Leading a business to success requires a good amount of knowledge about operations and day-to-day tasks.
These are what keep your business afloat. But you will likely miss out on market opportunities. That is unless you are incorporating yearly strategy sessions into your planning cycle. Worse, you may find that your competition has outpaced your business and your company is no longer relevant.
Businesses that use strategy consulting as part of their yearly cycles are more adaptable and stay ahead of the competition. Having a better understanding of what strategy consulting is, and how it can benefit your business, is the first step in bringing real value to your company.
Strategic Planning for Your Business
Strategic planning usually occurs annually. It is the process where a business analyzes its strengths, weaknesses, opportunities, and threats. Then, the business creates a set of strategic initiatives to whittle away at for the next year or five years.
Strategic planning is difficult, both in the planning as well as the implementation phase. Keeping everyone in your company keyed into your businesses‘ strategic plan is important. It is what keeps employees engaged and committed to improving their workplace day after day, year after year. And, it is important for every team member at the company to advance strategic goals and include them in their daily tasks.
The number of strategic planning sessions and duration, who is involved, and who are the strategic plan “champions,” are all things to consider when putting together your company’s strategic plan. To stay relevant and outpace your competition, you will need to use several strategic planning tools. These tools will give you insight into your competition’s capabilities. They will also highlight your businesses’ own strong suits.
PESTEL Analysis Tool
To launch a successful annual strategic planning process, focus on external influences to your business first. Market research will help kickstart your analysis. It will also lead to better decision-making. This is because the more information you have access to, the better informed your decision will be.
A great tool to use as a starting point for this external analysis is the PESTEL. PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal categories.
Businesses do not exist in a vacuum. They occupy space in a particular location with their own competitive landscape. Here we drill down into each category of the PESTEL to better understand the particular influences that could be affecting your business or industry.
Political leaders, policies, and the level of governmental control all affect business. When governments approve new policies they can be business-favorable or unfavorable. Trade policies, protectionism, and trading restrictions are a few examples of policies that can affect your business.
Be aware of leadership’s political affiliations and the threats or opportunities that a political party or leader poses to your business. If a particular party has promised tax breaks or other incentives, plan for a worst-case scenario anyway.
Finally, stay abreast of changes and keep your ears to the ground. Policies can morph quickly. Assume your competition is keeping tabs as well. Your competitors are smart and capable. Underestimating them and their capabilities can be detrimental to your long-term business viability.
Currency exchange rates and the strength of the stock market are examples of economic influences that affect your business. Business locations in areas where residents tend to have more disposable income create a favorable economic opportunity. On the other hand, inflation and high wages can have negative consequences for your finances.
Some governments have programs where they cut taxes to create business opportunities. This can also have a profound effect on your business operations. Take the time to outline the economic background of your business. This includes taking into account key economic drivers in your industry or geographic location.
Knowing the social landscape is important for every business. Customers may be more or less likely to demand certain products in various countries. Proximity to other countries, or size of country and population, can affect business as well.
Not only do social implications concern customer demographics but they concern labor preferences as well. For example, customers in certain locations may put more pressure on businesses to source ingredients ethically or sustainably. Labor may also organize more effectively in one country than another. It is important to note that these social implications can be tied to political ones as well.
Where your business is located may mean that you have easier access to technology, or not. Protections on innovation like patents can also keep your business’s proprietary information safe from competitors, or not.
Access affects your ability to remain swift and responsive to market changes. Protections on technological advances give your business a competitive edge for a certain amount of time.
Governments may regulate with a heavy or light hand on environmental issues depending on the country or location of your business. This can affect your business operations as well as any fees or overhead you incur from damaging practices.
Consumers may also buy only from environmentally-friendly businesses. Both of these factors drive the market for goods and services and must be taken into account.
Laws are borne of governmental policies and legal challenges alike. Both can have an impact on your business as an external influence.
For instance, if your company monopolizes the market, certain countries can lodge an anti-trust suit again you. Or, certain countries have minimum wage laws that prevent the exploitation of cheap labor. Knowing your legal environment can help you understand what your cost of doing business will be.
Porter’s 5 Forces Tool
The Porter 5 Forces Tool was created by Michael E. Porter as a framework for understanding the industry climate. The 5 Forces strategic analysis tool highlights the competitive landscape of your industry as well as its strengths and weaknesses as a whole.
The tool provides context to the business when each of its five categories is explored. The five categories include the threat of rivalry, entry, substitution, suppliers, and customers. These categories are outlined below.
Threat of Rivalry
The threat of rivalry category asks you to list the major players in your space. How much market share does each have currently? What are the projected forecasts?
