How to formulate a Business Strategy
This is the eight in a compilation of stories drawn from my learnings on the Fundamentals of Business Strategy from the University of Virginia’s course.
Stepping forward into the unknown (also known as ‘the future’) is what companies do every day. And what do they need to make sure they don’t get lost? A strategy, of course.
Over my previous posts, I covered several items related to Business Strategy: the foundations, analyzing the industry, our own capabilities, our competitive position, how the strategy evolves over time, internationalization and diversification.
In this post, I'll talk about how to come up with a strategy.
The Strategic War Room
The Strategic War Room, contributed by Krister Forsberg, provides a way for leadership teams to come to a common understanding of insights about the organization. When complete, leaders get a comprehensive view (both mentally and pictorially) of the organization’s strategies, goals, key stakeholders and delivery milestones.
The Strategic War Room is metaphorical; a virtual “room” built by the leadership team over the course of several facilitated strategic workshops. When complete, the Strategic War Room will have 5 maps on its walls:
- The Business Environment Map, showing trends and events in the delivery chain, customers, suppliers, partners, competitors, owners, the financial market, the labour market, the authorities, and other actors in the organization’s business environment.
- The Delivery Map, which includes the most important deliveries in goods, services and information from and to the nearest stakeholders.
- The Stakeholder Map which identifies the most important stakeholders.
- The Goal Map, including the most important performance and capability goals.
- The Strategy Map, outlining the most important strategies.
Rapid prototyping is an Agile strategy used throughout the product development process. With this approach, 3-dimensional prototypes of a product or feature are created and tested in an attempt to optimize characteristics like shape, size, and overall usability.
Prototyping is a way to validate the hypothesis that a product will solve the problem it is intended to solve. Although not fully functional by any means, a prototype often “looks” real enough that potential users can interact with it and provide feedback.
If the feedback reveals that the prototype is pretty far off the mark, then the company saves weeks or months from building something that won’t work in the real world; while a positive reaction to a prototype indicates the product concepts are on the right track and development should proceed.
The “rapid” part of this comes into play with the speed that the initial prototype can be produced, how quickly feedback can be gathered and synthesized, and then how fast subsequent iterations can go through the same process. Teams must find a delicate balance between creating a prototype that looks real enough so users are providing genuine reactions and feedback but without spending so much time on the prototype that the team is hesitant to throw away the work due to expended resources and opportunity costs of going back to square one.
The design thinking is an iterative non-linear cycle which involves developing a deep understanding of customers’ or users’ unmet needs within the context of a particular situation, making sense of data and discovering insights, questioning assumptions, exploring different perspectives, reframing problems into opportunities, generating creative ideas, critiquing and choosing ideas, testing through prototyping and experimentation, refining solutions, and finally implementing your innovation.
Business Model Canvas
Business Model Canvas is a strategic management and lean startup template for developing new or documenting existing business models. It is a visual chart with elements describing a firm’s or product’s value proposition, infrastructure, customers, and finances. It assists firms in aligning their activities by illustrating potential trade-offs.
The nine “building blocks” of the business model design template that came to be called the Business Model Canvas were initially proposed in 2005 by Alexander Osterwalder based on his earlier work on business model ontology. Since the release of Osterwalder’s work around 2008, new canvases for specific niches have appeared.