I often get asked this question. The textbook approach to developing strategy uses a simple approach – Where are we today? Where do we want to be tomorrow? How are we going to get from here to there. In large organizations with several BU, there could be several strategies running at any time. The question is – are these strategies all working to achieving a common corporate objective? How well do these strategies align with corporate strategy? Well …. let’s understand the basics first. In Fortune 500 organizations, there are several different types of strategies, as depicted below:
No matter where you operate, it is imperative that the current strategy is clearly tied to higher level strategy. For example, if you are working on Business Strategy, then this has to clearly tie back to Corporate strategy (alternatively, Corporate Strategy should be one of your inputs/drivers).
Corporate strategy is concerned with overall business to meet stakeholders, customers and board’s expectations. Corporate strategy is usually spelled out in mission statement.
Business unit strategies include Marketing Strategy, HR Strategy, IT/Technology Strategy, Sales Strategy, etc. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility. Some of these strategies even though focussed on achieving business unit objectives may include dimensions that are beyond the scope of a single business unit. Also, a lot depends on how these organizations/BU are structured – centralized, decentralized, or hybrid structure. Say for example, if each business unit has its own Marketing department, it may make sense, or rather the business unit may have its own Marketing Strategy. However, if the organization has centralized Marketing division, then a single cohesive organization-wide Marketing Strategy might exist.
Operational Strategy works as silo of Business Unit strategy with operational related activities and no budget of its own.
Understanding the big picture is very important esp. when having a conversation with C-level executives. Having a big picture view like above, helps not just in Strategy creation but also in areas of PPM, Change Management, designing org structure, new product development etc.
What does all this tell you? Well, before you jump onto Strategic engagements, try to learn and understand the organization structure from the perspective of how business is organized, conducted and the hierarchy amongst them. Read the board minutes, if you are lucky to get access to it (I haven’t read one so far, but I think I may get lucky one of these days!) Strategic plan, strategic choice and strategic analysis are very important topics for senior executives and it only makes sense for one to be fully equipped before engaging in a conversation.