It can be a daunting task to formulate a business strategy and with good reason: It could make or break an enterprise. But, developing a strong strategy does not have to be daunting.
The online class in the online course Business Strategy, Harvard Business School Professor Felix Oberholzer-Gee claims that strategy is straightforward. The secret to his success? Make sure you are focusing on your company’s value creating.
“Strategy can be an idea that only the top executives have the ability to create,” Oberholzer-Gee says. “But it’s true that anyone is able to think and act strategically. It doesn’t have to be complicated. All you require is a tested framework.”
Here’s an overview of the reasons why business strategies are important as well as the essentials of a value-based strategy, as well as six steps to create your own.
What are the reasons you should have a Business Strategy?
Strategy for business is the process of developing aligning, integrating, and implementing of an organization’s strategic goals to provide it with a advantage in the marketplace. The development of a business strategy will assure that you have a precise plan to reach your organization’s objectives and ensuring that you continue to thrive and grow.
As per research published in the Harvard Business Review 90 percent of businesses do not meet their goals for strategic development. This, in conjunction with the reality that 85 percent of executive teams do not spend more than an hour each month discussing strategy, and half of them do not even spend any time discussing strategy, highlights the need to devote more time to the development of strategies.
One strategy for business is known as a value-based strategy that makes the process simpler by using values stick as a framework in order to concentrate on the benefits your business produces.
What is a VALUE-BASED Strategy?
A value-based plan is also known as price-based strategy, or value-based strategy in which an organisation is based on the value it perceives for its products and services to establish the structure of its prices and allocation of resources.
A structure of the value stick is a tool to see the way that various elements impact on each other, and to determine the best strategies to follow to improve the value of all involved.
The value stick is composed of four components:
- Willingness to Pay (WTP): The most expensive price that a client will pay for your product or service.
- Price The amount that customers must pay for items or services
- Cost: The amount that a company pays to produce products or services
- Willingness to Sell (WTS): The most minimal amount that suppliers will accept for the raw materials needed to make goods or services.
To figure out how best to generate value, move each of the factors in the Value Stick and see what effect it has on the other aspects. For instance, lowering price increases customer delight.
“As analysts, as strategists we have three questions to ask,” Oberholzer-Gee says in Business Strategy. “How do I most effectively create value for my customers? What can my business do to bring benefits for its employees? How can my company increase its value through collaboration with suppliers? Imagine a company’s plan of action as a solution to the three issues.”
6 STEPS TO IMPLEMENT A VALUE-INSPIRED BUSINESS STRATEGY
1. Define your purpose
When it comes to business strategy and defining the purpose of your business is a great starting place.
This is crucial in generating the value of employees and customers in your business, particularly if its goal is linked to a cause, such as protection of the environment or addressing particular social problems.
A recent study conducted by the clean energy firm Swytch discovered that more than 75% of young people would accept the loss of a salary in the event of being employed by an environmentally-friendly firm. About 40 percent of respondents chose one position over another due to sustainability methods.
Furthermore, research in the Harvard Business Review confirms that consumers’ incentive to purchase from companies that are environmentally friendly is increasing. Products that are marked as sustainable rose over five-fold more than those that were not.
If you start with a clear goal Your company can generate greater value later on.
2. Review Market Opportunity
Learn about the competitive landscape of your market. What companies control the majority within the markets? What distinguishes their services from those of yours? Are there any needs that aren’t being met that your business could take advantage of?
Conducting research prior to planning the strategy is crucial to determining how your business can offer an exceptional customer experience and has the potential to add more.
3. Bring Value to Customers
If you are aware about the marketplace and your business’s goals, you will be able to determine the ways your company can provide something unique or more valuable and devise strategies to increase its value.
The value of the stick absorbed by the customers is referred to as “customer satisfaction.” It can be enhanced by increasing their willingness to pay and also lowering the cost of the product. If price reduction isn’t feasible, consider how you can improve the value of your product to the customers, thus improving their desire to purchase.
A few ways to add customer value are:
- Reduce the price of the product
- In addition, it improves the physical quality and durability
- We provide quick, professional customer service as well as a seamless shopping experience
- Making use of the effects of networks If applicable, to form the possibility of a community of users
- Incorporating a social or environmental motive into the manufacturing process, packaging and the branding
4. Provide Value to Suppliers
Alongside providing value to customers, you must also to offer value to suppliers. Suppliers could be any business that supplies the raw materials, labor and transport to aid your business in the production of products or provide services.
The term “supplier surplus,” also known as supplier delight, can be created when the cost of the materials increases or their desire to sell diminishes. It is the relationship that exists between a company and its suppliers could be fraught, since both are looking to increase their margins. But, there are methods to generate value for both sides.
A few ways to increase value for suppliers could be:
- Accepting to spend more on better quality products In addition to increasing the supply of the supplier however, it can also improve satisfaction with customers, by increasing their the willingness to pay or improve the company’s margin by allowing you to increase prices.
- Partnering with the supplier to improve efficiency This approach could increase surplus for the supplier by reducing the overall cost of labor for the supplier and their desire to sell.
5. Bring Value to Employees
Making employees feel valued is an essential element of a business’s strategy and is measured using”the value stick. Consider them in terms of employees as the “supplier” to work. You can also think of the margins of suppliers as the satisfaction of employees.
The satisfaction of employees can be improved through increasing wages or decreasing the amount they’re willing to accept by providing value in other ways. Employees who are satisfied can provide an improved customer experience which results in increased customer satisfaction.
The benefits you offer employees will inspire them to perform their best to improve their skills and remain with your business in the long run.
There are many ways to add value to your employees are:
- Bonuses and salaries competitive
- With benefits such as a large amount of paid time off and sick leave, as well as generous parental leave and wellness budgets
- Flexibility of work location for your team, regardless of whether it is completely remote or hybrid
- Supporting professional development
- In creating a workplace full of an array of ideas, experiences and perspectives
- Instilling a positive organizational culture
One illustration of Business Strategy is an office for diagnostics companies. The employees were paid minimum wage and stated that the fact that they were analytical in their calls to customers warranted more money. They also complained concerning the working conditions.
In the event that a pay rise was granted to all employees, in conjunction with adjustments to the operational process to make it more efficient, productivity of employees was so high that it offset the cost of salary increases.
As the employee’s satisfaction was increasing, they began giving better service over telephone with their customers. This increased customer’s willingness to pay which directly affected customer satisfaction.
6. Map Strategies to Tasks that can be Actionable and KPIs
While you’re creating value for each of these three groups, you must not forget the third party which is the one that requires value: your business. In creating value for employees as well as suppliers and customers in turn, you’re creating value to your business, too.
To ensure that you’re meeting your objectives, establish your top performance indicators, which metrics are considered successful, and how you’ll track your progress in time. Next, break down each of these value-creation goals into actions. For example, what steps could you take to boost the compensation of your employees? Who will be accountable for each job?
START BUILDING YOUR STRATEGIC SKILL SET
Utilizing this value stick strategy, you are able to design a business plan that will benefit employees and customers, suppliers and even your company.
To further develop your strategies and to better understand how you can navigate the process of creating value take a look at an online course such as the Business Strategy. Professor Oberholzer-Gee provides some real-world examples of business issues that prompt you to think about what you could do to create value and then discusses what business leaders achieved as well as how to apply those lessons to your own organization.