Definition of business strategy
A business strategy is a long-term plan of an enterprise to grow and improve its financial performance. It shall describe how an enterprise is going to increase value for customers and thereby extending the competitive advantage.
A business strategy presents a set of actions within a timeframe up to five years to move from the current competitive position to the target position of increased performance (strategic move). Vision and mission statements are concise descriptions of the target position and the way to it.
Strategic business goals
The paramount strategic business goals of an enterprise are providing more customer value than competitors and achieving profitability above the industry average. An effective business strategy includes offensive and defensive actions in order to reach these higher business goals:
- Seize opportunities from emerging (information) technologies and digital innovations
- Leverage existing resources, capabilities, and assets of the enterprise
- Adapt/change the business model/architecture
- Exploit industry change and new markets
- Lower vulnerability against substitutes and threats in the environment
- Defend against competitive forces
Projects are means to specify and organize strategic actions to move to the target position.
Business strategy phases
The development of a business strategy comprises two major phases:
- Business strategy formulation: Analysis of the current competitive position (as-is) and choice of the target position (to-be).
- Business strategy implementation: The way from the current competitive position to the chosen target position presented in high-level action plans and long/mid-term roadmaps.
IT Alignment is part of business strategy formulation. Projects are part of business strategy implementation.
Internal and external perspectives
Business strategy formulation shall balance internal and external considerations:
- Internal strengths and weaknesses: What the enterprise can do in view of its resources, capabilities, and assets, including skilled human resources, business architecture/processes.
- External opportunities and threats: What the enterprise might do in view of the macro-environment (PESTEL) and the competitive forces, including customers, competitor products, and suppliers.
A variety of useful frameworks for strategic analysis exist. We recommend PESTEL, SWOT, five-forces analysis (Porter, 1980), value chain analysis (Porter, 1985), STP marketing, and the customer value disciplines from Treacy and Wiersema (1995). Newer strategy frameworks such as 'The Business Model Canvas' (Osterwalder & Pigneur, 2010) build on similar ideas and can also be appropriate.
The business strategy includes all functional areas of the value chain:
- Marketing and sales strategy (channels, communication,…)
- Customer service strategy
- Production strategy
- Sourcing strategy
- Research and development strategy
- Organizational strategy (mergers, acquisitions, outsourcing, governance,...)
- Finance strategy
- Human resource strategy
The IT strategy of an enterprise must be consistent with all strategies of the functional areas. Thus, IT Alignment concerns all functional areas.
Various roles can be engaged in business strategy formulation: CxO, board members, business analysts, strategy consultants, internal strategists, business unit managers, functional managers.
Project portfolio managers and enterprise architects are key roles of IT Alignment and therefore involved in strategy formulation. Project portfolio managers ascertain business strategy implementation.