What Is Corporate Strategy?

Corporate Strategy is the most practical piece of evidence that allows every stakeholder to understand and align on a single, cohesive path for a company to achieve its goals. It is a simple and comprehensive articulation of trade-offs that a company has decided to make. These trade-offs optimally deploy company resources to solve the market problem as effectively as possible.

What does Corporate Strategy achieve? Efficiency

Imagine that you are trying to solve a big company-level problem.

What if you had a time machine that allows you to return to the same moment infinite number of times and try all possible paths to solve the problem? (Assume you will never get tired or bored)

OR

What if you had, at your disposal, infinite resources (people and tools) to do what you ask them to, and between all of those resources, you get to try all possible options to solve that big problem?

If either of these were possible, we wouldn’t need a Corporate Strategy because we can just try each possible option and eventually get to the one that works best. But that’s not the world we live in. Companies have finite resources and time. Trial and error is a highly inefficient approach to find the best path to grow, especially at resource-constrained, small- and mid-sized companies.

When should Corporate Strategy be developed? Before scaling

A frequent philosophical debate I have engaged in is the importance of structure and discipline in running a small- to mid-sized company. Many companies at that scale deprioritize development of a well-vetted strategy and alignment of operations with that strategy. However, as an extension of the takeaway above – the smaller a company, the more important Corporate Strategy is because resources and time are more constrained. This is completely counter to how many small- to mid-sized companies think about their priorities in their haste to deploy newly found investment.

Once a company has done basic market and product validation – to prove that the company’s solution to a market problem works – it should develop a corporate strategy before scaling up. It is the most effective use of investors’ funds and it significantly improves the probability of sending resources down the right path to win the market. If a senior executive is not ready to invest in developing and socializing a corporate strategy before (s)he decides to scale up, it implies a lack of confidence in market or product validation.

Who cares about Corporate Strategy? Everyone

Corporate strategy, and its clear articulation, is what gets everyone aligned and committed to a company. It can address all four stakeholder groups below:

  • Investors and board members want to understand whether the company’s resources are being deployed efficiently and what the expected payback is
  • Customers, vendors, and other partners want to work with companies that have a clearly articulated path to success
  • Before linking their future to a company, top employees will want to know whether the direction that the company is headed in (beyond marketing slogans) is the right one
  • Exit partners do not buy a company for its past performance; they are interested in the company’s path forward

What does good look like?

A corporate strategy should articulate ONE specific path, which the company will deploy resources toward for a certain period of time, at which point the path will be reevaluated. Management ‘gurus’ (Porter, Drucker, corporate executives, consulting partners, etc.) have spent decades trying to explain Strategy in a business context. Five Forces and other strategy development principles are insightful – but it is hard to find a practically applicable recommendation of what strategy looks like. So, an actionable view of Corporate Strategy, with three discernible components, had to be developed as part of the Turnaround Science framework.

1. A jigsaw puzzle of trade-offs…

… that optimally solves for the company’s goals and present a big enough market opportunity. A company has many choices to make across several major areas while deciding how to attack the market. i.e. Strategic Trade-offs. Then, it has to prioritize a handful of these major trade-offs that shrink the entire world into a market that it can attack with the resources and time it has. Examples include:

  • the type of customers to go after
  • the way in which the company chooses to solve customers’ problem
  • the quality with which the company will solve that problem
  • the way the company will deliver its solution to customers

Each of these areas leave the company with some choices to make. The strategic trade-offs and associated choices restrict how the company organizes itself. It is intended to be restrictive because a company only has finite resources and time. However, this exercise will also have to ensure that these choices leave the company with a large enough market opportunity to attack and meet its revenue goals.

2. Each strategic trade-off and choice must be clearly articulated

Making the above choices is important. It is equally important to ensure that each choice is explained quantitatively and qualitatively to memorialize and socialize with all stakeholders. Developing a company’s strategy is not a stand-alone effort. It will need underlying strategic initiatives, defined as part of strategic planning, that the company can execute on to fulfill the trade-off choices. Trade-off choices must be unambiguous and have all necessary guardrails that qualify them.

3. One mutually exclusive, collectively exhaustive Corporate Strategy statement

A company should then be able to articulate its strategy in one coherent sentence using simple language, limiting any interpretive differences. In other words, based on the strategic trade-off choices, the company should be able to write one cohesive, time-bound sentence that summarizes its plan to deploy its resources (people, equipment, technology, etc.) most efficiently to solve the market problem. Although this sentence has no incremental information from the strategic trade-offs, its cohesive and non-conflicting nature will validate that the trade-off choices are mutually exclusive and collectively exhaustive.


Although Strategy is an often-misunderstood concept, with desired involvement from all business operators, it is a very simple and easy to understand outcome that can be framed in one, cohesive sentence articulating explicit choices made by a company.


Published By

John Oommen
john@turnaroundscience.com

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