As you progress in your quality management career, you may be asked to take on a more senior role and contribute to the strategic direction of your organisation. In his latest post, Programme Lead Chris Smith PCQI, asks what is corporate strategy and why is it important? He provides a six-step process to ensure you develop a long term plan, designed to meet your organisation’s objectives.
The formulation of corporate strategy is a subject that by its very nature doesn’t lend itself to a generic approach which can be cut and pasted, or tailored to fit. Even some of the definitions and concepts can and are interpreted in different ways, and individual circumstances will dictate how a specific strategy should be developed and implemented, depending on the circumstances of the organisation in question.
Corporate strategy is based on knowing:
- where your organisation is today
- where you want it to be
- how you want to get there.
The risk of not changing and improving can be as significant as the risks which may affect your plans to develop your business, your competition is almost certainly changing and moving ahead. And, you are likely to be left behind in terms of efficiency, reputation and financial success if you do not learn lessons and appreciate what factors may influence your likely success in delivering your business goals. These factors all impact on your corporate strategy and business plan.
Defining corporate strategy is a process and the objective of the process is to combine the activities of the various functional areas of a business in a way which will achieve its organisational objectives.
It is not always written down or explicit, but it should determine how you:
- are organised
- set objectives, define policies and allocate resources
- operate on a day-to-day basis (i.e. your operational processes).
The output of the process is a strategic plan which will set the parameters for detailed operational and departmental plans.
What skills do you need?
To develop a strategic plan for your organisation you must be able to:
- establish a clear, achievable and compelling vision which sets out where the organisation should be going
- identify and prioritise strategic objectives that are consistent with the vision of the organisation
- balance risk with desired outcomes
- balance innovation with tried and tested solutions
- ensure that your plan is flexible and open to change
- develop policies and values that will guide the work of others towards your vision
- delegate responsibility for achieving goals and allocate resources effectively
- identify measures and methods for monitoring and evaluating the plan
- balance the needs and expectations of key stakeholders and win their support.
Some key concepts
Various terms are commonly used in connection with the overall business planning process (whereby you define your aims and objectives, your strategy for achieving them, and the means by which you will implement the strategy, ie your management system). To use an analogy, if the development and progress of an organisation is a journey, its:
- vision could be regarded as the reason for making the trip, and selecting the intended destination
- values influence the choice of path, the direction and speed of travel, and may even affect how you decide on your destination
- mission is the path it will travel
- strategy defines the direction and speed it will travel
- policies influence how the journey is made
- tactics may be required if the path is blocked or is rougher than expected.
1: YOUR VISION (WHERE YOU WOULD LIKE TO SEE YOURSELVES IN THE FUTURE)
A ‘vision’ statement communicates both the purpose and values of the organisation. For employees, it gives direction about how they are expected to behave and (should) inspire them to give of their best. Shared with customers, it can influence their attitude to why they should work with the organisation.
It should be a concise, compelling statement defining the organisation’s long-term direction, what the organisation intends to become in, usually 3 to 5 years’ time. It should have sufficient detail that it can be recognised as complete once accomplished.
It defines what the organisation is working towards. In effect, it says how the organisation would like to be thought of and remembered.
The business should develop the organisation’s culture, values and behaviour so that they can help people to achieve your vision without thinking consciously about it.
2: YOUR VALUES
Values are the guiding beliefs about how you should operate. Core values reflect what is important to an organisation, and they may well be a factor in how the overall ‘vision’ is defined. They do not change from time to time and in different situations, and they underpin the culture of the organisation. With corporate social responsibility (CSR) becoming an increasingly important issue in many quarters, more and more firms are taking action to turn their organisation’s values into a competitive asset.
For example: Microsoft Corporate Values
- Respect ‘We recognize that the thoughts, feelings, and backgrounds of others are as important as our own’.
- Integrity ‘We are honest, ethical, and trustworthy’.
- Accountability ‘We accept full responsibility for our decisions, actions, and results’.
