Strategy formulation is key to a successful business, but it's only effective when implemented correctly. Some professionals are experienced in developing comprehensive business plans, while others are well-versed in execution—more commonly known as "thinkers" versus "doers."
A balanced combination of both is an invaluable asset to any business. If you're struggling to bring your business strategy across the finish line, here are tips for transitioning from strategy formulation to implementation and a deeper understanding of why it's essential to your company's long-term success.
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Developing an effective strategy requires in-depth knowledge, critical thinking, and careful planning. While several frameworks can help set the foundation, Harvard Business School Online's Business Strategy course uses the value stick.
The value stick is a visual representation of value-based strategy and can help you formulate a business model that factors in pricing, product positioning, and vendor management. Value-based strategy relies on customers' perceived value of the products or services being sold and determines the organization's prices, costs, and supplier strategy.
Some key terms for formulating a value-based strategy include:
- Willingness to pay (WTP): The price customers are willing to pay for a product or service. The margin between a customer's WTP and the actual price is deemed "customer delight," or customers' perceived received value.
- Price: The price the product is sold for. The margin between the price and cost is the firm margin, or the money the business makes.
- Cost: The cost of manufacturing the product.
- Willingness to sell (WTS): The lowest price a supplier is willing to accept for its services. The margin between WTS and cost is called "supplier surplus" or "supplier delight"—the value suppliers believe they're receiving.
This is just one framework for formulating a successful strategy. You can use similar tools, but the best option will always depend on your company's strategic planning needs. To ensure you're on the right path to an effective business strategy, here are six tips for formulating and implementing successfully.
6 Tips For Transitioning from Formulation to Implementation
After formulating a well-developed business strategy, it's time to execute, which is easier said than done. Strategy execution often poses several challenges that can be hard to overcome.
According to the HBS Online course Business Strategy, there are three characteristics of strategy implementation that make the process difficult for many companies:
- Boring: Strategy tends to be exciting; implementation, by comparison, can be rather mundane
- Time-consuming: The best strategies typically require years to implement effectively
- Detail-oriented: Good strategy implementation requires an attention to detail many managers don't have
To prevent these obstacles and ensure a smooth transition from formulation to successful implementation, here's an overview of what you can do to set your business strategy up for success.
1. Set Clear Goals
A simple and effective way to transition from formulation to execution is to set clear strategic goals. Strategic goals are measurable, actionable objectives that align with an organization's purpose and long-term vision. These goals ensure that individuals implementing the strategy have clear guidelines on how to define successful execution.
“When we set goals, we like to imagine a bright future with our business succeeding,” says HBS Professor Robert Simons in Strategy Execution. “But to identify your critical performance variables, you need to engage in an uncomfortable exercise and consider what can cause your strategy to fail.”
Planning in advance and identifying possible weaknesses in your strategy can help you achieve these business goals and objectives without additional roadblocks.
2. Create a Value Map
A value map is a visual tool that helps organizations determine the needs, pain points, or desires its products or services can solve or fulfill for potential customers. It's a tool that illustrates a business's potential value drivers, the factors that influence customers' willingness to pay for a product or service. Identifying and mapping value drivers can be used to formulate an organization's value proposition and key differentiators.
According to HBS Online's Business Strategy course, there are five steps to creating an effective value map:
- Identify value drivers: Determine 10 purchasing criteria customers use when choosing between your product and competing products.
- Rank value drivers: Rank those 10 criteria from most to least important.
- Rate your company's performance: For each value driver, rate how your company is performing from a score of one (poor) to five (excellent).
- Rate your competitors' performance: Repeat this process for two or three of your main competitors.
- Review your value map: Ask yourself if your findings accurately reflect the market's competitive situation, your company's strengths and weaknesses, and if there are actionable next steps to mend any competitive gaps.
By creating a value map, you can review your business's performance and discover new opportunities to improve your position in the market. A value map can also rank how well your company is attracting and maintaining talent compared to competitors.
3. Strengthen Important Value Drivers
Once you've identified your key value drivers, the next step of execution is to strengthen them. Yet, it's important to focus on strengthening the most important ones rather than all of them.
"If you strive to be exceptional everywhere and spread resources evenly across all your value drivers, you end up being mediocre throughout," says Harvard Business School Professor Felix Oberholzer-Gee, who teaches Business Strategy.
Once you've identified the most important value drivers, strengthening them requires generating creative ideas. Since enhancing value drivers can be a relatively vague task, creativity provides ideas and direction. Don't be afraid to think outside the box, take risks, or even fail. Through experimentation and testing, new ideas can strengthen your value drivers and propel your business forward.
4. Create a Plan For Evolving Your Value Proposition
A value proposition is a short statement explaining the value your company provides and how your product or services differ from competitors. As the business landscape and market shift, so must your value proposition.
Competitors often become imitators or substitutes, which can cannibalize your revenue. To stay on top, your strategy—including your value drivers and value proposition—will have to evolve continually.
5. Delegate Work Effectively
Successful strategy implementation can be an overwhelming, multi-step process. It's important for managers to delegate effectively. By assigning tasks to other team members, leadership can spend more time focusing on bigger picture elements and:
- Engage other team members
- Share core business values
- Encourage strategy buy-in
- Win together and boost team morale
6. Continue to Review Performance
While these tools can be helpful for any strategy implementation, they don’t guarantee success without constant review and oversight. A successful strategic plan that drives value for a business and its customers requires continuous performance reviews and improvements.
One factor of strategy implementation to review is your employees. According to Strategy Execution, it can be beneficial in some cases to use ranking systems when reviewing employee performance to ensure your strategic initiatives receive the support needed to succeed long term.
“Ranking systems have really good features that managers can use to stimulate performance,” says HBS Professor Susanna Gallani in Strategy Execution. For example, employees who are highly motivated by personal achievement often thrive as a result of ranking systems.
It’s also important to continuously review your strategy, even after implementation. To ensure you get the most out of this review process, consider setting up a standardized operating procedure (SOP) for a designated task owner to run regularly to analyze and determine if an update is necessary. This can help you avoid common pitfalls of business strategy failures.
Why Business Strategy Formulation and Execution Are Important
Business strategy is an essential component of long-term growth and success. It offers value to customers, encouragement to key stakeholders, purpose for your company initiatives, and direction to your team. Yet, formulation only gets you so far.
Don't lose momentum during the implementation phase—ensure all your hard work pays off. With the right framework, you can create value for your customers and implement a frictionless strategy to achieve outstanding financial results.
Are you interested in learning about strategy implementation? Explore Business Strategy and Strategy Execution, two of our online strategy courses, to develop your strategic planning and implementation skills. To determine which strategy course is right for you, download our free flowchart.
This post was updated on November 3, 2023. It was originally published on November 17, 2022.
