Strategy Levels And How To Apply Them In Your Business
by Pat Ordenes, on Sep 28, 2018 1:44:16 AM
Let's talk about strategy levels. Like any business, strategy comes in various shapes and sizes. The strategy for a multi-national company will contrast one from a startup, yet the principles remain. To understand how strategies shift, we'll look at the strategy levels that exist and how an organization can apply them. Ultimately, the biggest take away we hope you get from this post, is that strategy is for everyone. You don't have to wait until your business grows to a certain size to 'get strategic'. You want to be conscious of where you are as a business so you can develop your strategy in a way that it fits and grows with your organization.
We're going to discuss 3 key strategy levels, how they differentiate and provide some context on how to use them:
Corporate Level Strategy
Corporate strategies are the ‘top’ level of strategy in an organization. The corporate strategy will define the overall direction the organization will move in and the high-level plans of how. These plans are usually created by a select strategy group such as the CEO and top management. Generally this is the group involved because they hold a deep understanding of the company and strategic business knowledge needed to steer the organization in the right direction. A corporate strategy is generally broader in nature compared to the other strategy levels. Strategies at this level are more conceptual and futuristic than business/functional area strategies, and will usually span a 3-5 year period.
A corporate strategic plan will generally encompass:
Why Create a Corporate Strategy?
The corporate strategic plan decides the markets the organization should compete in, which then directs the creation of business unit level strategy and the functional-level strategies. These strategies, in turn, will guide the downstream decisions made by employees of all levels. Therefore, every decision/action made in the organization should directly or indirectly contribute to the corporate objectives in the strategy, directly or indirectly. If the importance of corporate strategy isn't yet clear, let's make sure it is - every organization needs a corporate strategy. No organization is too small nor large to define what they want to achieve, and how they will do it.
Here at Cascade, we've used our own strategic planning and execution software to create our corporate strategic plan. Take a look below:
Business Strategy Level
The business-level strategy is the second tier in the strategy hierarchy. Sitting under the corporate strategy, the business strategy is a means to achieve the goals of a specific business unit in the organization. One thing to note, implementing this strategy level is only useful for organizations with multiple business units. An organization with multiple business units may sell products as well as services or may sell multiple products/services in different industries. A large Bank is a prime example of an organization selling multiple services in different industries, with business units in corporate banking, wealth management, risk management, and capital raising to name a few. Each of these business units would have distinct goals, and a distinct business strategy to achieve these goals.
Who Creates Business Level Strategies?
Strategies at the business level should be constructed by the heads of business units and other middle managers within each unit. Including a range of managers from each unit to participate in the strategy process is important for a few reasons:
- Increases buy-in: managers who've had a chance to contribute to the strategies creation feel included in the decision making. Therefore, they're more likely to accept the strategy and jump on board with the execution of it.
- Improves ownership: Employees who are given the opportunity to contribute to the formation of the strategy are more likely to take ownership over it's completion.
If your organization only has one business unit, you don't need to worry about this strategy level - and can skip to the functional strategy level. Here at Cascade, we only have one business unit, our strategic planning and execution software, so currently we don't have a strategy at the business level. Now let's say, for example, Cascade also developed a second type of software, for processing payments. We would then need to develop a business-level strategy to allow for the two business types to grow alongside each other.
Functional Strategy Level
This is the level at the operating end of an organization. At the functional level of strategy, decisions made by employees are often described as tactical decisions. They are concerned with how the various functions of an organization contribute to the other strategy levels. These functions can include marketing, finance, manufacturing, human resources and more. Functional strategy deals with a fairly restrictive plan, giving the objectives for each specific function.
In simple terms, this is the strategy that will inform the day to day work of employees and will ultimately keep your organization moving in the right direction. The functional strategy level is probably the most important level of strategy. This is because, without functional strategies, your organization can quickly lose traction and 'get stuck', while competition moves forward.
If you are a larger organization, at this bottom level you start to think about how the various departments will contribute to your growth and how they will work together, keeping in mind your corporate strategy. Your marketing strategy, finance, IT, operations and other departments, all have goals and responsibilities to deliver and having a visible functional level of strategy that aligns back to the overall corporate strategy, will increase the chances of success.
What If You're A Smaller Organization?
In this scenario, having a functional level is just as important (sometimes more so). It may mean that if you're one or two people, you end up wearing more than one 'functional hat'. Or, you may not have the various functions clearly defined - but they are still there. So, you might not have a 'marketing team', but there's still marketing activities that need to be done. You may not have a 'finance team', but your organization still has bills that need to be paid :)
Again using Cascade Strategy: we're not a massive organization (although we're moving fast!), yet we use the ability to create multiple plans within our software. We've created a strategic plan for each function in the organization, which link back to our main corporate plan to ensure everything is moving in the right direction.
As the saying goes: "A journey of a thousand miles begins with one step". Creating functional strategy levels will ensure that the steps your organization is taking are the right ones. Like we mentioned earlier, the key takeaway here is that strategy is for everyone, no matter the stage of your business idea or organization.
Of course, having a good (or great) strategy isn't a guarantee for success, but it's definitely the place to start in order to succeed. Understanding the levels of strategy is a big part of getting the creation right, however, with increased levels, there can be increased confusion. Our dedicated strategy software, Cascade, will allow you to build your corporate plan, then create plans for at the business level and functional levels with ease. Cascade makes it super easy to align projects and collaborate across plans and departments. Try it for FREE and see how you can go from simply writing your plan somewhere static to a more dynamic space that you can share with everyone in your organization - it makes all the difference!