It’s easy to get so caught up in the day-to-day running of your business that you lose sight of larger objectives. This guide stresses the importance of strategic thinking and offers some tips on effective strategic thinking.
Strategic thinking is about stepping back from day-to-day business to make sure you're going in the right direction. This article explains why strategic thinking is important and provides some tips to help.
Your vision gives you a goal; strategy gives you a direction
Your vision helps you to decide your goals: what you'd like the company to look like in the future. Your strategy is how you’ll get there. Without a strategy, you can waste a lot of time and energy doing things that aren’t important.
People often get confused between strategy and tactics. They’re two different things. Strategy is the broad plan for your business. Tactics are the specific steps you need to take to make it happen.
Here’s an example. Let’s say you’re a dog day care business, and your vision is: “To be the first choice for busy dog owners in ABC City by making their lives easier.”
Your strategy is to differentiate yourself by making it more convenient for your customers to deal with you than your competitors.
Your tactics to achieve that might include:
Finding premises in inner-city locations so customers can drop their dogs off on their way to work
Extending your opening hours to align with your customers’ working hours
Offering extra services like grooming to give your customers ‘one-stop shop’ convenience
Use strategy to inspire
Everyone works better when they understand the goals for the business. Use your vision and strategy to inspire your team and help them feel they are going somewhere, rather than just marking time. Having a clear direction will help keep you motivated too.
Be a leader, not a manager
As a manager, you oversee how your business is administered and organised to deliver good short and medium term results. Leadership includes management, but it goes beyond that. Good leaders transform their business. They have a clear vision and strategy for where they want it to go, and the ability to carry people along with them.
You can measure your leadership by how willing your people are to change.
Follow a structured planning process
1. Take a step back
It’s easy to get so tangled up in day-to-day issues that you don’t make time to think strategically. Being too close may also blinker you to opportunities or threats.
So start by stepping back from working in your business, so you can better see the wider picture.
Take a weekend to do some thinking away from your business, think about strategic directions and change your focus from management to leadership.
2. Think about where you are now
Strategic thinking starts with analysing and clearly stating your current position. Include your:
Current marketing and operating strategies, such as distribution channels, and any alliances and joint venture partners.
Conduct a SWOT analysis to identify where your areas of focus should be – for example, is there an external opportunity that aligns with an internal strength? Or is there a weakness you need to address in order to tackle a potential threat?
Consider external factors that may impact on your business; use frameworks such as ESTEMPLE to help identify the most important factors:
3. Decide where you'd like to be
Next, decide what you'd like the business to look like. Set specific targets and timeframes. For example, your current market share might be 10% of the total market and your profit margin might be 34%. You might decide to set two targets to achieve, in your strategic vision. 'Within the next three years we will grow our market share to 20% and increase our gross profit margin to 40%.'
To get where you'd like to be, you'll need a strategy (that is, a set of decisions about the path you’ll take). For example, you might decide to:
form new alliances or joint ventures
re-position your business in the marketplace (for example from low priced products and services to top of the market)
Differentiate your business and develop your competitive advantage.
For each decision, you need to develop a list of actions and steps— tactics — to implement the new strategies.
4. Make your strategy unambiguous
Once you’ve decided on your strategy, take some time to word it clearly and make sure everyone understands it. It is your business roadmap. You want everyone heading toward the same place.
Use your staff and advisers
As owner and leader of the business, you decide the strategy. But you’ll benefit from also asking others for input.
Tap into your workers’ knowledge
Your workers often know more than you realise. For example, if they deal with customers more often than you do, they can probably tell you what customers want and need.
For example, Sam Walton, who founded the giant Wal-Mart chain in the USA, made a point of riding with his delivery truck drivers across America. He knew that, as they made their deliveries, these people often gathered important feedback about what customers liked and disliked.
Gain staff buy-in
When you ask your staff for input, you help them feel some ownership of the strategy. People are more likely to commit to goals they’ve helped set.
Some questions you might consider at a staff meeting are:
What has changed over the last 5 years?
What will happen in the next 5 years?
What trends should the business discuss?
Consult your advisers too
Involve your advisers and stakeholders (such as your accountant and bank) in the strategic planning process. You’ll tap into their professional expertise and their knowledge of trends.
Check your bearings and alter course if you need to
Strategic thinking isn’t something you do once and forget about. The broad terms of your vision are likely to remain true, but you will need to adjust along the way to allow for changes you didn’t expect or anticipate in:
the environment, technology, or the market
your business, as a result of implementing your strategy.
This material is provided as a complimentary service of ANZ Bank New Zealand Limited ("bank"). It is prepared based on information and sources the bank believes to be reliable. It is subject to change and is not a substitute for commercial judgement or professional advice, which should be sought prior to acting in reliance on it. To the extent permitted by law the bank disclaims liability or responsibility to any person for any direct or indirect loss or damage that may result from any act or omission by any person in relation to the material.
This material is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals, and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product. If you wish to consult an ANZ Business Specialist, please contact us on 0800 269 249.