Furthermore, consider the maturity of your market or industry. Is it stable or changing? Or is your industry on a growth trajectory versus a decline? Where do your rivals fit into this picture?
Threat of Entry
The threat of entry category exposes the rivals of tomorrow. Staying one step ahead of the future’s competition will ensure your business keeps its blind spots in check.
To remain competitive, your business will need to consider not only current rivals. Tomorrow’s rivals likely will have improved technology and processes that you will need to adapt to stay relevant to consumers.
Threat of Substitution
Will your industry be replaced by a future market? This threat of substitution is difficult to identify. But like the airplane eventually replaced boats for across-seas travel, the threat can completely undermine your business.
Substitutions must be considered and adapted to if they pose a serious enough threat. Not every substitution will need to be dealt with in the next five years. But keeping your eyes on the horizon will help your company succeed in the long-run.
Threat of Suppliers
Changing conditions in your supply chain will affect how you make your product and in what time frame. Because of the threat of suppliers, the delivery timeline to consumers can be affected. This is another way your competition can best you.
Parts expense can also be prohibitive. If suppliers cannot produce parts cost-efficiently, it may indicate a threat. Perhaps it would be better to bring production in-house. This is something to consider at the strategy initiatives stage of the strategic planning process.
Threat of Customers
Customers have bargaining power that varies in degree across locations. When customers have the ability to organize effectively to pressure your company, you have a threat to customers.
The amount of leverage that consumers have will impact your decision-making. Operations will likely be affected at your business as a result.
Now that you have an idea of what opportunities and threats exist in your industry or market, you can turn your gaze inward. Use the following strategic planning tools to discover key internal capabilities and strengths. Also, pay close attention to your weaknesses – this is likely what your competition will be focusing their attention on as well.
VRIO Analysis Tool
Understanding your value chain and rating each piece of it gives you insight into your internal capabilities and weaknesses. Start by mapping out the pieces of your value chain bit by bit. This can be done as a drawing or on a computer file. Just be sure you can add to it easily, as the list will likely grow during the analysis phase.
Examples of Value Chain Capabilities
Over time, businesses build up capabilities in different departments and processes. These can be developed to such a degree that they become significant strengths. They can become so strong that they are difficult for the competition to imitate.
The technology development component to your value chain could be successful in innovating new market solutions. Your human resources department could be adept at recruiting, training, and retaining talent at your organization. Your procurement platforms could be one step ahead of that of your competitors.
More examples of value chain capabilities include your sales and marketing team, customer service, and supplier assembly. Consider each of these value chain components at your business. Are they strengths or weaknesses for your organization?
You may need to consider the competition when analyzing your value chain. Think about your marketing department in comparison to your main rival’s marketing department. Which is stronger? Why? Asking these questions will help you in the next step of the process.
Label Each Value Chain Component
The point of the VRIO analysis is to identify strengths and weaknesses in your value chain. VRIO stands for valuable, rare, inimitable, and organized. If your marketing department is valuable, and it is, consider next if it is rare. Does your main rival have a similarly built-up marketing department?
Then determine if your marketing department is easy to imitate. If it is not because your marketing department has built up a valuable network of clients and a solid consumer pipeline, then move on to the last consideration.
If your organization has the ability to organize your marketing department effectively in response to change, then this is a key competitive advantage that your company holds. Be honest during this stage of the process. Consider only current capabilities when building out this analysis. This will help you build strategic initiatives that are valuable to your business. This, rather than initiatives that speak to a future state.
SWOT Analysis and Building Your Strategic Initiatives
As a business, you do not want to compete in an area where you have little to no competencies. You will want to minimize risks, weaknesses, and threats. But to compete effectively you must exploit your strengths and opportunities first and foremost.
The SWOT analysis is the meat of your strategic planning session. You will use it to inform your strategic initiatives and improve your businesses’ strategy. SWOT simply stands for strengths, weaknesses, opportunities, and threats.
Create a 4 x 4 box and label the X-axis as strengths and weaknesses, and the Y-axis as opportunities and threats. Try different combinations in each box: SO, ST, WO, and WT. Take a look at examples and more information online if you are having trouble visualizing your SWOT table.
From these combinations, you will create your strategic initiatives. For example, to minimize an external threat, you will focus on a key internal strength you have identified. Ideally, you will have about 12-20 strategic initiatives that you will then pare down or combine to about three.
Three is a great number of strategic initiatives to have at the end of your strategic planning session. That number of initiatives is easy for everyone to remember and incorporate into their daily improvement process.
