Ángel Teodoro García Sánchez, CIDH Ambassador to the Balearic Islands, gives his views on strategy formulation and implementation.
The success of our company, that is the longed-for goal. In this article I will try to do my bit, giving my humble point of view on two aspects that I consider very important: strategic formulation and implementation, in which of them will lie the longed-for success?
A brief reminder
- Strategy: Details the steps that give rise to a process that seeks to achieve a goal.
- Strategic decision: Choose the strategy that, a priori, makes the company more competitive.
- Vision of the company: How we want the company to be today and in the distant and even indefinite future. It is about establishing the path to follow.
- Mission of the company: This is one level below the vision and tries to establish the personality and identity of the company now and in the future from a very general point of view. It must be able to adapt to change (be dynamic) in order to remain faithful to the vision over time.
- Stakeholders: People or groups of people who can influence the development of the company (shareholders, employees, local environment, suppliers, trade unions, state, etc.).
- Synergies (companies): A very important concept, especially in diversified companies. It consists of creating more value through cooperation between companies, in other words, if companies cooperate, they acquire more value than the sum of the value they create by operating individually.
- Company culture: Experiences, habits, customs, beliefs and values that characterise the way a company works. It is essential for engaging employees.
Before the strategic formulation, we must carry out a prior strategic analysis, i.e. an external analysis of the environment and an internal analysis of the company.
We construct the different paths that lead us to Rome.
We try to design the different alternatives (strategies) to fulfil the mission and objectives that have been defined in the strategic analysis.
These alternatives must cover the three strategic levels of the company:
1st Level. The corporate strategy.
This sets the basic orientation of the company as a whole. In diversified companies it is very important to search for synergies between the different strategic business units, or in other words, several homogeneous sets of business activities (UEN).
- Examples: what is the company’s mission, what objectives should we establish to achieve it, how should the company adapt to the environment (important to control the influence of stakeholders), how do we want to create value, etc…
2nd Level. Competitive strategy.
Determines how best to compete. In diversified companies, each CSU will have its own. I highlight some important decisions, such as: the creation and maintenance of a competitive advantage and valuable resources and capabilities for the company to be competitive.
- Examples: how to improve the quality of our products (keep in mind that quality is subjective, we have to be clear about what our customers perceive as quality), do we have to invest in technology to be more innovative than the competition, how should we optimise costs, etc…
3rd Level. Functional strategies.
How to use and apply the resources and skills within each functional area, such as: production, marketing, financing, human resources and technology.
- Examples: production (renewing equipment, production processes, etc.), commercial policies (promotion, advertising, etc.), financing (looking for new sources of financing, controlling financial sustainability, etc.) or human resources (incentive plans, promotion, etc.).
We evaluate the different strategies
We identify the one that, a priori, seems to be the best strategy.
This consists of implementing the chosen strategy. Three important factors play a role: the leadership capacity of the managers, the organisational structure (the continuous flow of information between the different levels is important) and, above all, the most important factor, the involvement of the employees.
Of particular relevance is the corporate culture, the purpose of which is that employees make the company’s objectives their own and internalise them. It is more important than one might think at first, because corporate culture can contribute to the success of the company: reducing costs (the employee looks after the interests of the company), improving performance (the employee feels at ease, therefore is more efficient and productive), improving the brand image and facilitating valuable contributions or ideas for improvement from the employees, among other aspects.
Once the strategy has been implemented, it must be closely monitored over time, in order to adapt or correct it if necessary, due to the increasing complexity (number of influencing factors) and dynamism (continuous change) of the markets.
So where does success lie?
No matter how good the formulation, if the employees are not involved, i.e. if the implementation is rejected or not fully or partially understood, it is very likely that expectations will not be met or even that the company will fail outright. However, a bad strategic formulation can be corrected by a good implementation.
In conclusion, the success of the company lies in the strategic implementation and consequently, the human capital becomes the most valuable asset of the company.
I hope you found the article interesting. I invite you to comment and criticise. Thank you for your attention.