership want the business goods and services to create for its customers.
In Practice, “Value Proposition” is the perceived value gained by the customer from the consumption of the business goods and services.
Realistically, the “Value Proposed” and the “Value Gained” often differ for most businesses, with the Business overestimating the value created and the customers underestimating the value gained. It is advisable for the Business to frequently seek and evaluate customer feedback to determine its true value proposition, incorporating relevant insights into the creation, delivery and follow-up of its goods and services.
Competitive Advantage is lessening its importance in business management primarily because it’s seen as extremely difficult to develop and execute, while the changes in technology and the economy make the information relatively obsolete relatively fast; there is little incentive for Businesses to invest the time and money to develop, and even less incentive for Small and Medium Size businesses. However, for a business to thrive and grow, it must manage a fit-for-purpose Competitive Advantage.
Theoretically, “Competitive Advantage” is how the Business differentiates itself from the competitors in a way that is more appealing to its customers than the competitors.
In Practice, “Competitive Advantage” is constructed by most using “Quality”, “Service”, “Price”, “Technology”, “Access”, and “Product” to create an offering that will win more often than the competitors.
Realistically, “Competitive Advantage” influences the target customer to believe that your products and service are more valuable than the alternatives available.
Corporate Strategy in Perspective:
The Vision – Defines Aspirational Goals the Business can eventually achieve.
The Mission or Purpose – Defines Practical Immediate Goals the Business can accomplish given its resources.
The Corporate Strategy Details – Defines the Strategies, Plans and Specific Details of how the Business will behave and operate to achieve its Mission or Purpose.
Why is Corporate Strategy Important?
In a nutshell, a business without a Corporate Strategy is synonymous with a Taxi driving without a destination.
Businesses, especially Small and Medium size businesses operate under the impression that as long as they are making money, they are doing ok; however, once the initial momentum has been exhausted, the Business begins to experience problems, and if nothing is done to solve the underlying problem correctly, it starts to decline.
The fallacy most businesses make is, believing that once a business begins to struggle, the solution is business process improvement, systems or tools, which rarely works. Why? Because any product, systems and tools layered upon inefficiencies will not resolve the underlying problem, only temporarily mask it resulting in the problems resurfacing only to frustrate management.
Dire Problem: I worked with a medium size organization citing dire problems with Professional Services, Product Development and Sales, a tangled web of weekly battles on whose fault it was that affected Sales. Product Development was forced to re-prioritize and modify its product roadmap, while Professional Services struggled to deliver on the promises made by Sales. A recurring nightmare. The Difficult Problems Leadership weren’t able to solve suddenly assigned to me. Problems that were blamed for the losses incurred monthly. Problems the traditional solutions failed to resolve.
The Solution: Clarity of the Business Corporate Strategy with relevant Corporate Strategy Details and a pivot of the Business In-Year Strategy, so the Business can resolve the root cause of the problems while redirecting its effort to focus on other revenue-generating opportunities. Only then did things truly turn around, and the Business was now able to move forward with its growth and value accretion plans.
Note: It is important to recognize that in addition to having a Corporate Strategy and the Corporate Strategy Details, EXECUTION is Key! And Execution is in the Business’s Operating Advantage, Operating Values, and Culture impact on its Brand. Reach out to us to learn more about Operating Advantages, Operating Values and Culture Impact on the Brand.
How to Start a “Fit for Purpose” Corporate Strategy?
Operating Business often falls into one of the following categories:
- A functioning Corporate Strategy, or
- An Ignored Corporate Strategy, or
- A Dated Corporate Strategy, or
- An Irrelevant Corporate Strategy, or
- An Idea of what the Corporate Strategy is, or
- A Wishful Idea of what the Business wants to do or achieve, or
- No Corporate Strategy.
The challenge is for you, the leader, to determine if it is a Goal you can move forward with. Then develop the details to support the achievement of that goal. Then validate the Business’s ability to execute the activities necessary to achieve that goal.
If, however, you are either unclear as to what the Business’s Corporate Strategy is, or whether the Business Operations are strategically aligned with its written Corporate Strategy, or how to begin solving the Business’s dire problems. Start with gaining some clarity on why the Business exists and how it intends to serve its customers and ensure that you ask all the difficult questions.
Once you have clarity, communicate first to the team, then to the rest of the Business and be open to feedback on whether it’s feasible. Work through the Corporate Strategy Details and Execute!
With clarity on the Business’s Corporate Strategy and the details communicated concisely to the Business, you will begin receiving insights from your actions, decision and subordinates on where the daily activities of the business conflict with the Corporate Strategy; valuable Insights and Information you can then act on.
An idea without execution is only an idea that soon fades and dies. The same is true for a Business without a Corporate Strategy. The Business will ultimately be pulled into conflicting directions, consumed with how best to allocate its limited resources.
A simple test you can do today to help determine if the Business has an effective Corporate Strategy is to ask. Ask your leader, managers or supervisors what the business Goal is. If they are uncertain, then follow.
- Apply the insights provided in How to Start above, or
- Get our book Leadership Processes, elevating Critical & Strategic Thinking, and it will give the Leadership Process to develop a Corporate Strategy, or
- Contact Us, and we will help.
Final Thought: Having a Corporate Strategy (Goals) people understand is a sign that you are in control. At the same time, not having an active Corporate Strategy is a signal that the Business is reactive to the circumstances of the environment; they are being led, not leading. We understand that a business strives when the circumstances are favourable – getting lucky, and struggles when the circumstances are unfavourable. However, it is important never to take your business luck for granted; ensure that it is supported by a Corporate Strategy that serves as a lighthouse in periods of uncertainty. And DO NOT risk your Business on chances because regardless of the circumstances, with Strategic Management, you can create your own favourable circumstances.
Be Strategic! Nallanie Manick