“A vision without a plan is just a dream. A plan without a vision is just drudgery…but a vision with a plan can change the world.”
– Old Proverb
An old proverb but true nonetheless. Any company that fails to create plans on how to achieve its Vision is doomed from the very beginning. The very next step for a company after identifying its Vision is to create strategies that can help the company achieve that vision.
It is important to first understand what is the meaning of strategy, its types and what role it plays in the popular goal setting methodology OKRs.
What is strategy?
Strategy is defined as, “a plan of action designed to achieve a long-term or overall aim.” Business strategies help give direction to the entire organisation and prevent its individuals from losing sight of the end goals.
From an organisational perspective, “strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations” according to Johnson and Scholes.
There are 3 levels of strategy depending on the different levels in the organisation:
At the top, you have the Company level strategy also known as Corporate strategy. At this level, it refers to the overall strategy of the organisation that is set for a long term, sets the tone for all the departments and demonstrate how they can create more value by working together than they would individually. Corporate strategy helps to structure the organisation in a way that it is able to make the best use of its resources to gain a competitive advantage in the market.
Walmart’s corporate strategy was to become a cost leader. According to their strategy, their company was positioned as a provider of lesser priced products as compared to their competitors. They increased their purchase volumes so that they could forfeit in terms of higher price points.
As we go down to the department or team level, strategy needs to be more tactical in nature. Every team has its own functional responsibilities that ultimately contribute towards the achievement of corporate strategies. Tactical strategies provide teams with clear directions to best perform a set of initiatives within short term deadlines.
Continuing Walmart’s example, their tactical strategy could be offer privilege memberships to particular customers based on their purchasing habits. Participating members would need to buy these memberships at a small amount to obtain its benefits at a later stage. That way they continue to be regular customers for a longer period.
Operational strategies are concerned with resources, people and process within the organisation. They help guide employees and determine a set of activities (usual day to day tasks) that need to performed in the right manner and at the right time.
Walmart’s operational strategy could be to offer attractive discounts on the purchase of a minimum amount or beyond a specific number of items to increase sales. These offers can be changed at short intervals or daily so that customers do not abuse it over a long term.
Strategies play a very important role in the goal setting process, such as the OKR methodology. When you have your strategies for each of these levels in place, it is easy to set your Objectives accordingly. If everyone in the organisation started randomly setting their OKRs, without understanding what the end goal is or what should be the time frame, they will not be of any use.
How to connect strategy and OKRs:
From our experience, we recommend that medium and large companies should ideally set OKRs at 3 levels viz Company, Team and Individual level. Smaller companies and startups can typically stick to setting only company and individual level OKRs owing to their size or growth rate. Assuming that the goal setting process is being carried out for a long term, we can consider setting at all 3 levels in this case.
The 3 types of strategies need to be connected to the 3 levels of OKRs according to their nature and duration. Company level OKRs will be based on corporate strategies and remain unchanged for at least a year. Team level OKRs will be based on tactical strategies and lastly individual OKRs will be based on operational strategies. Both of these levels can have shorter cadence i.e. from 1 month to quarterly duration.
Irrespective of which methodologies are being adopted, the management needs to be very careful while drafting their strategies. If done right, they can be assured of reaching their destination but if they are not able to correctly define the right course of action, they will need to restart from the beginning. How do you define your strategies?