What is strategic advice
Table of Contents
- Occasions of strategy consulting
- Levels of strategy consulting
- Strategy consulting approach
As a specialty of classic management consulting, strategy consulting includes support for a company or organization in dealing with strategic issues. These concern the review, further development or new development of goals, concepts and measures including the design of entire business models. Strategy development is always directed towards the future. It is based on the one hand on expectations regarding the corporate environment (e.g. markets, technology, competition, legal framework, etc.) and on the other hand on fundamental and comprehensive objectives for the company (e.g. continued existence, market position, return on investment, shareholder value).
It is a process of analysis, interpretation and creative design in which rationality and intuition work together. Not every strategy is systematically developed. Targeted strategy development requires, on the one hand, the willingness to take dedicated strategic action and, on the other hand, a broad spectrum of professional skills and experience (e.g. industry experience). These prerequisites can be completely or partially absent in a company. This gives rise to the starting point and, in many cases, the need for strategy advice.
Occasions of strategy consulting
The involvement of strategy consultants results from the need of company management to gain an unbiased perspective for the company and to overcome any diverging views on the further development of the company. This results in different tasks.
Review of existing strategies: Companies are in a certain strategic position at all times and act in a strategically relevant manner. Strategies pursued consciously or unconsciously do not necessarily represent an optimum. Their validity in relation to the environment and corporate objective as well as their consistency and internal consistency must be checked. The review can be triggered by negative developments (e.g. declining business development, falling earnings, unsatisfactory return on capital), but also by new business ideas in the company. Significant investments to be made can also be a reason for review.
Further development / adaptation of strategies: The need for strategic further development or adaptation (strategic redesign) arises from external or internal changes. The external environment of the company changes constantly or in leaps and bounds (e.g. market saturation, appearance of new technologies, new laws and values, new competitors). Internally, the availability of new or additional resources (e.g. inventions, cash flow becoming available) as well as their loss (e.g. expiry of patents, loss of important employees, loss of operating permits, etc.) can give rise to expansive or contractual reorientation.
New development of strategies: The need for a new strategic start (Strategic Renewal) arises when a new company is founded, in connection with mergers or acquisitions and in many cases after a change of ownership. In these cases, it is often necessary to redefine the general corporate objective, which entails a strategic repositioning in the market and an adjustment of the value chain.
Levels of strategy consulting
Different strategic tasks arise at the different company levels, which have to be dealt with with the appropriate conceptual approaches. Depending on the strategy level, the consultant must have specific knowledge and experience.
Corporate strategy: At the highest company level (e.g. group level), the following strategic questions in particular have to be decided:
(1) Definition of the company's core values and formulation of an entrepreneurial® vision (strategic intent);
(2) Establishing / updating and quantifying overall and overarching corporate goals;
(3) Selection and weighting of the business areas to be included (business portfolio);
(4) Objectives or mission of the individual business units in the corporate group;
(5) Review and approval of the downstream individual business strategies,
(6) Overall allocation of funds for the individual business units (allocation of resources). Important areas of work in the development of corporate strategies are: analysis of trends and discontinuities, development of industry and environment scenarios, assessment of internal core competencies, portfolio analysis and management, value management, alliances, takeovers, mergers.
Business strategy: At the level of independently planning and operating business units, the following strategic questions arise in particular:
(1) Positioning of the business unit in relation to the competition;
(2) Selection of the market segments to be focused on;
(3) definition and evaluation of strategic options;
(4) Decision for / against a business strategy to be pursued and a promising business model;
(5) Definition of the internal added value required for enforcement;
(6) Feasibility Study;
(7) Quantification of the desired results over time (business plan);
(8) Elaboration of action plans for implementation. Important areas of work in the development of business strategies are the analysis of industry and technology trends, the assessment of industry-specific market forces (demand structure, supplier structure, competitors, substitution risks) and the assessment of product life cycles.
Functional strategy: Decisions at the functional level within the value chain of a company are subordinate to the corporate and business strategy. However, in terms of efficiency, costs or capital commitment, they can acquire particular strategic importance and create the prerequisites for special competitive advantages and the development of new business models. Important questions are, for example:
(1) Conformity of internal processes with the requirements of the business strategy (e.g. costs, efficiency, speed);
(2) Degree of productivity and cost efficiency (e.g. research and development, customer relationships);
(3) Optimization of the depth of added value (e.g. outsourcing);
(4) Generating additional customer benefits through the use of superior systems (e.g. networking with customers and suppliers). Important work areas of functional strategy development can be: process reengineering, cross-industry comparisons (Cross Industry Functional Benchmarking (CIFB)), outsourcing / insourcing, use of experience curves, etc.
