Business Strategy
A business strategy guides the activities of either a standalone business, or a business unit within a larger corporation.
Typically, a corporate business unit represents a largely stand-alone business operating in a well-defined market. The business unit leader has complete profit & loss (P&L) responsibility for the performance of the unit. The business unit strategy will cascade from the corporate strategy, focused on the activities required to successfully achieve the role for the business defined at the corporate level. The definition of business units can differ across corporations and can even change over time. Typically, business units will be defined by geography, by market segment, by product segment, by function, or by a hybrid of these dimensions.
Whether for a standalone business or a corporate business unit, the business strategy will reflect a competitive market and an envisioned future role within that market. The business strategy is typically the foundation for many other strategies that we will discuss in the coming days.
Business strategy drives investment decisions in sales/distribution, product development, and operations.
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Scope: The entire business
Key Stakeholders: Business Leaders, Corporate Executives or Board Members
Decisions Involved: Envisioned future position in market, product and market prioritizations
Example Tools/Approaches: Scenario Planning, BCG Growth-Share Matrix
Decisions Enabled: Product Strategies, Market Strategies, People Strategies
Scenario Planning
Initially developed for the military, scenario planning has been used by businesses for nearly 50 years. The primary output from scenario planning is the development of four potential future scenarios to help think through a range of outcomes for which your organization needs to be prepared. For each scenario, I like to write out a narrative “story” that describes what that future would look like. I identify winners and losers and specifically call out the implications for your business. I also like to assign probabilities to each scenario, but as with a weather forecast — if the chance of snow is greater than zero, you’d better be prepared for snow!
Scenario planning can work great as a group exercise to drive engagement across a leadership team. The process starts by defining the future date for the scenarios. I then like to use six segment analysis to identify uncertainties that will have the greatest impact on the future. It’s not unusual to identify a list of dozens of uncertainties, but to complete the process, you narrow the list down to the two uncertainties with the greatest potential impact on the future of the organization. For each of those two, you identify two potential outcomes. Both outcomes should have a reasonable likelihood of occurring, but they should represent two very different implications for the industry and your business. Especially when developing the scenarios in a group setting, debating the likelihood of each outcome can generate very meaningful discussion. Even though other outcomes may be possible, in discussing the likelihoods, assume these are the only two outcomes so that their likelihoods sum to 100%. At this point, you can combine the two uncertainties into a table to create the four scenarios as shown below.
(Note that the likelihood of Scenario A happening would be aa% multiplied by cc%, and likewise for each of the other scenarios.)
You can now take each of the scenarios and fully develop them. Describe what the impact on your industry would be under the scenario. Identify which organizations would be winners and which would be losers. What would be the impact to your organization? What would you need to do to respond? Finally, brainstorm a name for this scenario that captures the general impact.
For an example, watch my tutorial on how to develop scenarios.
