In this module you will learn to create a sustainable strategy to help align your activities to achieve your goals.
You need to have a sustainable strategy. Your strategy aligns your activities to achieve the goals you set for your project or company. This increases the chance of success, reduces waste and facilitates efficiencies. Without purpose or a plan, teams are aimless, distracted by short-term and/or low priority actions, and failure and waste follow.
The aim of a successful sustainable strategy is to intelligently select the best actions you need to take to achieve your company goals. It is fundamentally important that your sustainable strategy does not just focus on best practice but goes beyond that to cultivate a unique position in terms of servicing your customer’s needs. An efficient market will destroy your profits if you don’t have something unique and not replicable about you. The goal of your strategy is to strengthen that position.
How do companies create good sustainable business-based strategies that focus on long-term and unique value creation?
This Module will help you create a sustainable strategy that is focused around your competitive advantage and creating sustainable value. This will help you chose the most appropriate actions to achieve your goals. The tools in this module are designed to help you through the three stages of creating a sustainable strategy. This includes a contextual analysis to help you understand your internal and external environment in terms of their status quo and trends. Thereafter, you will plot out where you want to be and set measurable targets to get there. This will be done by creating a winning game plan that includes actions to strengthen your unique competitive advantage.
Understanding your operation
+ Understand your internal and external environment
A sound strategy requires you to know your internal and external context in order to best use your resources and capabilities to captalise on your external environment and anticipate and mitigate threats. Knowing what you have to work with informs your strategic approach to different circumstances. Without this knowledge, your strategy is aimless and ineffective.
+ Use your strengths to capitalise on opportunities and mitigate risks
Understanding what your strengths and weaknesses are help you to know what you can use to exploit opportunities and protect yourself from damages. Fortifying your strengths and improving on your weaknesses where needed is only achievable when you know what these are and how they influence your company in the context of your environment. In doing so you increase your sustainable competitive advantage by having access to opportunities that are not available to others, and better managing risks where others don’t.
+ Increase resilience in the face of uncertainty
Have strategic processes in place that are agile enough to accommodate change. Understanding the things you have limited or no influence over (external environment) in the context of your strengths and weaknesses (internal environment) can allow you to capitalise on new and existing opportunities and mitigate new and existing threats more effectively. This strategic approach to resource and capability use and allocation can give you a sustainable advantage over competitors.
Have purpose and align resources towards a common goal
+ Improve success rate and reduce waste
A sustainable strategy reduces waste and unforeseen risks in ventures by carefully analyzing the status quo, trends and setting specific, measurable, achievable, relevant and time-bound (SMART) goals. By reducing risk and using strengths to capitalise on opportunities through your unique advantage you increase the likelihood of success. Furthermore, by running scenarios, you are able to have contingency strategies in place during unfavourable periods.
+ Increase operational effectiveness and efficiency
Having a carefully created game plan improves asset use efficiencies and makes actions more effective in terms of achieving targets. The process of crafting a solid strategy helps activities to be more directed, goal-orientated and impactful.
+ Foster cohesion and capitalise on synergies
A strategy that considers all parts of the system and sets overarching goals for the company helps all divisions and functions to pull in the same direction. This cohesion facilitates synergies between groups that might have otherwise undertaken counterproductive activities because of conflicting targets. A more balanced, sustainable and long-term strategy helps reduce internal conflicts of interest and improves overall chance of success.
A Business development opportunity
+ Captialise on new revenue sources
The analyses used during strategy creation provide the company with a unique opportunity to identify new revenues sources in the market that its capabilities can better service. For instance, identifying a new market trend that was previously unknown to the business allows them to create a strategy that will better position them to service the new market and increase revenues.
+ Access new markets
Knowing where the ball will be and positioning yourself to capitalise on this is an important component of strategy creation and scenario modelling. In so doing, you are better able to service new markets that misaligned incumbents and competitors will not be able to.
+ Create new products and services
New revenue sources and servicing new markets could require creating new services, products or capabilities. By better understanding your unique competitive advantage in relation to servicing your target market’s needs, you are in the position to modify your offering through evolutionary or revolutionary innovation.
How to create a sustainable strategy
Creating a sustainable strategy involves four distinct, but interlinked steps. This toolkit will walk through each step and includes templates to help you create your own strategy.
A brief summary of the steps are as follows:
- Visioning: define your sustainable future
- Contextualising: understand your situation
- Formalising: explore strategic options and set goals and objectives
- Validating: performance measurement and learning
Define your sustainable future
The first step to creating a sustainable strategy involves having a clear and realistic idea of where you want your company/project to be.
+ To clarify this, ask yourself the following questions
- What is the vision for your company/project?
- What does this look like in real terms?
- Is it sustainable?
- Does it promote long-term profitability?
- Does it benefits people?
- Does it hurt the planet?
Understand your Situation
Once you have a good grasp of your context, you need to both understand your context (external, internal, trends, etc.). This section will help you to do just that.
Firstly, it is recommended that you and your team have a sound understanding of your business and how it currently operates.