Strategy consulting approach
Strategy consulting basically follows the general pattern of consulting projects. Based on an assessment of the situation, options for action are developed, checked and selected. The implementation of the selected variant is prepared, later the implementation in the company is accompanied and supported. Specific characteristics and requirements result from the complexity of strategic issues.
Clarification of the strategy level / project focus: Even if the company initiates, i. d. As a rule, the consultant is given the task of clearly formulating the project. This includes the clarification of the strategy level on which the project is to move as early as the acquisition phase. If questions from different levels are raised at the same time, the order in which they are dealt with must be agreed with the client. The conceptual hierarchy indicates that in such cases the company or group level has priority over the business level and the functional level. A top-down approach is not mandatory, however, as, for example, the appearance of new competitors or new business models can trigger the review of the entire corporate strategy (e.g. the portfolio strategy). Regardless of this, a content focus must be found for each project. This does not rule out that strategy consulting goes through several stages and that, with new findings, shifts in the project focus can be made by mutual agreement.
Company goals: Strategy development requires the existence of corporate goals. Consulting therefore implies the fundamental clarification of these goals and often also their reformulation in dialogue with the company management before the final definition of the project. This process can be repeated in practice if strategically relevant information makes a target correction useful. Strategy consulting can also be an occasion to revise corporate goals in the light of an existing vision.
Selection of relevant information: From the point of view of the consultant and project manager, it is necessary to quickly gain clarity about the existing or necessary information base. Key information is compiled, checked for relevance and merged into a description of the situation. Any misinterpretations must be eliminated at an early stage. In agreement with the client, a common knowledge base for the strategic analysis is established.
Analysis of the strategic starting position: In this phase, the methodological competence of the consultant is used in particular. From an external perspective, the analysis relates to the company's position in the economic environment, the position and behavior of competitors, the power relations between customers and suppliers, the possibility of new market participants or substitute products. The internal analysis relates to the company's cost and earnings position, existing core competencies, the meaningfulness of its value chain in relation to market requirements and target groups, the evaluation of individual business areas, etc. In this phase, expected economic developments as well as structural trends or breaks are to be expected record (e.g. global economic developments, demographic changes, tendencies in customer behavior) and if necessary condense them into scenarios (scenario analysis)
Strategy development in the narrower sense: Against the background of the company's position, strategic approaches in the sense of action plans are developed. It is the responsibility of the consultant and project manager to collect existing ideas, contribute further ideas and support the generation of new ideas through suitable events (e.g. brainstorming workshops). The innovative content of a future strategy is justified in this project phase. As far as the generated ideas condense into concrete options for action, they are to be evaluated qualitatively and quantitatively and subjected to a selection. The development of selection criteria takes place with a view to the company goals in dialogue with the company management. All alternative courses of action are measured against the criteria which, in the sense of a filter, reveal the most expedient options. In this phase, the consultant can bring experience of meaningful operationalization. If there are several plausible future scenarios, it becomes necessary to play through all alternative courses of action against their background and thus to check their robustness and their overall potential for value growth.
Decision: The responsible decision in favor of a strategic option rests with the company management. The consultant must, however, be willing and able to make recommendations and justify them quantitatively and qualitatively in a comprehensible manner. In any case, it is up to him to ensure the systematic preparation of the decision. This primarily includes the financial evaluation of each alternative, in the case of a business strategy, for example in the form of a business plan. Possible risks (e.g. the non-occurrence of assumptions, counter-reactions from competitors) are considered in their possible effects as variants. If several future scenarios are considered, their parameters are to be used to further diversify the expected results. Finally, the real feasibility of each variant must be checked. The systematic preparation of decisions does not lead to a reduction in the uncertainty about the future, but enables the range of possible consequences to be narrowed down.
The aim of developing each strategy is to implement it in the company and assert it in the market. Success depends on the one hand on the determination of the responsible management and on the other hand on the observance of specific requirements. The process can be secured, facilitated and accelerated by advisory support, whereby methodical competence and (partly also cross-industry) experience provide the essential benefit. The implementation of a new or modified strategy requires a change process in the company. It can fail if the strategy is not understood and accepted in the company. This results in a need for internal communication and training. Reference is made to the change management tools.
The overall strategy must also be broken down into individual goals and tasks in order to be effective. This ties up qualified management capacity, which can be effectively supplemented by deploying the strategy consultants who have been involved since the development stage. The implementation of the strategy in the company must ultimately take place through the actions of the employees in their respective areas of competence. It has been found that this effect can only be insufficiently achieved by setting targets (e.g. budgets). Rather, it is important to combine quantitative goals with qualitative action and to direct the initiative and creativity of the employees in the strategically desired direction. One successful method became known as the Balanced Scorecard (BSC). It includes the coordination of individual goals and measures with the corporate strategy and enables the control of strategy-based actions. The introduction and use of these instruments has become an integral part of strategy consulting.
See also Consulting.
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