Creating a business strategy is a crucial part of managing a business. While most CEOs understand the importance of the strategy, they have a hard time creating one. This is quite natural because business strategy is a set of principles that define decision-making processes and the allocation of resources within the company to achieve the desired goals. Creating a strategy requires a deep understanding of the company’s vision and mission. If you want to create an efficient strategy that works you should have a clear idea about what you want to achieve and how you want to do it. Nobody says it is easy and, in the process, you will make mistakes. Nevertheless, there are common mistakes you should avoid when creating a business strategy.
1. Business Strategy Integration
It is very challenging to integrate business strategy with day-to-day operations. Implementing the strategy and making sure it can be part of business processes is very tricky. But this does not apply to every business strategy. By default, it is a challenge to implement a business strategy, but some strategies are easier to implement and some just do not work.
Business strategy is hard to integrate when its foundation does not correspond to the company’s needs and aspirations. Very often management creates a strategy that looks very good on paper, it is coherent and well-established, but it cannot be implemented because it does not suit the company it was made for. When creating a strategy do not think about ideal conditions but consider the reality within which your company operates. Ask yourself if the mission and vision that you are basing your strategy on can work in a real life. It might seem obvious, but this is one of the most common mistakes CEOs make. They try to create a perfect strategy that would work in a perfect environment, but the truth is the market is full of anomalies and your company should be able to navigate in an imperfect condition. This will happen only if your strategy can be integrated with your daily processes.
2. Not setting clear strategic objectives
Strategic objectives set very specific goals for the different directions of the company. These objectives act as a bridge between the overall mission of the company and goals that need to be achieved on annual basis. Within strategic objectives, you should determine what you want to achieve, how you want to achieve them, and how do you measure your success.
If a company is unable to identify strategic objectives, then the daily operations cannot contribute to the mission of the company. The tricky thing about business strategy is that very often top management cannot implement the principles in business processes. That happens because strategic objectives are not well-defined. When working on strategic objectives make sure that the objectives are SMART (Specific, Measurable, Achievable, Realistic, and Timely). Additionally, pay extra attention to KPIs and resource allocation.
3. Confusing strategy with actions
As we mentioned, the strategy works as a set of guiding principles that help the company allocate its resources and create a decision-making process in a way that the company’s mission can be achieved. It is a complex document that informs managers what and how to do it. Michael Porter describes the strategy in his famous article “What is Strategy” as deliberately choosing a different set of activities to deliver a unique mix of value.”
Unfortunately, strategy is often mistaken with simple actions such as market share or revenue growth. A lot of CEOs and top managers make this mistake while thinking they have a good strategy that will deliver the results. In truth, when you set actions as your strategy you only have one goal but do not consider all the things that help achieve that goal. The strategy considers objectives as well as information about how to implement them.
Inconsistency is one of the biggest issues with strategic planning and business strategy. We see this issue during 2 stages: business strategy creation and implementation. Quite often different parts of the strategy are not consistent with one another, even more, they can be contradictory. This creates a strategy that cannot be executed because the foundation is not well-built. If you need to grow your business, you need will need a strong basis that can work for years to come.
Managers also face the issue of inconsistency during the execution. One of the most common mistakes is not following through with your strategy on the implementation stage. Change things as you go sometimes can be beneficial, especially if you have a crisis or need to adapt to market changes, but this does not mean you have to neglect your strategy. Being inconsistent with your business strategy will eventually throw you off track. Some of the actions you will make will be contradictory and decrease efficiency.
If it is necessary to change your direction and not follow your original strategy, then you must make sure you update every aspect of your strategy in accordance with the new changes. Especially, if you are managing a start-up, things change constantly and it is normal to update some parts of the strategy, but you need to be consistent with the initial big idea.
5. Overestimating your capabilities
CEOs and top managers who work on the creation of business strategy are visionaries with big goals and ambitions. This is a very good feature for the success of the business, but it can also have negative sides. Very often ambition outweighs reality and strategy tend to set bigger goals than the company can achieve. This is harmful because once the team starts working towards strategy implementation and they realize they cannot achieve the set goals they get unmotivated. This experience can be destructive for the company. If the timeline is too short or the budget is too low, then the goals are unfeasible. This process wastes a lot of time for the company and ambition becomes destructive instead of being motivating power.
The Domino Effect
All these mistakes are highly intertwined. If you make one, chances are you will make another one. It has a domino effect and once you have made these mistakes it is hard to come back from them. So, pay special attention to all these recommendations and try to create a strategy that mirrors your company’s vision as well as capabilities.