Strategy is an action plan designed to achieve certain short-term or long-term goals. In terms of business, it can be defined as a master plan designed to gain competitive advantage, satisfy customer’s expectations, and achieve the overarching goal of an organization. In today’s competitive world and dynamic markets, strategy formulation has become the foundational aspect for any business. It is a common notion among business owners that strategy is a big large document that defines every process and operation in a company. However, there are different strategies for different hierarchical levels in an organization. A corporate-level strategy is on the broadest spectrum that defines the long-term goals of an organization. Further down the line, there are business strategies that are similar to different verticals in an organization and at the lowest level, there are strategies on the functional level that defines the day-to-day operations of the organization.
You may wonder that understanding the theoretical part of strategizing is one thing, however, formulating is altogether different. Strategy formulation has two major aspects: knowing what to do? And what no to do? At a most fundamental level, strategy is the outcome of your understanding of what you want to achieve and as a result what steps you should prioritize to reach your goal. You cannot do everything in an organization; so knowing what not to do can channelize an organization’s resources towards what to do.
Emphasizing What Not To Do
Business strategy is nothing but knowing what not to do so that you know what to do.
The right strategy entails the understanding of your customer, the products you produce, and the ways they reach your customers. Choosing a target audience and making products for that particular base is a trade-off that a company should take to formulate a well-defined strategy. For example, Facebook, in the beginning, was designed especially for students. This made it easier for the developers to decide on what kind of user interface they need or what features to put in. In short, having a target audience helped facebook’s to efficiently use their resources rather than waste them where it is of no use.
If put in simple words, once the choices are made it is the matter of strengthening the cohesion of chosen tasks and activities to achieve the desired result. A well-formulated strategy puts forth the operations that need to be performed. Moreover, it also divides the operations in terms of their priority so that the most important resources are allocated to the most important tasks.
Prioritizing is The Key
Now that you have understood that strategy helps in prioritizing operations. However, why prioritizing is important, and why do many organizations fail at prioritizing if it is important?
In an organization, various operations happen simultaneously. Within each operation, multiple choices are required to be made. Prioritizing the tasks helps in making those choices. It helps to decide the order of activities and ensure that suitable time and resources are allocated to every task.
However, prioritization is something the majority of the organization fails at. One of the major reasons due to which companies fail at prioritizing is not being able to choose what truly is urgent and eventually giving priority to the wrong areas. This can be understood from the classic example of Kodak. In the 1990s, Kodak invested billions in developing digital technology, however, they abstained from producing digital devices. On the other hand, Canon in Japan prioritized the production of digital cameras and latched on to the opportunity provided by digital photo technology. Today we all know canon is one of the largest producers of digital cameras. The scale of damage due to wrong prioritizations can be huge.
We have observed that there are two major reasons why companies fail at prioritizing:
We have seen countless examples where business owners or managers tried to prioritize things but failed to do so just because they could not find enough time to decide on which tasks to complete first.
Prioritizing is all about setting the sequence for small operations that will eventually lead to a final goal. A more profitable project should be prioritized first or you might prioritize projects from the clients that are sure to be long-term.
While not prioritizing sure does have its negative consequences, however, it is important to analyze the advantages of prioritizing.
Prioritizing helps various verticals in a company to align their resources for a better outcome. This improves the coordination between the departments as everybody is informed about the priorities beforehand.
Prioritizing helps to allocate the best of your resources to the most important tasks. However, it also means that resources can be allocated to future tasks in a more efficient way.
When the best of resources concentrate their energy on a single task, it surely will lead to improved quality of work.
In the above-mentioned example of Kodak and Canon, it can be observed how one company with the right priorities surpassed the one with poor priorities. It is a common fact that companies who are organized will be able to outperform their competition.
To understand the importance of strategizing and prioritizing, let us look at one of the largest cell phone manufacturers in the world i.e., Apple. Most people think that merely producing cell phones is keeping the company alive. What they fail to see is the well-thought-out strategy and their adherence to it. Apple’s business strategy constitutes of 5 key aspects:
The last point i.e., locked in ecosystems is something that has made apple customers loyal. They offer certain free software like iTunes and Apple store to the people who purchase Apple products. This has enabled them to greatly influence the usage patterns of their customers.
Strategy formulation forms the base of everything an organization does. In volatile markets, wasting even an iota of resources can prove to be harmful to the companies. This is where having a well-defined strategy prioritization comes into play. It creates an environment in the organization where every process, operation, and employees work towards improving the efficiency of the company and eventually deliver better services to its customers.