3: YOUR MISSION (WHY YOU EXIST)
The ‘mission’ of an organisation describes its overall function (what is this organisation trying to accomplish?). It defines the key measures of the organisation’s success. It should reflect the organisation’s purpose, values and intended market (what we do, and for whom). It does not (necessarily) define how you do it.
Examples of mission statements:
Jaguar Land Rover: ‘We want to deliver more great products, faster than we have ever done before. We want to be leaders in the field of environmental innovation. We want to be sure our customers always come first’.
Jet2: ‘To be the UK’s Leading and Best Leisure Travel business.’
Google: ‘To organise the world’s information and make it universally accessible and useful.’
CQI: ‘To advance the practice of quality management in all sectors for the benefit of society’.
4: YOUR CORPORATE STRATEGY (HOW YOU WILL DO IT)
Corporate strategy is concerned with deploying the available resources to achieve your objectives whereas tactics are concerned with employing them. Strategy will affect the overall direction of the organisation and establish its future working environment.
Corporate strategy defines the markets and the businesses in which an organisation chooses to operate. Competitive or business strategy defines the basis on which it will compete. Corporate strategy is typically decided in the context of the organisation’s mission and vision (what the organisation does, why it exists, and what it intends to become).
Competitive strategy depends on an organisation’s capabilities, strengths, and weaknesses in relation to market characteristics and the corresponding capabilities, strengths, and weaknesses of its competitors. According to Porter, competition within an industry is driven by five basic factors:
- threat of new entrants
- threat of substitute products or services
- bargaining power of suppliers
- bargaining power of buyers
- rivalry amongst existing firms.
Kepner-Tregoe define strategy as ‘the framework which guides those choices that determine the nature and direction of an organization. Ultimately, this comes down to selecting products (or services) to offer and the markets in which to offer them.’
They propose that executives base these decisions on a single ‘driving force’ of the business. Although there are nine possible driving forces, they say that only one can serve as the basis for strategy for a given business. The nine possibilities are:
- products offered
- production capability
- natural resources
- market needs
- method of sale
- size/growth
- technology
- method of distribution
- return/profit.
5: YOUR POLICIES
Policies are the intentions and principles which provide a framework for how an organisation means to operate.
Policies must be relevant to the organisation’s mission and plans. They will influence how processes are designed, managed and implemented or even if they need to exist.
Compliance with external standards requires that you have a suitable policy for the achievement of quality/environmental management etc, which must be communicated to and understood by your staff.
You will also have policies (whether formal or informal) relating to your attitude to staff and their development, the selection of suppliers and a range of other matters. It is important that these are also clear and consistent, so that your people can easily apply them to the processes in which they work.
Where are you now?
In defining corporate strategy, it makes sense to follow an APA (assess/plan/act) process to emphasise:
- the importance of the first (Assess) stage
- the fact that it is not a continuous cycle, but a repetitive process carried out at intervals.
Whether you are a start-up company deciding on your key priorities or a long-established business facing changing market conditions or planning to expand, there will be times when you as senior management need to:
- Assess: consider your current position and capabilities (where do you want to be in your chosen market ‘space’, what are your ‘core competences’, what is the strategic fit?.. gather information, identify risks and other factors that might influence how you will operate, clarify overall objectives, consider available options which will take you where you want to get to
- Plan: define a detailed and costed action plan to deliver the selected option(s), formulate policies, decide how to mitigate risks
- Act: put your plans into action.
The concept of core competences was developed by Prahalad and Hamel through articles in the Harvard Business Review. The CQI also have developed their current range of Quality Management Courses through extensive research into a wide range of sectors and organisations and as a result of this investigation then applying the resultant competency framework covering the following five competences:-
- Governance
- Assurance
- Context
- Improvement
- Leadership.
The idea is that, over time, an organisation may develop areas of expertise that are both distinctive to the organisation and essential for long term growth. They are most likely to develop in the core functions of the organisation where the most value is added to its products.
