In the article ‘What is strategy?’, we already discussed how strategy is anything but merely a buzzword – it is the compass that ensures that everyone in the company is moving in the same direction to achieve a clear, long-term goal. Today, we’re going one step further and breaking it down a bit. After all, ‘strategy’ is a huge field that can be divided into different but closely related sub-areas.
The Levels of Strategy: from the Frame to the Chain
Imagine your company as a bicycle. To really get going, everything has to work together: the frame, the chain, the gears – and, of course, the person at the handlebars who knows where to go. If just one part doesn’t work, you won’t get anywhere – or you’ll just be pedalling in vain. In companies, too, there are different levels of strategy that must work together perfectly in order to successfully reach the destination.
1. Corporate Strategy
The corporate strategy is the framework and the direction – it determines where the journey should go.
The central question is: What terrain do we want to travel on? In other words: Which markets do we want to conquer and how do we differentiate ourselves from others?
Example: A company that has only sold coffee up to now decides to add food and household goods to its product range. This decision determines the route the company will take.
2. Competitive or Business Level Strategy
This is about how we want to drive on this track. Are we the sprinter who focuses on speed? Or the driver who stands out through technique and style?
That is the strategy of each individual business unit: how do we win in this market?
Michael E. Porter has, for example, brought three fundamental strategies into play:
- Cost leadership: Reaching your goal with minimal resistance and maximum efficiency – like someone who drives as energy-efficiently as possible in low gear (e.g. Aldi, Ryanair).
- Differentiation: Shining through style, design and experience – the racing cyclist who scores with quality and performance (e.g. Apple).
- Focus: Choose a specific route that you know particularly well – such as the steep mountain route where others have long since given up (e.g. Porsche).
The key thing is to choose your gear carefully. If you’re constantly changing gears, you’ll lose speed and direction.
3. Functional Strategy
This is where the strategy is put into action – the chain, pedals and wheels that drive the whole thing. Every department contributes to keeping the wheel turning:
- Marketing strategy: How do we make ourselves visible and stay ahead of the competition?
- Sales strategy: How do we get our products to our customers?
- Human resources strategy: Who is in the saddle and ensuring that we reach our destination?
- R&D strategy: How do we equip our bicycle with new technologies and ideas?
- Production and purchasing strategy: How do we ensure that all parts work together smoothly?
- Financial strategy: How do we secure the fuel to continue the journey?
- IT strategy: How do we use digital tools to drive faster, safer and more efficiently?
Strategy pitfalls from practice
The ‘Strategy Is Just Theory’ Trap
Many entrepreneurs see strategy as a one-off exercise or a nice concept on paper. Define the ‘vision’ and ‘mission’ once and that’s it. But strategy is not a document that you can tuck away in a drawer – it is the foundation for every decision in the company. It determines ‘what’, ‘how’, “where” and ‘why’.
Especially in turbulent and uncertain times, it is your compass. Strategy is your decision-making guide! If strategy, structures and resources are not consistently aligned, your company runs the risk of getting bogged down and suffocating in the chaos of everyday life.
I think an example might help here: imagine that a discount supermarket suddenly offers significantly more or only premium products. At first glance, this sounds great, but behind the scenes it completely disrupts the company’s cost structure. As a consequence, the new price structure (e.g. due to warehousing, higher purchase prices) is passed on to the consumer. In the long term, the target group, the brand and – surprise, surprise – the entire corporate strategy change
Countermeasures:
Make strategy a living part of your daily work. Regularly check whether every action really follows your strategic direction – and adjust if it doesn’t. Strategy must be lived and not just hang in the office as a nice motivational slogan.
Important: every single task should really contribute to your goal! Radical, true guerrilla. 😊
The ‘We Have Other Priorities’ Trap
I’m happy to share my personal experience here: I think this is the worst trap of all, and it has happened to me in the past. The business is finally scaling up, and customers and orders are pouring in. In the hectic day-to-day business, strategic issues quickly disappear from the agenda. Customer enquiries, operational challenges and short-term decisions push their way to the forefront – and the long-term orientation quietly slips into the background. Step by step, the company loses its clear direction. Chaos is never far behind.
Counterattack:
Create fixed time slots in which strategy has absolute priority. No emails, no distractions – just focus on the big picture. Regularly check whether your resources are really being channelled into activities that will help you progress in the long term. Even if this means a customer has to wait, it really pays off in the long run in terms of satisfied customers.
Important: Strategy determines how you use your resources, where you set priorities and which decisions are viable. All resources should be used in a targeted manner. Take note: radical, business guerrilla warfare.😉
The ‘Quarterly Panic’ Trap, or: Hasty Actionism Instead of Consistency
Many companies are ruled by quarterly actionism. The figures for the last quarter are in, and suddenly the entire strategy is thrown out the window in search of an ‘immediate rescue’. It’s like running a marathon but changing your running shoes every few kilometres just because you don’t like the colour anymore. You never really get into your rhythm and end up with blisters on the side of the road. This back and forth not only signals uncertainty, but also eats up an incredible amount of resources.
The counterattack:
Strategy requires the courage to persevere. That doesn’t mean you have to be stubborn, but you do have to give your vision a fair chance. Don’t review your strategy daily, but at fixed intervals. Look at the indicators that really matter, not just the short-term fluctuations. Focus on consistency, not hecticness. After all, a strong compass is only useful if you trust it.
Conclusion
Strategy is not an isolated concept, but rather the foundation upon which every business decision is built. Its influence extends deeply into all areas of business – from product development and marketing to resource allocation. In larger companies, all departments contribute to the implementation of the strategy and share responsibility for it.
In times characterised by uncertainty, rapid change and increasing complexity, it is more important than ever to position oneself strategically. Only when strategy, structures and resources are clearly aligned can a company operate in a stable yet flexible manner – and the entire system work seamlessly together.
My insider tip:
A strong strategy is not created with big words, but by consistently focusing on it. Reduce complexity by radically concentrating on the essentials: the areas where you can make a real difference. This requires the courage to be clear and the willingness to consciously set priorities. But the clearer your focus, the more powerful your implementation! Viva el entrepreneurial spirit 😊
If you ever feel like you’re straying from the path, concentrate on your strengths and your target group! Your target group should always be your North Star.
Outlook:
In the next steps, we will look at how you can make your strategy even more targeted: with practical analysis tools for strategy development, a clear definition of your target groups and the evaluation of your markets – so that strategy not only provides direction, but also enables real growth.