Consider Different Outcomes With Scenario Analysis
What do your company’s distinct futures look like? To be most effective, choose three different scenarios. Create a basic forecast and modify that base case to reflect three distinct future outcomes for your business.
For instance, your company may face a high-revenue and low-revenue future based on the effectiveness of your new sales strategy initiative. You can create a model that shows these futures and their monetary impact on the company.
Scenario analysis and sensitivity analysis tools help you visualize best and worst-case scenarios and present these to your management team. Some factors have a greater impact or are more sensitive to change. They can have high risk but also high reward. Decide as a team what strategy is best for you given the current external business and industry environment.
Implementation is Strategy Too
It can be easy to forget, after putting so much effort into creating strategic initiatives, that implementation is just as important as planning. Be aware of how you communicate your new strategy to your team. A good communication plan and the use of project champions can help move your initiatives along positively and productively.
Human resources can be especially helpful at this stage of the implementation process. Allocate personnel to the strategy team early on. They will help your business stay on track and keep employees informed at every step. Remember: no strategic leader can disseminate information solo. Rather, a strategy is a team effort.
Easy access to training information is important for your team members, especially ones that will be directly affected as a result of strategic initiatives or changes. Ensure that each employee has access to key information well ahead of deployment dates of changing technology or processes. Consider interactive, feedback-oriented sessions to increase buy-in.
It cannot be overstated how important implementation is to the success of your strategy. Alignment is key. Your company will not be able to move its strategy forward without buy-in and employee engagement. You can have the smartest strategy in the world and not be able to execute it.
Strategy mapping can be an effective way to communicate strategic initiatives with your team members through the use of visual aid. Prioritize your strategic initiatives in order and place them on a color-coordinated map for deployment and training purposes.
One purpose of using a strategy map tool is to explore how your strategy affects four key aspects of your business: finances, customers, operations, and learning or growth at the company. Fitting your strategy to address these aspects forces you to think about the consequences and implications of your strategic initiatives. It also helps you think about why this strategy is a best-fit, and what goal it helps you achieve in the long-run.
Try to tie all strategic initiatives through the map back to specific departments or employees. This process can also help your team members understand how their actions affect the whole. This keeps them well-engaged and focused on value add work.
Some of us are visual learners. Presentation is everything. Executing a clear and colorful strategy map can help you disseminate important information to your employees. It can be a best practice for helping get everyone on the same page and working toward a common goal.
How will your team measure the company initiatives’ success or failure? How will the company’s team members know that they have achieved their goals?
The balanced scorecard is borne from your strategy mapping process. It also incorporates the four key aspects of your business: finances, customers, operations, and learning or growth capabilities.
Set clear metrics and targets for your team. Then, make sure everyone is aware of the business direction moving forward. Prioritize what your team measures and provide examples or templates of key resource documents.
A poorly executed balanced scorecard can be detrimental to employee motivation. It is important to only measure what is important. Furthermore, you must not be unrealistic in your measurable goals. In the worst-case scenario, this can encourage fraudulent behavior or the fudging of results.
When executed well, a balanced scorecard can provide a baseline for improvement. It can also be incorporated in year-end bonus negotiations or annual celebrations.
The best balanced scorecards are indeed balanced. Team members should not be able to succeed by performing in only one priority, category, or strategic initiative. Performance should be measured more holistically.
The balanced scorecard does not need to be the most complicated document in the world. It should be standardized for use across the company. The balanced scorecard should also be simple to understand.
Capturing Your Blue Ocean
In business-speak, there is an ideal state called a “Blue Ocean Strategy,” a term coined by W. Chan Kim and Renee Mauborgne. Finding that market that holds opportunity and for which you are particularly well-suited is the ultimate goal.
On the flip side, your business will want to avoid a red ocean, where competition is fierce and the only way to compete is by lowering the price of your goods or services. Nothing can spell a quicker disaster than this scenario.
Avoid the red ocean and exploit the blue ocean by implementing these strategic analysis tools. The next point to consider is whether an in-house strategy team or an outsourced strategic consultant is best for your business.
What is Strategy Consulting, and Why Do I Need It?
Strategy consulting is when businesses bring in third-party consultants to perform the strategic planning cycle. Many companies find value in bringing on a third-party rather than performing strategy planning in-house. There are a few reasons for that.
Executing strategy planning can be a daunting and time-consuming task for any business owner. Furthermore, some businesses simply lack the resources to invest in a proper strategy team. Everything from your company’s position in the maturity cycle to your employee’s capabilities as strategists can indicate the need to outsource. This, as opposed to keeping your strategic planning in-house.
Strategy consulting relies on outside consultants to map your strengths, weaknesses, opportunities, and threats for you. This is so that you and your business leaders have more time and energy to focus on daily operations.
