A successful strategy can set your organization on the right track for years to come, but creating one is often easier said than done. According to a recent survey by Bridges Business Consultancy, just 68 percent of professionals believe their organization is good at developing strategy, down from 80 percent in 2012.
Before diving into tips from real brands that can help you formulate a successful strategy for your organization, here’s a look at what strategy formulation is.
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What Is Strategy Formulation?
Strategy formulation is the process of using available knowledge to document the intended direction of a business and the actionable steps to reach its goals.
This process is used for resource allocation, prioritization, organization-wide alignment, and validation of business goals.
A successful strategy can allow your organization to share one clear vision, catch biases by examining the reasoning behind goals, and track performance with measurable key performance indicators (KPIs).
Here are five tips to leverage when formulating a successful strategy for your organization.
Related: Why Is Strategic Planning Important?
5 Tips for Successful Strategy Formulation
1. Start With Purpose
When setting out to create a winning strategy, the first question to ask yourself is, “What’s my organization’s purpose?”
In the online course Sustainable Business Strategy, Harvard Business School Professor Rebecca Henderson discusses the importance of starting with purpose when building your business strategy.
“We see this pattern in a wide range of firms,” Henderson says. “The leaders and firms who are driving real change and often reaping the benefits of being first-movers are motivated as often by the driving desire to make a difference as they are to make money.”
One example of a company that formulated its strategy using purpose is Unilever’s Lipton brand.
“It started with the feeling that, for communities, we could do a better job,” says Kevin Havelock, president of refreshment at Unilever, in Sustainable Business Strategy. “It didn’t start with the business case. We then said, ‘Hang on—how do we bring this to life?’ If it’s the right thing to do for these people and for the planet, then we should bring it to life for the brands.”
Instead of jumping right into logistics, Unilever put its values and mission of producing sustainable tea at the center of its developing strategy, enabling the organization to take steps to reach that vision.
Henderson notes that this intersection of “doing good” and “doing well”—often referred to as the process of creating shared value—has the potential to be a highly lucrative space. If the purpose at the center of your strategy is rooted in sustainability or helping others, there’s value in pursuing the goal, especially if your organization is the first to do it.
Related: HBS Professor Explores the Impact Purpose Can Have on Your Organization
2. Consider Current Events
Another organization that took a purpose-driven leap is L’Oréal. Its response to the coronavirus (COVID-19) pandemic demonstrates the importance of considering current events when strategizing.
Earlier this year, the coronavirus spread rapidly across the globe, leaving hospitals with a shrinking supply of personal protective equipment (PPE) and sanitizers. In addition to an economic shutdown, the virus caused food, shelter, and job insecurity for many.
L’Oréal USA, alongside L’Oréal Europe and other global branches, decided to take action.
“I know I speak for all of my colleagues when I say that we at L’Oréal USA feel a deep responsibility to do our part to help address this crisis in the many communities in which we live and work,” said Stéphane Rinderknech, president and CEO of L’Oréal USA, in a press release.
L’Oréal USA’s coronavirus response included:
- Pivoting its North American plants to hand sanitizer production, which it provided free of charge to all essential healthcare workers, L’Oréal employees, and partners
- Donating $250,000 to Feeding America to support its COVID-19 Response Fund, as well as matching every dollar donated to Feeding America by L’Oréal employees
- Donating more than $1 million worth of personal care and hygiene products to Feed the Children
- Donating surgical and N95 respirator masks—typically used in its operations facilities—to local hospitals lacking PPE
- Freezing the payments of small businesses in its distribution network that were unable to operate due to the pandemic, such as salons, and shortening payment times to its small suppliers
This response was strategic, despite ultimately costing the company money. By responding with donations and support, L’Oréal positioned itself as a brand that cares about its communities, vendors, suppliers, employees, and customers.
When current events shift and create new challenges and opportunities, the way your organization responds can lay the groundwork for its strategy moving forward.
3. Consider Data, Case Studies, and Trends
In addition to current events, a successful strategy must take into account the information and knowledge you have about your organization, other firms, and the fundamental theories of economics.
Understanding this information enables you to orient your company in the current business landscape and learn from others’ mistakes and successes.
“As you think about going out into the world and using these tools of experimentation, the first thing is to think of yourself as an experimenter,” says Nava Ashraf, an associate professor at HBS who’s featured in the online course Economics for Managers. “Change your mindset of what it actually means to look for data from the world that helps you know whether something works or doesn’t work.”
When crafting your strategy, examine your organization’s financial statements, along with historical strategies that have been successful and unsuccessful. Also, analyze case studies of other businesses and the economic principles that underlie them.
Related: 5 Reasons Why You Should Study Economics
4. Set and Effectively Communicate Goals
The selection and communication of strategic goals is another important step of strategy formulation. Research shows that, on average, 95 percent of employees don’t understand their company’s strategy—a staggering statistic, considering that successful strategy execution requires organization-wide effort.
“I would argue that the value of clear, honest, explicit communication rises exponentially with the size of the organization,” writes John Hamm, general partner at VSP Capital, in the Harvard Business Review.
Hamm likens a leader’s communication style to a professional golfer’s setup and swing.
“In the long term, consistently positive results spring from intelligent strategy and an incessant focus on the quality of execution,” Hamm writes. “Think of a golf pro like Tiger Woods, whose best bet for winning major championships is to master his aim, setup, and swing. Once the ball is in the air, there is no way to control it; it will land where it will.”
Crafting a strategy is crucial, but it can’t be successful unless it’s effectively and artfully communicated to your entire organization so that all employees feel empowered and responsible for reaching the company’s goals.
Related: 8 Essential Leadership Communication Skills
5. Think of Strategy as an Ongoing Process
Once you’ve formulated and communicated a strategic plan, it can be tempting to assume the strategic planning process is complete. According to HBS Professor Clayton Christensen, however, strategy is a continual process of development.
“Most people think of strategy as an event, but that’s not the way the world works,” Christensen says in the course Disruptive Strategy. “More often than not, the strategy that leads to success emerges through a process that’s at work 24/7 in almost every industry.”
Periodically reassess your company’s strategy to adapt to new challenges and opportunities, and continue to communicate its evolution to your broader organization.
Moving Forward Strategically
As you move forward and embark on your strategic planning, tap into the knowledge and case studies of those who've come before you. To hone your strategic thinking skills, take a course on strategy, or speak with contacts in your network about their experiences.
From purpose to plan, communication to reassessment, know that by committing to the strategic planning process, you’re investing in your organization's future.
Do you want to formulate winning strategies for your organization? Explore our portfolio of online Strategy courses to get started.
