Once a business reaches a certain stage, it has to think about other strategic considerations beyond its core group of products and services. It needs to make financial decisions that will affect the structure and identity of the company far into the future. In many organizations, the business strategy and the corporate strategy are created independently of each other. Failing to keep these two different strategies in alignment can have far-reaching consequences for the success of a business and its bottom-line.
How Different Strategies Can Lead to Stalled Growth
While some businesses manage to find limited success without harmonizing their business and corporate strategies, this is often the result of luck. Over the long-term, allowing these strategies to develop independent of each other will lead to stalled growth.
Imagine a situation where an organization needs additional capital to fund a major expansion. The company could move to get listed on a stock exchange, it could look to attract a strategic investor, or it could solicit interest from a private investor. If this decision is made only with the overall corporate strategy in mind, and without considering the current business strategy, the resulting transaction may weaken the company instead of strengthening it.
The business unit may find that their best plans are consistently undercut by the corporate development strategies being pushed by others in the organization. Corporate transactions and initiatives will fail to deliver the promised results and returns because the business unit is unintentionally working at cross-purposes from the corporate strategy.
While it may seem natural to have a business strategy and corporate strategy that are independent of each other, in practice this lack of cohesion can destroy an otherwise financially healthy company surprisingly quickly. Differences between the corporate and business strategy can also harm mature start-ups on the cusp of getting financing because the lack of unity can scare away investors.
Creating Alignment Between Business Strategy and Corporate Strategy
When the business and corporate strategies are aligned, it creates a synergy that produces higher returns on investments and faster growth for the organization. But, how do you create this alignment?
In order to create strategic alignment the organization needs to:
- Have a clear vision for the future
- Adopt strategic alignment as a top priority at the C-Suite level
- Create communications strategy to make sure strategic goals are not muted further down in the chain of command
- Bring critical leaders in both the business units and the corporate development unit together
- Reward members of the organization who adopt new behaviors and further the goals of strategic alignment
- Evaluate how the corporate strategy impacts the business strategy
- Evaluate how business strategy impacts the corporate strategy
- Make members of the executive team accountable overseeing strategic alignment
Strategic alignment will not happen without intervention from the highest levels of the company. Without active involvement from the executive team, most organizations quickly silo different strategic tasks and turf wars erupt in overlapping areas of responsibility.
In order to make strategic alignment a reality, the long-term goals of the company must be clear to employees at every level of the organization. Often the key strategic message from the CEO slowly loses potency as it is communicated down the chain of command. Alignment requires that everyone in the organization be pushing in the same direction.
The Role of Advisory Services
One of the biggest obstacles to aligning strategic and business strategy is the inability of people in the organization to recognize where current strategies diverge from each other. Outside advisors can be instrumental in both helping the organization recognize strategic problem areas as well as is making suggestions on how to make a course correction.
Outside advisory services often have a role in helping businesses create strategic alignment because:
- They can offer an outside perspective
- They are not loyal to any internal faction
- They are solely focused on strategic issues
- They are better at seeing the long-term consequences of any actions
- They have extensive experience in creating alignment in other organizations
The earlier your organization can achieve alignment between its corporate and business strategies, the better its long-term growth will be, the stronger financial performance will be, and the higher the return that you deliver to the investors will be.
© Saint Gabriel Pty Ltd 2017