6: YOUR TACTICS
From time to time, and certainly when significant change (internal or external) is foreseen, you should revisit each aspect of the APA process to:
- Review progress, assess the significance of changes which have occurred since the plan was put in place
- Revise the plan accordingly
- Refine how you put the plan into action.
A: Assess (Review)
You need to consider at least the following key areas:
- Turnover and growth
What are your current (and forecast) financial position and sales trends?
Will you need to raise additional funds, and if so how?
- Product (goods and services)
What is the current and planned ‘output’ of goods and services?
How have existing products developed and where are they in their lifecycles?
What new products are needed and when will they be ready?
What are the main attributes of the products?
- People
Do you have the right team in place with the required range of skills?
If not, how will you fill the gaps?
- Resources
In what condition (age, suitability, reliability) are your premises, plant and equipment?
Can new technology enable you to do different things, and to do things differently?
Can you strengthen your relationships with partners and suppliers?
- Market profile and competitor analysis
Who are your current and potential customers?
Who buys, and who influences the decision?
What are their needs?
What are the main market segments?
What and where is the competition?
Who are they, strengths and weaknesses, market sectors?
Are your promotional, selling and distribution channels established and working?
Answering these questions involves a mix of internal analysis and an analysis of relevant external factors which come together in a SWOT (strengths, weaknesses, opportunities, threats) analysis, the summary of which should inform your strategy selection.
Some of the more popular methods of assessing the factors which should influence your strategy include:
- PEST: political/economic/socio-cultural/technological
- PESTLE: political/economic/social/technological/legal/environmental
The various factors which have to be considered are:
- Social: consumer habits and the status of the general public (eg demography, income profile)
- Legal: government and other legislation
- Economic: retail sales figures, stock market trends, GDP, balance of payments, labour markets and issues (eg a change in the minimum wage)
- Political: changes in government influence (eg Brexit)
- Technological: developments and trends
- Environmental: aspects and impacts, legislation changes, public attitudes
Strategic objectives might include:
- to maintain a virtual business structure that operates electronically through a series of partnerships and associations
- to seek to acquire a similar organisation in each of our targeted regions within the next 24 months
- to introduce a new product every 9-12 months
- to maximise our turnover and profitability for the next three years with a view to selling the organisation.
B: Plan (Revise)
Where do you want to be? Define the strategic direction of the business, and your objectives, in terms of:
- physical appearance
- size
- premises and locations
- products and services
- methods of distribution
- staff
- markets
- corporate image.
How will you get there?
Consider all key issues and create a strategic plan for each, all supporting the overall mission:
- marketing: segments, promotion, selling, products
- people: training, communication, culture
- resources: required and available
- finance: funding, pricing, profit.
Define policies to be followed. Such as:
- diversification
- organic growth or acquisitions
- methods of funding growth
- new product development
- in-house or subcontract production.
Set clear goals, action plan and timescales. Such as:
- what results are needed in the medium term?
- what has to happen / not happen for the business to develop?
- what are the main risks and how can they be overcome?
Assess financial implications:
- basis for financial calculations (assumptions and constraints, sensitivity analysis)
- current financial commitments
- for each major product / project: major elements of cost / expected revenue / timescale.
Operational objectives support the longer-term strategic objectives. They should be measurable and should relate to both the vision and mission. They are detailed, costed and timed plans of what you will do to meet each strategic goal. They set out a work plan, typically over a 12-month period.
C: Act (Refine)
The usual issues relating to the management of change such as resistance and how this is resolved within the specific organisation. Also ensuring robust plans are developed for the implementation of the strategy. So working to a timetable of major milestones should help to ensure that the plan is followed, the objectives achieved, and steps are taken to bring you closer to your long term vision for the organisation.
Chris Smith, PCQI
Programme Lead, rove.
If you’re looking to achieve at strategic level in your Quality Management career, you may be interested in studying one of our Professional CQI and IRCA Quality Management courses. What’s more, they also meet the knowledge requirements for CQI membership at Chartered Quality Professional level. Find out more about our Professional courses here.