Iron key hanging from a ribbon

How to create a business strategy

Creating the right formula for success

4 minute read
Iron key hanging from a ribbon

The objective of a business strategy is for an organisation to achieve success in its short-term and long-term goals.

In order for a strategy to be successful, its development process needs to be considered for optimal achievement of a business’s primary goals.

However, the process is contingent upon each organisation’s circumstances and involves finding the right approach for the business.

What is involved in planning a business strategy?

According to The University of Western Australia Business School Professor and Master of Business Administration Director Allan Trench, the initial phase to strategy development is planning.

“Rather than just doing it, this is a precursor step that discusses how we are going to organise ourselves to actually make the strategy,” he said.

Minerals industry strategist John Sykes said developing a plan to create a strategy was often helpful to produce a successful result.

“The planning process is a valuable thing that brings everyone together and helps to identify issues and create coherence."

“One of the mistakes made with a lot of strategy work is that not enough time is put into thinking about how it will be done," he said. 

“Setting out the process, saying what you’re going to do in advance and getting the right people involved can be enormously helpful in that situation.”

The hidden choices

Developing a business strategy involves several decisions being made, with what is known as hidden choices potentially informing a strategy unbeknownst to the business.

Generally covert, hidden choices are assumptions or unconscious solutions being implemented into a business strategy on the basis of what has been done previously, however this carries significant risk and it is crucial for businesses to identify these hidden choices.

“Addressing hidden choices is absolutely vital,” Dr Trench said.

“If you don’t step back and think through what those hidden choices are, then you could be potentially making the process suboptimal, if not wasting your time in carrying out the strategy.”

Mr Sykes identified a number of relevant factors that should be actively considered throughout the strategy planning process.

“Think about how much you’re going to base it on previous strategies or if it is something completely new and you’ll start fresh,” he said.

“If you’re a startup company, there may not be anything to base your strategy on, so decisions may be made through the use of data, intuition or tacit knowledge.

Dr Trench agreed, saying it is important to consider if a rational or creative approach will be taken, as well as who will be involved – whether that be all employees or just the board and executive team, or external parties like a strategy consultant or other stakeholders.

“A rational approach is getting data, analysing it and using the data to inform the steps of the strategy,” he said.

“A creative approach may include methodologies, such as the use of future scenarios to inform your thinking, and perhaps allow you to find solutions that a wholly data-driven approach may not offer.

“It’s always worth thinking about implementation right from the beginning.”

As well as the big choices, Mr Sykes said everyday decisions also had a significant impact on the formulation of a strategy.

“There’s an awful lot of strategy that’s done without people necessarily realising it's strategy work,” he said.

“Whether to engage with this client or not, whether to choose this supplier or not, whether to buy this new technology or not – all these little decisions eventually add up to the whole strategy.”

Considering organisational circumstances

Dr Trench said when planning a business strategy, an organisation’s circumstances needed to be taken into account.

“An emergent strategy, where you try lots of things and keep what works, would be better suited for organisations where the cost of trying to do something is very low and you can carry out different methods quickly,” he said.

“On the other hand, if you’re a large oil and gas company, then clearly you cannot do this because, when trying something can mean spending $10 billion or building a liquefied natural gas plant for $50 billion, the idea that you build half a dozen plants and keep the ones which work is obviously nonsense.”

According to Mr Sykes, when planning a strategy, you should always remain aware of the risks and circumstances that will surround its execution.

“Usually what you come up with is outdated quickly, as the world changes very quickly,” he said.

Keeping it simple

While much consideration is involved in business strategy planning, Mr Sykes said, ultimately, it should be kept straightforward.

“I think strategy is, often, vastly overcomplicated,” he said.

“I would just try and keep it simple, whether you’re trying to create a strategy for your team or a personal strategy.

“The two things that are massively underrated are time and effort – sufficient time must be devoted to implementing and continuing a strategy, and making yourself change or moving your team in the same direction is an enormous effort.”

Mr Sykes said it was important for businesses to not be too ambitious in order to retain the ability to explore new ideas.

“We have infinite opportunities to do all sorts of things, but we also have limited time and capacity,” he said.

“You have to be selective in what you’re doing.”

Other articles in this series:

What is Business Strategy?