Role of strategic management in running a business. To thrive, businesses must make strategic choices. For instance, a 5-year vision has to be strategized about and narrowed down to fit the goals annually. The overarching goal for many organizations is growth. That does not always mean more money but can also mean more stability or further development (in a certain market).

The importance of strategy

The strategy gives direction, ensures that there are clear frameworks for making choices, and helps in determining the success factors for growth. Strategy is a much-discussed topic in business at the top and unfortunately, it is regularly complained about by employees:

‘We just do whatever’ ‘We have no vision’ ‘We always choose money’.

All these comments say something about the degree of strategy. Sometimes about contentment, sometimes about transparency, and often about the everyday impact. If management does not share its business strategy with its employees, it is even more difficult for them to understand the choices that have been made by them. This effect indicates that strategy plays a crucial role in a business. But what is strategy anyway? Where does it come from? Which components of the strategy are important to businesses?

Origin of strategy

The concept of strategy originated in warfare. Over the years, this concept has been adapted to the art of doing business. Historically, strategy has been about finding a way to conquer. In short, a general is victorious when he/she is aware of the troops, the enemy, the landscape, and the movements that are taking place.

According to the book ‘The Art of War’, a good general continuously weighs all possible options and makes choices that provide the best long-term effect. Sometimes it helps to lose a battle so that you can win the war later. The general uses all possible components to make the army victorious. Direct confrontation is avoided as much as possible in order to be victorious without a pitched battle.

Ultimately, the importance of strategy is about finding a path that leads to success. Each business builds its own strategy that is based on achieving the set goals. Therefore, the strategy is the path you take to achieve growth.

Components of strategy

As a business, you can approach your strategy in different ways. Largely, the strategy consists of a combination of the following components:

External: market forces, product development, the customer wishes, trends, macroeconomics, etc.

Internal: professionalization, digitization, development, the right personnel, organizational strengths, weaknesses, etc.

Businesses often tend to closely monitor external components. In general, it is an understandable choice as a business is financially and commercially dependent on these developments. What happens in the market, with your customers and the competition should certainly play a very strong role in determining the organizational direction.

However, there is a pitfall in an improper balance between external and internal components. For instance, a business that is insufficiently aware of its own strengths and weaknesses has a high chance of making the wrong choices. This pitfall results in strong growing pains that can lead to a lot of pressure in the long run and insufficient internal growth. 

Growth is managed through people’s hard work internally and not always through the right choices and developments based on external factors. It is then not very strange to think that this is the reason behind the emergence of the SWOT analysis.

Knowing your business inside out is the solution 

The SWOT (strengths, weaknesses, opportunities, and threats) analysis comes from the military history. Like a general, a manager should be aware of all these elements. In fact, Sun Tzu (in The Art of War) says that only a general who knows the enemy and himself well can conquer in the complete sense of the word. 

As a business is constantly growing, managers can quickly lose sight of the core identity of their business. If a business is trying to expand its horizons to the international market, a different culture, people, and beliefs can create a conflict with its identity. On the other hand, something that is a universal office-cultural trait is that, with time, when office politics take over, employees become less vocal, start showing group behavior and expressing their doubts about the leadership. 

To challenge this reality, some of the rudimentary actions businesses take are projecting the core values ​​​​on the walls, adopting new working methods (agile, lean, etc.), or organizing teambuilding exercises with the leadership. These steps are not bad in themselves, but the question is whether they can resolve the challenge at hand.

The only thing that can help businesses is managing their strategy. Making sure you know the organization inside out and knowing how to match the vision to the internal and external developments is the most important role for every manager or leader. 

Curious about the role strategy plays in your business and how to upgrade it? Contact us to map your organization’s DNA.