This can be a great option for entrepreneurs and start-ups, or businesses that simply need an outside perspective or fresh pair of eyes. Having consultants take part in your strategic planning process can help keep you honest. It can also result in the best strategies for your business if taken advantage of correctly.
Why Hire a Strategy Consultant?
The stress of running a lucrative business is high. Your business leaders can be stretched enough as it is. Excess time is hard to come by and hiring an internal team, for whatever reason, is not feasible. This is the environment at many businesses, which can make the choice to hire outside an easy one.
You may also lack the expertise necessary to perform strategic planning. Perhaps your company needs outside help for clarity, feedback, and fresh ideas. Blind spots are present at every company. It is important to consider every angle thoroughly and without bias.
Lastly, your company may not have access to the latest and greatest technology for market research. Working with a strategy consultant that has access to these tools can bring value to your business.
When you shoulder a high level of responsibility at your company already, feeling alone when making decisions about the future of your business is possible. Helpful support and collaboration can alleviate this feeling. Strategy consultants provide this service to business leaders at all types of companies.
Different Types of Strategy Consulting
Strategy consultants can specialize in particular areas depending on their education and career background. Different consultant or consultant companies may have different time ranges of availability.
Bringing a third-party strategy consultant onboard comes with the decision of which type of consultant might be best for your planning process. Here we will discuss several different types of strategy consultants and the value they can bring to the table.
Brand Strategy Consultant
A brand strategy consultant can help you understand your company’s product and overall brand positioning in the eyes of your customer. This can help you develop an idea as to your brand identity. Developing your brand strategy can also help you be more effective in product messaging and retention of customers.
Brand strategy consultants can also offer strategic advice on brand protection and durability, or the deployment of a brand new logo design. Introducing a new product to capture a different market segment? Depending on your branding needs, a brand strategy consultant can help you develop a winning strategy.
Marketing Strategy Consultant
When you need robust and accurate market research, turn to a marketing strategy consultant to chart out changing market landscapes effectively. This type of consultant can also help you develop your business product’s value proposition.
When you need a successful marketing strategy, a marketing consultant can help you develop customer profiles and use data analytics for maximal impact. Categorize segments and explore product choices by outsourcing your marketing strategy implementation and development.
Financial Strategy Consultant
There is no quicker way for you to go out of business than for your company’s finances to be mismanaged. But understanding taxes and tax impact, how to forecast or budget, and other important financial topics is difficult and time-consuming, to say the least.
Leave it to the experts to conduct a product line profitability analysis. Financial strategy consultants can give you the best, most up-to-date information on asset depreciation and investment or disposal moves. And capital gains and losses can seriously impact your liability and cash flow. For expert assistance in all matters financial, collaborate with a third-party financial strategy consultant.
Operations Strategy Consultant
An operations strategy consultant assists with operational efficiency strategy generation. If your company needs a serious look at cutting costs or overhead for higher levels of profitability, operations strategy consultants can be just the ticket.
They can also help with effective implementation. Everything from training modules to the strategy deployment schedule can be worked into the strategic plan.
Risk Strategy Consultant
To prevent financial or other value loss, a business must avoid or mitigate risks in their environment. This goes back to the PESTEL and 5 Forces analyses – if you have threats in your industry or geography, these can affect how you do business.
Having a risk strategy consultant on your team can help you identify risks and develop mitigation strategies to deal with those risks. Industry experts can be excellent choices for this type of strategic consulting. They have the experience that translates well to your needs.
Technology Strategy Consultant
Many companies install new technology or software solutions into their business to help them achieve higher levels of profitability. They also install them to help the business remain competitive in a changing industry or market landscape.
Technology strategy consultants can help install new technology, identify risks with that technology, and communicate results to management and employees. New software and technology integration can seriously improve business operations. Enlist a technology strategy consultant to help keep you moving forward effectively.
Acquisition or Merger Strategy Consultant
Mergers and acquisitions are notoriously difficult to manage. Business identity and politics can prevent effective mergers and lead to mass talent exits.
To plan for and mitigate these negative consequences of a growth acquisition or merger strategy, hire an acquisition or merger strategy consultant. These consultants can assist with everything from full acquisitions to joint ventures, considering everything from legal to operational consequences of the move.
Online Business Strategy Consultant
COVID-19 and the resulting pandemic have had a serious impact on normal business operations. There is an increased need for remote, on-demand expertise. Online business strategy consultants can provide comprehensive or specialized assistance, depending on your needs.
