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Understanding Strategic Clarity involves dissection of the two words of “Strategy” & “Clarity”
In ancient Greek, ‘Stratos’ was the term for the army and so in military terms, ‘strategy’ referred to ‘the act of the general’.
Strategy nowadays is ‘big stuff’ – the top levels of the organisation are generally involved in preparing plans for the future – for finance, and growth by acquisitions, innovation in products, developing new markets and increasing internal efficiency.
Strategy itself may have several definitions of its own:
1. A strategy is
“The art of war*, especially the planning of movements of troops and ships etc., into favourable positions; plan of action or policy in business or politics etc.”
– Oxford Pocket Dictionary
2. Hofer and Schendel define it as
“the mediating force or ‘match’ between the organisation and the environment.”
– Hofer and Schendel 1979
3. Alfred Chandler Jr. suggests:
“the determination of the basic-long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals”.
– Chandler (1962)
4. Quinn stresses integration:
“the pattern or plan that integrates an organization’s major goals, policies and action sequences into a cohesive whole…strategy helps marshal and allocate an organization’s resources into a unique and viable posture.”
There are various Schools of strategy too and for strategic clarity it is essential to understand what they want to tell us.
1. The planning School:
• Achieves a ‘fit’ between the organisational strategy and the environment in which it operates.
• Requires detailed and inflexible planning not suitable in turbulent markets.
• Uses ‘Product Life Cycle’ and other marketing theories.
• Based on past trends, forecasts and stable structures and environments eg mature industries, public sector.
• Uses a very bureaucratic and rational process.
2. The ‘positional’ school:
• Focuses on a rational, analytical approach of making strategy
• Attempts to place the organisation and its products in a favourable market or environment
• Based on performance measurement and decision-making tools
• Emphasises competitive advantage.
3. The ‘resource based’ school
• Looks to the internal environment instead of the market
• Incorporates the ‘core competence’ approach of Prahalad and Hamel, 1994
• Based on an ‘inside-out’ approach suggesting that the competitive advantage of an organisation is based on its own distinctive resources, capabilities, and competences.
Apart from these schools, strategy has various levels too. These Levels are as follows:
1. Corporate strategy – what business are we in, or hope to be in? what business or businesses the firm should be in? It relates to the future formula and structure of the company and affects the rationale of the company and the business in which it intends to compete. Example Racal Electronics’ decision to float off Vodafone as a separate company.
2. Competitive or business strategy: Strategic Business Units (SBUs) are a part of an organisation for which there is a distinct external market for goods or services how each business attempts to achieve its mission within its chosen area of activity. Here strategy is about which products or services should be developed and offered to which markets and the extent to which the customer needs are met whilst achieving the objectives of the organisation. A term that is often used in relation to business strategy is SBU, or strategic business unit. SBU means a unit within the overall corporate entity for which there is an external market for its goods and services, which is distinct from that of another SBU.
3. Operational or functional strategies – departmental level – accounting, HR, manufacturing, marketing – how the different functions of the business support the corporate and business strategies. They are concerned with how the various functions of the organisation contribute to the achievement of strategy. It examines how the different functions of the business (marketing, production, finance etc.) support the corporate and business strategies. Such corporate planning at the operational level is means oriented and most activities are concerned only with the ability to undertake directions.
Now, what do we understand by the word clarity? Clarity in strictest business terms means mere absence of haze and passage of light through a material so that it can be clearly seen. Clarity in strategy means that the PROCESS OF STRATEGY should be clear enough for a company to achieve its goals and objectives in a corporate world. It must not deviate from the path that had been chalked by its management team both higher, middle, and lower. Now let us discuss the PROCESS OF STRATEGY
Every organisation will have a purpose for its continued existence. A mission statement expresses their purpose and can therefore be a brief statement. It also links with the idea of Vision – how managers interpret the Mission for their colleagues.
Mission statements can be long or short. A statement should include the basic function or tasks of an organisation, particularly why it exists, the nature of the businesses it is in, and the customers or clients it seeks to satisfy. A formal mission statement provides a driving force behind the organisation’s other plans and more specific objectives. A mission statement is a formal commitment to the vision that incorporates the company’s strategy.
Goals are general statement of aim or purpose. Objectives are quantification if possible or more precise statements of the goal.” Objectives do not only represent the end point of planning but are the ends towards which management activities and resource usage is directed. They therefore provide a sense of direction and a measure of success achievement. In a way, objectives are easier as they are nearer ‘now’ and can be seen at the bottom levels – such as “reduce absenteeism by 5% by end-year”. These are often ‘SMART’ –Specific, Measurable, Achievable, Relevant/Realistic and Time-bound.
Strategies relate to broad areas of an enterprise’s operations. Their purpose is to furnish a framework for more detailed tactical planning and action.
Tactics are actions carried out to put into effect the details of a strategic decision –tactics can therefore be the detailed implementation of a strategy. In addition, some tactical decisions will be made in response to changing circumstances.
Actions, programmes, and rules are the operational practices that will translate the intention of the tactics into action by individuals and are therefore detailed, short term and subject to immediate control.
Formulating appropriate goals is a vital component of the process of strategic planning and decision-making. The ‘goal model of effectiveness’ stresses external achievement. Organisational goals are important because they provide a sense of direction and help to focus management decision-making; they also provide a standard against which progress can be evaluated. Usually goals are thought of as more long-term or higher-level abstractions, than objectives. Such goals may be derived for functional activities and departments – to create a more efficient factory or implement a better management information system for example. Also, there may be more general performance goals such as ‘to increase the return on assets’, or ‘to raise productivity’. These are desired results linked to timescales.
Therefore, Strategic Clarity is nothing but clarity in the strategic process for achievement of goals.