2011 has been a tough year for most smaller and mid-sized businesses in Australia. 2012 is just around the corner and what better way to kick-start the New Year than by committing to re-visit, refresh or even initiate development of a formal business strategy?
After all, strategy is no different from a map – it’s all about setting course and then staying on track – in this instance with a view to growing your business and meeting (and hopefully exceeding) your objectives.
Business strategy can be an intimidating area for many business owners. The terminology used by business strategists such as USP’s or competitive advantage can be confusing and there are lots of business strategy tools available which at first glance, look like you need a PhD to understand.
We’re going to cover some of these business strategy tools and get back to basics so that, as a business owner, you can have a far greater understanding of strategy and an appreciation of the benefits it can provide.
5-step process to developing your business strategy
We have developed our own 5-step process (using well known and proven tools) to develop your core business strategy.
1. Vision and mission
Everybody needs a purpose in life, according to Eleanor Roosevelt…….”The purpose of life is to live it, to taste experience to the utmost, to reach out eagerly and without fear for newer and richer experiences”.
The simplest way to think about corporate vision is……..If you don’t know where you’re going then how are you ever going to get there? Spend some time over the holiday period considering your vision for your business in 2012 and beyond.
2. The SWOT analysis
After developing your own corporate vision and mission you know where you want to go. The next steps are all about understanding your current position.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats as they relate to your business. A carefully considered and honest SWOT analysis will help you understand some important issues about your business and the industry in which it competes. That process will give you some direction around future decisions.
According to Arthur Ashe, the legendary tennis player and AIDS activist, “Success is a journey, not a destination” – accordingly the preparation and ‘doing’ are more important than the outcome.
3. Boston Matrix
Not all strategy tools are applicable to your business, but for companies with a number of different businesses or even businesses with a number of different products or services, this is a useful way to consider your business mix.
The Boston matrix will help you decide which products or services are ‘stars’, ‘cash cows,’ ‘problem children’ or, worst of all ‘absolute dogs’.
That doesn’t mean that you must automatically get rid of the ‘problem children’ or ‘dogs’ as you may have plans to address one or more of those negatives …and by the same token that also doesn’t mean you should keep your ‘cash cows’ either, as that may distort balance and direction.
Like many strategy tools the Boston Matrix creates context and develops insights, which better inform future decisions.
4. Porters 5 forces
Named after the guy who developed the concept, and one of the founding fathers of business strategy – Michael Porter. A “Porter’s 5 forces” assessment is an industry analysis tool, which is a simple, quick and effective way of analysing the industry you compete in and the forces which drive business.
Importantly it involves assessing:
- Competitive position;
- Barriers to entry;
- Substitute products;
- Supplier bargaining power; and
- Customer bargaining power,
many of which impact the SWOT assessment above.
This discipline helps you determine which elements of your business need the most attention from an industry perspective.
5. PEST analysis
By now, you will have probably noticed that many of these tools overlap with each other. That’s fine, each tool provides a different means of looking at the industry and your business within that industry, and it’s expected that you will come up with similar issues using the different tools! If you don’t get duplication… something is wrong!
A PEST analysis is a macro-economic analysis tool. It looks at the big picture and what’s going on in the economy in which you operate and what that means for your business.
PEST stands for:
Change is never a destination, just as hope is not a strategy (Rudy Giuliani). You can’t sit back and expect your business strategy to reveal itself, you need to proactively follow the above steps and determine your own destiny.
So now we’ve set the scene, share your business goals below. Where would you like to be in 2012? How do you plan to get there? If you would like a more in depth analysis of each these steps, subscribe via email or rss as we break each of these steps down into bite size chunks to assist you in developing your own business strategy.
If you can’t wait and need to take action on your business strategy now, contact us at firstname.lastname@example.org and we‘ll discuss your business strategy needs directly.