Your selection of the right strategy consultant depends wholly on your business and the particular risks you face. Plus, expertise needs can differ drastically for small businesses versus large businesses.
Strategy Consulting for Big & Small Businesses
There is no doubt that running a small business is very different from running a large company. This is because the number of team members you employ is different. But also, your consumers have different needs as well.
Because of these reasons, small businesses will have different goals and track results differently than large businesses. Strengths and weaknesses will depend on market size and the number of employees you have.
Additionally, the guidance you need on strategic next steps and implementation advice will vary. Setting goals may be a one or five or twenty-year process depending on the size of your business and the maturity level of the industry. Because large and small businesses have different amounts and types of resources, the allocation of those resources will be different.
Are you expanding or downsizing? Bring in a strategy consultant for help on moving in or out of the small or large business space. But be sure to let your consultant know how your growth will help you achieve your long-range goals. Being clear on your overarching goal from the outset helps you get the most out of your experience with a strategy consultant.
What to Look For in a Strategy Consultant
Many strategy consultants will have a bachelor’s or master’s degree in business management. Beyond credentials, however, you must vet for skills and experience.
The best strategy consultants will have high-level critical thinking skills. They can see the big picture and long-range goals as part of the development process. But they are also adept at performing detail-oriented work and getting into the specifics.
Communication is key. Your strategy consultant must be an excellent facilitator and very people-oriented. Change is difficult for many employees. The better your consultant can communicate, the easier the transition into a new and changing strategic path will be.
Because things change quickly, it is important that your strategy consultant can go with the flow, so to speak. Being flexible and adaptive, yet results-oriented is important. The business must keep in mind its ultimate goal at every step of the process.
The bottom line is that considering your strategy consultant’s background and career expertise is a great starting place. But more importantly, your company’s new strategy consultant must have the ability to mesh with your team members. If this key puzzle piece is missing, the process of strategic planning may fall apart quickly.
Pricing Your Strategic Project
The cost of hiring a third-party expert strategy consultant can vary widely. Start with creating your company budget. Spending on strategy is important and cannot be de-prioritized. But ensure that your budget is also realistic and there is wiggle-room in case the project extends longer than planned for whatever reason.
The costs should be split into two categories: pre-planning strategy generation phase and post-planning implementation. Determine whether your company or business will require both or just one. This depends on your internal capabilities and capacity.
Depending on the firm reputation and level of expertise, you may pay more or less for a qualified strategy consultant. Be sure to do your research before scouting out the best fit for your business. Doing this will help keep your sights on realistic options rather than setting your sights on consulting above your price range.
Many consultants charge by the hour, at an average rate of $150 per hour. Price can vary depending on geographic location, demand, and timing. If you search for a consultant near the end of the year, when many other businesses have their fiscal year-end, you may pay a surcharge due to high demand timing.
Choose the Best Consulting Firm For You
It may go without saying, but choosing the right consulting firm is a highly personal choice. Your business may choose to work with a local consulting firm for one project and a large consulting firm for the next. Or, your business may keep it consistent by retaining the same strategy consultant each year for the yearly strategic planning process.
There are upsides to each, which again can only be determined by your specific needs. Everything from your location and access to quality strategy consultants, to project needs or specific challenges, will help decide what company or firm is right for you.
Resiliency During the Pandemic
The pandemic has changed the face of business for the long-term. COVID-19 has left its mark on the way we work from home. It has determined which industries are essential. The pandemic has even reinforced online markets and delivery services.
Small and large businesses alike are having to rearrange their business models and reinvent or scrap previously profitable product lines. The threat of the pandemic has also created an opportunity to connect more with consumers digitally.
An online strategy consultant can help your business weather the pandemic as part of the annual strategy process or not. The best consultants can give you information on new stimulus packages, loans, or government business incentives.
These impacts are changing quickly and can be hard to follow in the news. Having a trusted consultant at your side to keep your business moving forward is important now more than ever.
Although consulting used to be a travel intensive industry, travel is largely on hold these days. This does not mean your business must forfeit expert consultant third-party advice.
To maintain resilience during the pandemic, consider working with a strategy consultant to help you through the worst of the economic downturn. Flexibility and adaptability have always been the name of the game. The pandemic has just sped up the competitive process.
Kickstart Your Business’ Path to Success
Keeping a business moving toward its goals is the primary objective of every business owner or leader. Incorporating an annual strategic planning session into your yearly calendar can help you keep your eye on the ball. It can also help keep your business competitive and responsive to every opportunity.
Your business’ strategy consulting pathway to success starts by hiring the right third-party consultant expert for your team. For more information on how to keep your business competitive, and more business strategy tips, check out our blog.