2 of 4: What are Your Strategic Objectives? (Part 1)

[This is the second of some posts I've planned on the topic of business strategy.  My intent is to offer up a simple model for structuring strategy conversations.  I hope you find it thought provoking & useful.]

TRANSLATING STRATEGY INTO STRATEGIC OBJECTIVES (Part I)

The initial posting for this four part series on practical strategy application focused on determining the “basic strategy” for your company.  This second posting looks at how you translate the strategy into appropriate strategic objectives.  To keep it easy to read, we will look at what constitutes a good strategic objective and how to identify possible strategic objectives in this post.   The subsequent post will cover how to create focus on the most appropriate strategic objectives.

STRATEGIC OBJECTIVES DEFINED

Strategic objectives are documented and measurable long term goals that put your strategy into action.  Strategic objectives address intended changes, improvements, and challenges within a given period of time. They provide specific guidance on what an organization will do in support of winning in the market place. 

QUALITIES OF STRONG STRATEGIC OBJECTIVES

As your team considers strategic objectives, it is important to ensure the objectives are as strong as they can be.  The “SMART” framework can help ensure objectives are strong:

Specific:  Provides specifics about the activity or action area.

Measurable:  Quantifies progress against fulfilling the objective.

Appropriate:  Consistent with the strategy of the organization.

Realistic:  Achievable given the organization’s capabilities and competencies.

Time bound:  Lists a time frame for accomplishing the objective.

Here are two contrasting examples (weak, strong) of strategic objectives for a company that features service as part of their differentiation strategy: 

Weak strategic objective	Strong strategic objective
Improve customer satisfaction by 10 points over next 5 years.	Achieve satisfaction ratings of 92% by 2014 from web customers who use website technical support (a 2 percentage point improvement / year from ‘09 to ‘14).

IDENTIFYING STRATEGIC OBJECTIVES ~ “Where to Look”

You should look at these areas for possible objectives:

Basic strategy (Overall cost leadership, Differentiation, Focus, other):  The theme of the basic strategy (see prior post) is central to establishing strategic objectives that create a very distinct value proposition.  For instance, if the basic strategy is cost leadership, the strategic objectives will specify exactly where costs will improve.

By function (e.g., marketing, human resources, etc.): Within the bounds of the basic strategy, how might key functions improve to support the value proposition?  For example, if the basic strategy is differentiation, the strategic objective related to marketing could measure improvement in customer understanding that new products offer novel and effective solutions to customer needs.

Balanced Scorecard approach:   Kaplan and Norton introduced the Balanced Scorecard as a way to assess strategic progress.  However, another tool introduced with the balanced scorecard is the idea of creating a strategy map.  A strategy map is a visual depiction of strategic organizational objectives and the relationships between them.   Creating a strategy map will involve strategic financial objectives that are linked to customer objectives, which are in turn linked to internal capability objectives, and finally linked to the supporting objectives of learning and growth. 

Feedback from customers, competitors, CFO:  Another source of possible strategic objectives come from outside the organization via feedback from customers and competitors.  Another source is to ask the CFO for trends related to the balance sheet and income statement that represent threats or opportunities.

Environmental scan: Considering external forces outside of customers and competitors can also yield possible strategic objectives.  Macro environmental-socio-economic trends can often have an impact that requires longer term attention.  For instance, demonstrating environmental consciousness requires longer term attention for companies that feature that as part of their value proposition (e.g., Patagonia).

NEXT POST:  An approach for prioritizing strategic objectives and related considerations.

COMMENTS

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