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Corporate strategy, business strategy and functional strategy; why so many?

Why are there so many types of strategy and how do you keep them all connected?

This a really important question as planning happens all the time and as this question suggests at different levels and with different scopes of influence.  Before I answer this, first some definitions:

  • A corporate strategy sets the strategic goals for the company as a whole.
  • A business strategy sets the strategic goals for the business unit. If a company is small corporate and business strategies are one in the same.
  • A functional (area) strategy set the strategic goals to deliver on the business or corporate goals AND to continue to strengthen, improve or enhance the functional area itself.

Like a set of Russian dolls.

The corporate strategy is the broadest and most long-ranging. It must be developed first to provide direction to the business and functional area planning efforts where the activities are planned and managed. So, it is the largest doll that all the others fit into.

The business strategy is next.  The business strategy is informed by the corporate goals, the success or challenges of the current strategy, the business’ market conditions including shifts in customer preferences, market innovations, and regulatory shifts.

The functional area strategy is last.  Functional areas exist to serve the business and the corporation as well as their particular discipline, so they have multiple masters.  They need to carefully examine the corporate and business strategic plans for direct or indirect objectives and create a strategy to respond to those needs.  Additionally, they need to evaluate their strengths and performance and plan to exceed their standard of performance. Finally, they need to stay on par if not ahead of the innovations or regulatory change in their field.

One area of strategy development not mentioned by critical for this set of connected strategies is the brand strategy.  Just as in most Russian doll designs, each doll has a similar look and feel. You can tell they are a set or related to one another.  This is also true with strategy; the strategy that connects all the strategies is the brand strategy.  In the development cycle, it is either incorporated into the corporate strategy or developed after the corporate and before the business strategy.

How do you keep them all connected?  This is both incredibly difficult and practically simple: the planning processes.  Like all great strategic thinking, you start at the end and work backward. 

  • If the goal of your strategy is to announce a huge shift at a particular event, your planning process has to work back from this event, building in enough time for each layer of planning. When you have accommodated the shortest possible timeframe for each, you can see when to schedule your first corporate strategy session.
  • If you don’t have a particular event that drives your planning cycle, use your annual budget as the deadline. Again, work backward giving each planning layer just as much (often not as much as desired) to respond and build a plan based on input from the outer layer of direction setting. For most corporations on a fiscal year that ends with the calendar year, this means that corporate planning begins in the Q2 in the years they conduct strategic planning.  Remember, corporate strategy is the broadest and most long-range if it is a strong strategy it should not need a full strategy process annually. However, there should be a review of progress and time to evaluate emerging issues that could tweak the strategic direction. The same is true for brand strategy.

To make them all stay connected require a very deliberate planning and managing process driven from the corporate level through the functional areas. All too often this is lead by the CFO since budgets are where “the rubber hits the road,” but that is not the best choice.  The role of ensuring strategic plans are created and connected is a full-time job that should be sponsored by the CEO and given the resources to stay on track.

This is one of those investments that pay-off tremendously in the long run.  This “neutral party” role has many benefits, not the least of which is to escalate issues up and down the planning chain rapidly so disconnect are spotted and address promptly or changes to planning assumptions are identified and discussed as soon as they are visible.  Ultimately, the goal of this role is for the company to stay vision driven and market responsive.

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Post Tags: strategic planning process Strategic Planning

Cecilia Lynch

WRITTEN BY:Cecilia Lynch