Expert Guide: Functional Business Strategy

4 years ago

You can slice and dice business strategies hundreds of different ways, but one recommended way puts corporate strategies at the top, business strategies in the middle and functional strategies at the base. Functional strategies support business and corporate strategies in specific ways, often resulting in improved bottom lines.

Three Tiers of Operational Strategy

While the word strategy can be used to describe tactics or even just an orientation for what you are doing, when most refer to strategy they really mean tactics. Strategic statements are usually separated into three tiers, where the highest tier is most important and the lower tiers are subsets, subordinate to the higher tier. The three tiers are corporate strategies, business strategies and functional strategies.

Corporate Strategy

Most businesses operate in corporate environments and a substantial part of one’s job is to support the corporate strategies. At the top tier of the three tiers of corporation strategies are broader strategies, such as goals for returns on investment (ROI), return on equity (ROE), market share and market penetration.

Business Strategy

As an employee in business strategy, you will be charged with supporting at least one business strategy but may be charged with supporting multiple strategies. In general, businesses operate as a subset of their parent corporation, so strategies will usually be pulled from corporate strategies. Typical strategies that support multiple business strategies are: return on investment (ROI), return on equity (ROE), market share and market penetration.

Functional Strategy

At the bottom are functional strategies that are tactics for support of the business and corporate strategies. Functional strategies pull from the corporate strategies and include strategies such as: key account sales, order yields, pricing, bonus structures, quotas, efficiency metrics, customer satisfaction goals, market surveys, team goal setting and more.

Examples of Functional Strategies

Key account sales tactics improve customer loyalty through better selling, pricing and servicing techniques. This particular strategy can be deployed in sales, marketing, accounting, product development and numerous other functional areas that can have an impact on improving key account activity.

Improve order yields strategies can improve sales by optimizing pricing, increasing inventory turnover and reducing discounts. Improved order yields will have a positive impact on your company’s bottom line without adversely affecting revenue. Improved productivity in these areas can result in reduced costs and higher profits.

Efficiency metrics including metrics such as first-time-right, while addressing the reduction of wasted motions that are associated with greater quality. First-time-right can result in cost savings.

Efficiency metrics are not sexy like the hope and hype of technology, but they can improve customer satisfaction by helping you deliver what is expected. When you ask for the moon, but you give the customer the sun, you can leave customers feeling satisfied to the point where they stay loyal to your company even though they know competitors can deliver the same products at half the price.

Three Tiers of Strategy Meeting

To get good at the strategy meeting, we like to meet at each of the three tiers. For example, we may start with a meeting about the parent company’s corporate mission statement, next meet with a break out group to develop corporate goals and objectives and then meet at the functional level to work with the functional teams to deliver on their tactical strategies. The word strategic is often used and nobody seems to know if the word means really big tactics, real technique or really expensive. It should mean both really big and really expensive, but usually it only means really big.

Famous strategic planning retreats actually result in confusion over tactics and unrealistic expectations as well as a lack of focus on purpose related business strategies. The result is gross debt, waste and failure. Whenever we work with a client on strategic planning, we make sure they have the right attitude and motivation. We have heard people say they are doing strategic planning meetings and have never heard anything tactical come out of the meetings.

Strategic Planning Fun

The key to a good strategy meeting is the organizational culture and your own personal attitude. This article describes three different corporate attitudes for strategic meeting. The strategy meeting should support business strategies and tactics. The word should means that you should have a meeting with your teams or your break out group.

Some companies like to have big meetings to develop strategies that are put in place modo perpetuo regardless of the realities of the marketplace. These meetings are not fun. Events that are not fun are a waste of time.

The second common strategic planning style is to implement what arises out of a big retreat, but then not have any ongoing strategy meetings. These companies make it up as they go along. You can make up as you go along, but you cannot guarantee that actions will always be based on the demands of the marketplace. If you cannot say that you are generally responding to market demand, then you cannot say that you are competitive.

The third and best style for a business is to have effective strategic meetings day in and day out that help your team focus its efforts based on market demand. This style of strategic meetings is fun, effective and profitable. We call this third style of strategy meeting “Think better, not bigger.” This is an advanced approach where dynamic and proactive strategic meetings help you be both reactive and proactive.

Are You a Real Business Strategy?

Most companies do not meet at the corporate level to develop specific business strategies and do not meet at the functional-level to develop functional strategies. This is done because it takes time to do it right. You will be wasting your time just making up strategies. If you are not having daily strategy sessions, then you are probably not a business strategy.

The more time you spend focusing on getting rich in the marketplace, the more success you will have. It is not real to work without a competitive edge that helps you be better in the marketplace, so you should focus your strategy meetings on helping you to develop business and functional strategies that support your competitive edge. If you are not getting richer, you are not making your numbers.

Strategic Meeting Mistake

Most management teams focus on big events and projects and they never develop a culture of strategic meetings that support their business strategies and functional strategies. One common mistake is trying to work with objectives, rather than strategies. Objectives have no power and they never support the tactics to make your numbers.

Another mistake is trying to do strategic meetings and then moving on. It takes a full commitment to the process to complete it. If you move on to other things without closing out an item, you will be in the state of meetings and no actions. If you do not have a complete strategy picture of your business environment, then you cannot create the right business strategies. You cannot get your team to work effectively if you do not share a complete picture of your strategy for the coming months, quarters and years.

Another dead giveaway for ineffectual strategy meetings is an absence of action items. With a big event, people are likely to walk away with a whole host of action items, better described as emails marked urgent. If you have a big project that does not get completed, then you probably have dead or disorganized action items. The worst action items are the ones where the action is an “I will ” statement. Nothing happens or happens slowly when there are action items that are prefaced by an “I will .”

Strategic Planning that Works

Every day your company is making a lot of money, so you should be thinking intelligently about how to make it more money, spend less money and add more value. You should spend more time in strategy meetings focusing on the three tiers of the bistorre agenda strategy meeting. Your business culture should support a strategic culture because the right strategic culture will lead to success.

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