“Our strategy is to put the customer at the center of all our operations.”
“Our strategy is to be the recognized leader in XYZ industry by 2020.”
“We’ll maximize shareholder value while growing sustainably and become the market leader in 2020.”
Do such statements sound familiar? If so, it’s because they are the typical phrases in corporations’ strategy statements. Unfortunately, most firms tend to confuse the definitions of mission, vision, and strategy.
In the simplest terms, a corporate mission can be summarized as the thing that a company stands for; the reason it exists. Vision represents what the company wants to be in the future, the ultimate level it wants to reach.
There are some factors that differentiate strategy from mission and vision statements. First of all, corporate strategy applies to both now and the future. It is not something only for 2020 or 2025. (Why our milestone years always end with zero or five is one of the world’s biggest unsolved mysteries.) While we should have a strategic objective that can be realized within five years, that alone falls short in defining the whole strategy.
The five-year target can be the “strategic objective,” the crucial first step in a complete strategy statement. A good strategic objective should be specific, measurable, and time-bound, such as “we’ll double our revenue and reach to $3 billion by the end of 2022,” instead of just “we’ll be a market leader,” which poorly defines what you want to reach.
Corporate strategy game plan
INSEAD defines corporate strategy as a five-step process.
In sports terminology, our strategy is our high-level game plan. It tells how we are playing the game now and how we will play in the near future.
Are we planning to win the game, or is a deuce is good enough for us? What are our advantages? Our competitors’ advantages? How can we stop them and succeed? Are we going to play more controlled defense in the first half and more offense, especially from the wings, in the second half?
Strategy is a living thing, a dynamic process we continually change and adapt. It is not something we carve into stone and revisit five years later.
Writing your corporate strategy
A good corporate strategy should include:
- Naming a clear, time-bound, measurable strategic objective
- Analyzing the market and competition
- Differentiating from the competition (identifying competitive advantage)
- Determining how to create value for customers
- Identifying customer segments to target
- Selecting activities (what to do and not to do) with some options
- Committing to strategic decisions, strong execution, and frequent adaptation
A great example of a strategy statement was written by David J. Collins and Michael G. Rukstad in a Harvard Business Review article:
“To grow to 17,000 financial advisers by 2012 by offering trusted and convenient face-to-face financial advice to conservative individual investors who delegate their financial decisions, through a national network of one-financial-adviser offices.”
What about digital/IT strategy?
Digital strategy or IT strategy definitions also tend to use vague buzzwords like: “business enabler,” “innovation driver,” and “business partner,” without any clear strategic objective, measurable output, time constraint, situation analysis, focus area, or initiatives. Unfortunately, CIOs and chief digital officers (CDOs) often fill their digital strategy documents and roadmaps with vendor brand/product names and new version numbers, represented by some boxes connected with arrows, which have little meaning in the eyes of CEOs and CFOs.
The approach given above for corporate strategy also applies to IT strategy. To begin with, IT strategy statements should include clear strategic intents and be tied to measurable business outputs. Some examples:
- “IT will drive $65M in value by increasing the company’s Net Promoter Score to 73, forecast accuracy to 93%, and employee engagement to 8.4 by completing a series of digital transformation projects in sales, supply chain, and human resources domains by 2021.”
- “IT will eliminate complexity and simplify our application portfolio by reducing the number of corporate applications from 224 to 15 by the end of 2021 with a net present value $25M financial effect on total cost of ownership.”
- “IT will create a $45M value annually for shareholders by adopting a cloud-only strategy and moving all of our non-business critical systems (e.g., procurement, HR, finance) to to cloud by the end of 2019 and moving all other systems by the end of 2022.”
A digital strategy can be best explained in a three-to-five year roadmap document. Every element in your strategy must be backed by a financial justification and set of business benefits, with clear answers to questions like, Why will you do that project? and What business output, in terms of KPIs or money, will it provide?
With these best practices, CIOs and CDOs can prove the value of their digital agenda to the CEOs and be perceived as a critical business unit within the organization, rather than a cost center. This approach is also the best way to communicate the digital strategy to shareholders, the board, and business stakeholders.
For more on getting the entire C-suite on the same page, see CFOs And CIOs Making Tech Decisions Together.