Strategic Management Process: The Definition Stage

When the going gets tough, the tough get, well, strategic! Let’s face it, that’s not the normal reaction from companies that are performing below par. The normal reaction is to start cutting costs. However, while cost improvements without sacrificing quality are always welcome, they are rarely the answer to putting companies on the path to sustained growth and profitability. For that, companies need to think and manage more strategically. More specifically, they need a strategic management process.

An effective strategic management process can be defined as having four main stages:

• Definition Stage, which culminates in the selection of a market strategy.
• Translation Stage, which deals with the business philosophy.
• Construction Stage, whose focus is the design of performance measurement systems.
• Operational Stage, which creates an environment of continuous improvement.

The purpose of this short article is to review some of the most important elements of the first stage, or Definition Stage, of a strategic management process. While all stages of the process are important, the first stage is perhaps the most exciting, because within it, companies define their marketing strategies. That provides visible evidence that companies are at least beginning to think strategically.

Market strategy

Many companies believe that once they have defined their go-to-market strategy, their strategic process is complete. Of course, nothing could be further from the truth. However, there is no doubt that having an effective marketing strategy is critical to success. So what makes a go-to-market strategy effective? There are two attributes that need to be in place.

Perhaps the most important attribute is differentiation. A company’s market strategy must clearly differentiate it from the competition. The emphasis here is on “clearly.” It will clearly and uniquely identify a company in the opinion of all interested parties such as customers, suppliers, employees and shareholders.

Second, an effective go-to-market strategy must be based on a company’s core strengths. New fortresses can be built or acquired, but it can take quite some time before those new fortresses are credible on the market. An effective go-to-market strategy will highlight strengths that are already perceived and accepted by stakeholders. In essence, a company’s go-to-market strategy and its core strengths are strongly linked, both externally and internally, supporting and reinforcing each other.

Natural customer base

An effective go-to-market strategy must strongly appeal to a customer base large enough to support a company’s financial goals. There are cases where it strongly appeals to an entire broad-based market. However, those cases are really rare. Most likely, a company will need to perform a market segmentation analysis to identify the customer segment or segments that will adopt the company’s market strategy and become the company’s natural customer base. The segmentation analysis must be deep enough to identify all of the various market segments, along with the demographic attributes associated with each segment.

Purchase factors

Buying factors can be thought of as “triggers” in the buying and selling process, encouraging customers to buy or discouraging them from buying. Many companies never really address the buying factors. That is an error. A lot of work goes into crafting an effective go-to-market strategy and to identify a natural base of customers who adopt that go-to-market strategy. That hard work can go to waste if companies don’t understand the factors that can cause customers to make positive or negative buying decisions. Often times, buying factors can be obvious extensions of companies’ go-to-market strategies and natural customer bases. However, it is important that companies recognize and understand these buying factors and adjust their in-market approaches based on them.

While cost reductions can ease the stress on underperforming companies, strategic management is the answer to achieving long-term growth and profitability. Defining an effective go-to-market strategy, along with a natural customer base and buying factors, is the first step on the path to sustained better performance.