3 Principles To Create A Better Strategy And Make It A Real Business Tool

 

aleksey-savkin-headshotIntroducing:  Aleksey Savkin, Thought Leader and Contributor

Aleksey Savkin is a founder of AKS-Labs, vendor of BSC Designer software. His areas of expertise are Strategy Execution, Balanced Scorecard, KPIs, and Business Performance Management. Aleksey is the author of a number of articles and books on Balanced Scorecard. He runs Balanced Scorecard seminars in the Moscow Business School (MBS).  We are fortunate and delighted to have him join us as a contributor to our Blogs on Prism Perspectives Group LLC.

Following is Aleksey’s latest article, “3 Principles To Create A Better Strategy And Make It A Real Business Tool”.

 

 

aleksey 3-principles-better-strategy

 

In theory, properly prepared and described business strategy is a key to the impressive business results. Unfortunately, the average business has a strategy that is updated once a year and that is too abstract to be used in the real business environment. You can change the situation, update your strategy, and make it a real business tool. Here are 3 principles to make your strategy shine.

Principle 1. Good strategy need to have an agile component

As explained by Richard Rumelt strategy might be “good” and “bad.” The good is one that incorporates:

  • The analysis of the problems that business wants to overcome,
  • Business context that gives the sense to the future decisions, and
  • A coherent action plan.

If things could be that easy! We are living in the complex world; today having just a good plan is not enough. The strategy should also have an “agile” component. Terms “agile” and “lean” were first introduced by software engineers. They wanted to make their software products faster and make them more reliable. Why not apply the principle of agility to the strategy of a “normal” business? If you want your company to survive it need to have an agile component in its strategy. Dan Montgomery explores this topic in the details in his Agile Strategies Toolkit.

Principle 2. Good strategy need to be described on the strategy map

By now we agreed that a company needs a good strategy, which should be “agile,” and for sure it should explain all the details about the business hypothesis that we want to try. Unfortunately, there is no step-by-step algorithm on how to come up with such a strategy, it depends a lot on your expertise and experience, but there is a proven way to frame your discoveries. The technique is called a strategy map. It was first introduced by the authors of the Balanced Scorecard concept as a way to capture business inputs and objectives and explain:

  • How exactly a company is going to satisfy stakeholder interests,
  • How customer values need to be created,
  • What business systems are needed, and
  • Where company’s learning efforts need to be focused.

On bscdesigner.com in the article “Strategy Maps: A Guide for Getting Started” we have discussed in the details how the strategy map can be created.

Principle 3. KPIs need to be aligned with a strategy

When discussing a new business challenge we often hear something like “… and we need to use some good KPIs here.” Business indicators suppose to act as a magic pill and ensure that everything goes in the right direction. In reality KPIs help to measure either the success or the failure when it has already happened, but does not lead to the desired outcomes. When strategy is ready, company’s goals are detailed enough, we can start thinking about KPIs. If our goal is to create an engaging website then how will we understand that we succeed? It will be relatively easy to come up with lagging metrics, while leading metrics might come much later when an understanding of business patterns will be clear.  The right approach is to move from strategy to business goals, and then to the KPIs. The wrong approach is to get a bunch of KPIs and start improving measures that you don’t really need.

 

Strategy checklist

I’m not pretending to give a comprehensive strategy guide, but I can highlight some key ideas and takeaways that you can use to improve and focus existent strategy:

  • Check that you have a “good” strategy. It needs to be clear where are you going, why, and how all your actions are aligned with these goals.
  • Have an “agile” component in your strategy. What if a new opportunity will appear on the market? Is your company ready to explore it? Do you have a dedicated time to think strategically?
  • How was your strategy created? Who contributed to it? Was your team involved? Was your strategy properly translated to the line-level employees? If you are the only person who did all strategy job, then a strategy won’t work, and it will be just another reporting routine that you do yearly.
  • Do you have a visual picture of your strategy in a form of strategy map? Do you have local versions of strategy maps for each business unit? Are these local maps aligned with the top level map?
  • Are KPIs guiding you toward YOUR goals, or you are just doing pointless measurement exercise? Align KPIs with your business goals, don’t use a KPI just because it looks promising.

I hope now you have enough new inputs to start the review of your strategy. Give them a try and let us know in the comments about your results.

 

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