+ This will include considerations such as:
- What is the idea behind the business? What does it do?
- What are its current targets? Are they sustainable?
- How does the company currently plan to reach its targets?
- What is your understanding of the company’s current value proposition?
- Is this both sustainable and unique?
- What is your company’s business model? How does it make money?
- Is this sustainable and unique?
Once you have a reasonable understanding of your company overview, you will now proceed to analyse the company’s external and internal environment.
2.1 External Environment
The company’s external (or contextual) environment includes those factors that you don’t have direct control over. Four tools will help you analyse your external context and are described below.
+ Tool 1: PESTLE Analysis
Firstly, the PESTLE tool will help you to consider your overarching macro context. This includes the Political, Economic, Societal, Technological, Legal, and Environmental (PESTLE) factors in which you operate. Use the template to work through each factor and carefully consider the relevant factors in each category that have a significant impact on your operations in terms of opportunity and threat creation. For multinationals, a PESTLE should be considered for each operational region.
+ Tool 2: Industry Desirability Analysis
Once you have a sound understanding of your overarching context, you should then consider the industry in which you operate. To do this, consider the five forces of industry attractiveness. These include the power of industry suppliers and buyers, the threat of new entrants and substitutes in the industry, and the level of competition in the industry (use the Place in Market Identifier tool to help you). A lower power of suppliers and buyers is favourable as this increases your bargaining position. Similarly, low threats of new entrants (e.g. high barriers to entering the industry) and substitutes is desirable as this reduces competition to incumbents. A low level of competition between these incumbents further increases the attractiveness of the industry. For multinationals, a five forces analysis should be considered for each operational region. Use the Five Forces templateand answer the questions in each force category to better understand the industry in which you operate in.
+ Tool 3: Business Ecosystem Analysis
You company is likely to be influenced by multiple industries. To analyse this, it is recommended that you undertake a business ecosystem analysis. This helps you interpret trends in other industries and their impacts on your operations. To do this, take a blank canvas and map out the following (using nodes and arrows):
- Map key players in each industry (interlinking nodes)
- Drivers and limiting factors for each node? Consider consumer behaviour, technology and regulatory factors
- What are market trends and how do they impact each node? Consider consumer behaviour, technology and regulatory factors
- What disruptors might impact you?
- What are others doing?
- What are the best practices out there and how do you measure up?
- Who can I partner with?
- Which symbiotic relationships could exist?
- Who is my current competition?
- What is the market doing?
- What disruptions are likely? (If you spot disruptors, try to align symbiotically with them.)
This is not an exhaustive tool and can be revisited. However, it is an important step in understanding the macro landscape in which you operate.
+ Tool 4: Scenario Analysis
Once you have a reasonable understanding of the other industries and they key players and how these relationships impact you in the status quo, you now need to determine what the world would look like for your organisation under different significant scenarios. This scenario planning exercise is broken up into five stages.
Stage 1: Orientate
Identify the main goal/target that you are wanting to model. This will be informed by your previous analyses (particularly the business ecosystem analysis).
Stage 2: Driver Analysis
Explore the main drivers that are changing in the landscape. Consider market-related (e.g. preferences, demand forecasts, growth, etc.), technological (e.g. automation, industry 4.0, AI, social media, etc.) and regulatory trends.
Stage 3: Scenario Creation
Describe critical uncertainties that arose from the business ecosystem and driver analyses. To do this, you need to consider the top high priority risk scenarios (rank by likelihood x impact) and prepare you accordingly.
Stage 4: Option Considerations
Describe scenarios and implications based on these uncertainties. Use the Scenario Framework Template templates to create a narrative for each scenario and include company implications.
Stage 5: Integration
Firstly, complete the internal situation analysisbelow to understand how you could proactively address each scenario. Describe what opportunities and threats each scenario brings with it. Then describe how you will use your strengths to captialise on these opportunities and mitigate the threats.
Secondly, create early warning flags for each scenario. The aims of these flags are to alert the company if it seems likely that one of the scenarios is materialising. The company then has a basic understand of likely effects and implications that are likely to result.
2.2 Internal Environment
Now that you have analysed your external environment, it is time to look at your internal environment and see how you can strategically position yourself to have a sustainable competitive advantage in an ever-changing market.
The company’s internal (or immediate) environment includes those factors that you have direct control over. Three tools will help you analyse your internal context and are described below.
Once you have determined your unique and critical strengths, you should examine your significant weaknesses. These internal characteristics are malleable, and you can work on them. Use them to capitalise on the opportunities and threats in your industry and business ecosystem to increase sustainable profitability and resilience.
+ Tool 1: SWOT Analysis
The primary tool to integrate your internal capabilities to the external environment is using a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). The Strengths and Weaknesses are internal factors that you can control. The Opportunities and Threats are external factors that you do not have control over. These external facots were analysed in 2.1.
The goal of the SWOT analysis in sustainable strategy creation is to use your strengths to capitalise on opportunities and mitigate threats.
