Businesses that have leaders who are committed to their strategies grow faster and are more profitable than their counterparts. Unfortunately, there aren’t enough executive leaders who invest time into strategy—85 percent of executive leadership teams invest less than one hour each month on strategy, while 50 percent do not spend any time on strategy at all.
The results of this lack of investment cascade down to leaders in the middle, leaders on the front line, and the workforce: 95 percent of employees do not know or understand their organization’s strategy. To fill this gap and position an organization for long-term success, leaders must prioritize strategy. Because “strategy” creates a myriad of benefits, it is a broadly used term. Many people find it confusing; for some it can even feel intimidating. Unfortunately, people get so caught up in the vernacular that they miss the essential meaning. At its core, strategy is a place you want to go and the path that will get you there. It is a plan to succeed or win in the long term, so it is important to be clear about what success or winning means and the desired outcomes.
Let’s take a closer look at why strategy is important to businesses and how it can help drive your organization forward. If you have any questions, we encourage you to look into our strategic leadership training programs that provide the skills and tools necessary to address your business’ strategy needs head-on.
1. Strategy Compels Leaders to Stay Focused on Short-Term & Long-Term Growth
Organizations and leaders alike face the constant challenge of balancing short-term and long-term objectives when rapid, immediate demands and pressures develop. Leaders must find the capacity and presence of mind to transition back and forth between competing short- and long-term demands.
With a clear strategy in place, leaders are better able to meet short-term expectations and manage pressures and decisions in a way that aligns with and sustains the company’s overarching mission and vision. For example, Hitachi, a leading multinational manufacturer of automotive systems, construction machinery, and defense systems, divides its long-term vision into a three-year mid-term plan. The plan is further divided into annual goals. By getting all leaders and management teams aligned with these goals, Hitachi can actively engage its teams in achieving short-term goals that support longer-term goals and strategies.
Ultimately, strategy enabled Hitachi to nurture long-term relationships with investors and elevate their enterprise value. This is why strategy is so important to the long-term success of a business—rather than undermining short-term objectives, strategy leverages them to support the long-term vision of the business. This cohesion is vital in preserving the viability of any organization.
2. Strategy Creates One Forward-Focused Vision
As noted earlier, 95 percent of employees are not aware of or do not understand their business’s strategy. Leaders at all levels play a critical role in closing this gap. When organizations are led by strategic leaders, they are better-equipped to remain relevant and add value that is focused on the organization’s future.
Your business strategy should drive strategy at all levels. By helping people at all levels understand the organization’s strategic objectives as well as “how they fit and why they matter” to that strategy, you can create a group of people engaged in meaningful work with a single, forward-focused vision that drives the business toward achieving those objectives. This approach builds an increased sense of responsibility throughout the organization.
For instance, a team or function in the value chain might refine its workflow in a way that is better tailored to support the business’s strategic objectives. This may involve adjusting employees’ quarterly goals or cross-training team members to increase productivity and better meet market demands.
When it comes to executing on a strategic vision, leaders have a stewardship to start conversations and help their teams understand how they can take a proactive role in shaping the future. Strategy clearly defined sets the stage for alignment and action.
3. Strategy Creates Data-Driven Businesses
Data is central to making smart business decisions. As 67 percent of an organization’s business strategies are not aligned with their departmental and corporate strategies, focused KPIs can alleviate this disparity. Streamlined KPIs become the catalyst for measuring quantifiable objectives towards short- and long-term goals, helping the business become more data-driven.
Moreover, companies can reference strategic objectives to better understand, combine, and manage multiple sources of data to make problem solving and decision-making more effective. Executive leaders can analyze the data to decipher how they can better allocate their resources to various functions and initiatives.
For example, Hitachi continuously reviews its strategies and KPIs and updates them periodically to keep up with changes in the industry, competitors, and its strategic priorities. This helps the company stay ahead of its competitors and identify ways to further fine-tune its organizational processes in support of long-term viability.
4. Strategy Promotes Strategic Agility
The periodic, data-driven updates Hitachi incorporates not only safeguard its internal operations and management but also its external position in the market. Strategy is essential in helping businesses determine and refine their value propositions as a company, which can help them elevate their reputation in the industry and with customers.
A well-defined strategy is important— but strategic agility is even more important. Strategic agility is the organization’s capacity to respond rapidly when an internal or external opportunity emerges. It means having the flexibility to efficiently re-prioritize projects and initiatives, make course corrections, and take action. When there is a strategy in place, leaders will have a keen sense of how plans are unfolding so they can move fast when problems or opportunities surface.
Strategy pushes leaders to reflect upon and more rapidly address strategic issues their organizations may be facing.
- Globalization trends: How are shifts in production and labor markets affecting your supply chain? How will it impact your revenue goals?
- Technology disruptions: What technological advances are on the horizon that will change consumer behaviors or business’ production processes? What types of new technologies do organizations need to onboard?
- Competitor behaviors and shifts: What types of business strategies are your competitors pursuing? How is the target marketing shifting? How can you elevate organizational processes and value propositions to stay ahead?
5. Strategy Helps Leaders Adapt to Change
Change is inevitable in business. There will always be volatility, ambiguity, and complexity. Unfortunately, not enough leaders are equipped with the right training and expertise to successfully lead their organization through change—nearly two-thirds of businesses believe a lack of change management expertise was a roadblock in their most recent initiatives.
With fundamental business strategy principles in place, leaders have no choice but to help themselves and their teams change and evolve because they will have to do things that are different from the things done in the past.
Strategy creates change that is intentional, deliberate, and designed, but leaders need to be change drivers in ways that support the strategy. They also have a responsibility to lead people through natural changes that occur in the business environment. Change is not easy. Staying rooted in strategy can help leaders feel more confident in spearheading long-term initiatives and coaching team members through the change process.
6. Strategy Finds Value in Innovation
Strategy sparks innovative thinking—a crucial leadership competency.
Strategic leaders can withstand change and succeed by innovating and customizing ways in which their organization can tackle initiatives. Every business is different and taking a cookie-cutter approach will not suffice in most situations. With a clear focus on strategy, leaders will be compelled to find creative and customized solutions to problems as well as ways to more effectively execute a strategy.
Business leaders can also tap into managerial leaders to help them leverage the creativity, expertise, and skills of team members in a way that supports the overall strategy of the business. Leaders can find ways to capitalize on the strengths and weaknesses of the organization and use them to strategize a realistic roadmap to success.
Launch Your Strategic Training Today
As you build and refine your business strategy, take advantage of CMOE’s strategic training workshops. Our workshops are designed to help leaders safeguard the long-term success of their organizations while understanding the short-term milestones necessary to achieve desired results.