Why Strategic Thinking Matters

Success in business stems from the ability to communicate with the customers, solve their problems in a way that they prefer, and do it profitably. To be able to do this as efficiently as possible you need a business strategy that guides you to your goals. Strategy defines where and how your company competes and what you want to accomplish.

The pitfalls of strategy

A well-documented strategy is not worth much if it not rooted in the reality of the industry and the company itself. I’ve seen many organizations whose strategy is a phantom that has no chance of succeeding. A strategy must be ambitious, but executable.

Even if the strategy is potentially realizable it is still almost worthless if the management and employees don’t commit to it. The reason for poor commitment is often that employees don’t understand how they can work towards the strategic goals. In addition, there is no strategic guidance and leadership that wants to make things happen.

Can you succeed without a strategy?

Every company has a strategy even if it is not documented. The strategy is visible in the decisions that the company’s leaders make and in the way the business system is organized.

A company lacking elaborate strategy documentation can still be highly successful. In that case it usually has a clear purpose for its existence and that purpose drives the decisions and work at the company.

Why bother?

If documented strategy in itself has no explicit value, why bother with the strategy process?

Based on my experience as a management consultant creating strategy as a one-off exercise is not completely useless. However, if strategic thinking becomes a process, as the name implies, it has a transformational effect. Strategic thinking becomes everybody’s business.

The purpose

The most important question leaders have to ask themselves is “why does our company exist?” That question is the basis of all strategic thinking. Failing to understand the purpose of the company is like a house without a foundation. It can hold up for a while, but it will eventually collapse in a storm or flood.

The purpose is the way a company describes itself – why it exists, the unique value it brings to the world, what sets it apart, and why and for whom it matters. “We’re here to make money” does not explain why your company exists.

Expressing the purpose of your company is the first step before rushing into the strategy process itself.

The future

How many small companies actually think where they want to be in 10 years from now? My experience tells me that most small enterprises have not really set goals further than 12 months. The goals are more operational and related to cash flow than strategic.

What do you really want to be in the future? Is the way you do your business and the environment you do it in going to take you there? These questions are essential when it comes to strategy. A strategy is a journey. Without a direction it does not make much sense.