A successful strategy can keep your company on track for years to come, but developing one is often easier said than done. According to a Bridges Business Consultancy survey, only two-thirds of business leaders believe their organization is good at strategy development.

Before we get into tips from real brands on how to create a successful strategy for your company, let's define strategy formulation.

WHAT EXACTLY IS STRATEGY FORMULATION?

Strategy formulation refers to the process of developing a comprehensive plan to achieve an organization's objectives and goals. It involves analyzing the internal and external factors that can impact the organization's performance and competitiveness and making decisions on how to allocate resources and capabilities to achieve a sustainable competitive advantage.

This process is used for resource allocation, prioritization, organizational alignment, and business goal validation.

An effective strategy allows your organization to share a single, clear vision, detect biases by examining the reasoning behind goals, and track performance using measurable key performance indicators (KPIs).

Here are five ideas to consider when developing a successful strategy for your company.

Five Recommendations for Successful Strategy Formulation

Commence with a Clear Objective

When embarking on the creation of a successful strategy, it is crucial for organizations to have a deep understanding of their mission and fundamental principles. To establish a strong strategic approach, begin by asking, "What is the purpose of my organization?"

In the online course called Sustainable Business Strategy, Professor Rebecca Henderson from Harvard Business School emphasizes the significance of starting with a clear objective when developing your business strategy.

"We observe this trend across a wide range of companies," explains Henderson. "The leaders and organizations that drive substantial change and often reap the benefits of being pioneers are motivated by their strong desire to make a difference as much as their pursuit of financial gains."

Unilever's Lipton brand serves as an example of a company that formulated its strategy based on purpose.

"It all began with the belief that we could do better for communities," says Kevin Havelock, President of Refreshment at Unilever, in Sustainable Business Strategy.

"We didn't start with the business case. Then we asked ourselves, 'How can we bring this to life?' If it's the right thing to do for these people and the planet, then we should make it a reality for our brands."

Rather than diving straight into practical details, Unilever placed its values and mission of producing sustainable tea at the core of its developing strategy, allowing the organization to take progressive steps towards achieving that vision.

Henderson points out that the intersection of "doing good" and "doing well"—commonly referred to as creating shared value—has the potential to be a highly profitable domain. If the purpose at the heart of your strategy is grounded in sustainability or aiding others, there is value in pursuing that objective, particularly if your organization has a competitive advantage as the first mover in that area.

Taking into Account Current Events

L’Oréal is an example of an organization that made a purposeful leap by considering the current events at the time, as demonstrated by its response to the COVID-19 pandemic.

As the coronavirus rapidly spread worldwide, resulting in a shortage of personal protective equipment (PPE) and sanitizers for hospitals, as well as causing economic shutdowns and insecurity in areas such as food, shelter, and employment, L’Oréal USA, along with its European and global branches, made a strategic decision to take action.

Stéphane Rinderknech, the president and CEO of L’Oréal USA, expressed the company's deep responsibility to contribute to addressing the crisis in the communities where they operate. In response, L’Oréal USA implemented several initiatives:

Converted its North American plants to produce hand sanitizers, which were provided free of charge to essential healthcare workers, L’Oréal employees, and partners.

Donated $250,000 to Feeding America to support their COVID-19 Response Fund, while also matching every dollar donated by L’Oréal employees.

Contributed over $1 million worth of personal care and hygiene products to Feed the Children. Donated surgical and N95 respirator masks, typically used in L’Oréal's operations facilities, to local hospitals facing shortages of PPE.

Assisted small businesses in its distribution network affected by the pandemic, such as salons, by freezing their payments and shortening payment times for small suppliers.

Although this response incurred costs for the company, it was a strategic move. By offering donations and support, L’Oréal positioned itself as a brand that genuinely cares about its communities, vendors, suppliers, employees, and customers.

Considering current events and adapting your organization's response to address new challenges and opportunities can establish the foundation for its future strategy.

Think about data, case studies, and trends

To develop a competitive strategy, it is important to consider various factors, such as data, case studies, and trends. This involves incorporating information and knowledge about your organization, other companies, and fundamental economic theories, in addition to staying informed about current events.

By understanding this information, you can effectively position your company in the current business environment and learn from the successes and failures of others. Nava Ashraf, an associate professor at HBS featured in the online course Economics for Managers, emphasizes the importance of adopting an experimental mindset when seeking data from the world to assess the effectiveness of different approaches.

When formulating your strategy, it is crucial to analyze your organization's financial statements, as well as examine past strategies that have either succeeded or failed. Furthermore, studying case studies of other businesses and the underlying economic principles can greatly influence your own growth strategies.

Establishing and Clearly Communicating Objectives

One essential step in the process of strategizing is to define and convey strategic objectives effectively. It is astonishing to note that research indicates an average of 95 percent of employees lack understanding of their company's strategy, which is alarming considering that successful execution of strategy requires effort from the entire organization.

According to John Hamm, a general partner at VSP Capital, in his article for the Harvard Business Review, the significance of transparent, truthful, and explicit communication increases exponentially as the organization's size grows. Hamm draws a parallel between a leader's communication style and a professional golfer's approach and swing.

Hamm explains, "In the long run, consistently positive outcomes emerge from a well-designed strategy and unwavering emphasis on execution quality. Consider a golf professional like Tiger Woods, who maximizes his chances of winning major championships by mastering his aim, setup, and swing. Once the ball is in the air, there is no way to control its trajectory; it will land wherever it may."

Formulating a strategy is crucial, but its success hinges on effectively and skillfully communicating it throughout the entire organization. This ensures that all employees feel empowered and accountable for achieving the company's objectives.

View Strategy as a Continuous Journey

After you have created and shared a strategic plan, it might be tempting to consider the strategic planning process finished. However, according to HBS Professor Clayton Christensen, strategy is an ongoing process of growth and development.

While many people see strategy as a one-time occurrence, Christensen argues that successful strategies usually emerge through a constant and continuous process that operates around the clock in nearly every industry.

Regularly evaluate your company's strategy to adjust to new obstacles and possibilities, and consistently communicate its progress and changes to your entire organization.

Who is responsible for formulating strategy?

Although organizational leaders, such as the CEO and executive team, typically bear the responsibility, individuals in any position can develop their strategic abilities to contribute to this process. It is important for every employee to play a part in executing a well-defined action plan that enhances business performance and ultimately attracts potential customers.

As you move ahead and engage in strategic planning, it is valuable to draw upon the knowledge and case studies of those who have preceded you. To refine your strategic thinking skills, consider taking a strategy course or seeking insights from contacts in your professional network regarding their experiences.

From establishing purpose to creating a plan, fostering effective communication, to periodic evaluation, it is crucial to recognize that by dedicating yourself to the strategic planning process, you are laying the groundwork for successful implementation of strategies and investing in the future of your organization.

Conclusion,

By following these successive strategy formulation tips, you can lay the groundwork for a successful strategy that aligns with your organization's objectives and helps drive long-term success.