+ Tool 2: Strategic Asset Identifier
The Strategic Asset Identifier template helps you to know which strategic assets you have. This in turn, provides you with a better understanding your competitive advantage and will further help you to refine your understanding of your internal context.
These strategic assets have one or more of the following charactersitics:
- They give you a sustainable competitive advantage
- They help you to capitalise on new opportunities
- They help you mitigate threats
- They provide you with a distinctive and valuable ingredient
For each function within primary and supporting activities (logistics, operations, marketing and sales, customer service, procurement, human resource management, etc.), consider which assets (tangible or intangible) are most important. Your strategic assets can take the form of various capitals (financial, human, intellectual, natural, relational and technological).
+ Tool 3: Competitive Advantage Inventory
To help you catalogue your distinctive ingredients and competitive advantage, use the Competitive Advantage Inventory template below. This will help you soldify your understanding of what these assets are and help you build your sustainable strategy around them. As you write them down, consider how your current strategy, value proposition, performance, processes, competencies and organisational structures promote or hinder these competitive advantages.
+ Actionable Tips
To anticipate and capitalise on future opportunities, it may be helpful to consider the following actions:
- Use the tools above to get a thorough understanding of market trends and the company’s relation to them
- Consider where the company can intercept the trend and capitalise on it
- Collaborate with others to compliment your competencies
- Be cognisant of the business ecosystem risks and try to mitigate them
- Have a supple and agile mindset
- Get the resources and capabilities you need to best capitalise on and fortify yourself against the external environment
- Move from sustainable strategies as risk mitigation to a value creation opportunity
- Use products and services as sustainable solutions
- Focus on business continuity and resilience
- Aim for talent acquisition and retention
- Collaborate through mutually beneficial relationships (identify best stakeholders)
- Rank your strategic priorities and only focus on a the top few
- Focus on three to five year horizons
- Anything shorter than that is tactical
- Anything longer than that will be too abstract
- Be forward-thinking i.e. focus on strategies that will prepare you for the future and not the status quo.
- For instance, if your company is in the production sector, you could consider how you will respond to the following trends:
- Augmented reality
- The Internet of Things
- Advanced Robotics
- Cloud Computing
- Big Data Analytics
- If you are in the business of mobility you may consider:
- Autonomous Vehicles
- The Sharing Economy
- Electric Vehicles
- Public Transport Dynamics
- Insurance Factors
- Traffic Optimisation Measures
- For instance, if your company is in the production sector, you could consider how you will respond to the following trends:
For instance, consider how you can refine your strengths to capitalise on sustainable opportunities and market trends such as circular economy drivers, renewable energy technologies and market behavioural changes. This could include considering how to make your products and services more durable and how you could reduce resource inputs and waste. Similarly, consider how you could mitigate threats such as resource scarcity, commodity price changes, waste and energy management regulation changes, and environmental impact pressures. Often, you will notice that by capitalising on a sustainable opportunity, you will be mitigating a potential threat automatically. This is an example of an effective (achieving your goal) and efficient (two goals with one action) strategy based on external and internal considerations.
Explore strategic options and set goals and objectives
Now that you have a clear understanding of where you want to be and what you have to work with, you need to ask yourself: What will help us achieve our vision given our context (external and internal)?
3.1 Goal Setting
This will involve setting goals. These goals should focus on using your strategic assets and distinctive ingredients to further your sustainable competitive advantage in a way that helps you achieve your vision. Use the Vision-Goal Alignment Template to formalise this.
+ Write you goals down
Each goal should be:
- Specific i.e. not vague
- Time limited i.e. they have an end
+ Actionable tips
- Be proactive
- Look for strategies that use circular economy thinking e.g.
- Align activities to capitalise on resources that can be regenerated in production
- Consider scalable actions that maximise use from the same number of goods
- Reconfigure value chains to use waste as inputs
- Increase the lifetime of resources and products
+ Sustainable Value Driver Map
A helpful way of determining key goals is to break your company down into value drivers and selecting key factors to strategically address. To help you do this, use the Sustainable Value Driver Map to identify the most strategic areas to address, based on the external and internal situational analysis and scenario planning exercises you did in the preceding sections.
+ Strategy Value Map
To help you chose and prioritise goals in different scenarios, it may be helpful to consider the Sustainable Strategy Value Map. To use this tool, consider strategies for addressing current and future scenarios in the context of internal and external factors. In each of these instances, consider the most important drivers, the strategy you will use and the expected payoff. This process will help you refine your goals in the scenario that you are considering.
3.2 Objective Setting
You now have a clear vision, understand what you’re working with, and have goals to achieve your vision and sustain your competitive advantage. The next step is to create a game plan to achieve your goals.
To do this, break your goals up into actionable deliverables or outcomes: objectives. By completing these objectives, you will achieve your goals which will get you to where you want to be. This will be done through considering short-term actions that align with long-term goals to meet both current and future needs.
Your objectives should be geared around using your strengths and sustainable competitive advantage to capitalise on opportunities and mitigate threats to achieve your desired outcomes. Use specifics on how to achieve your goals. Consider having clear metrics for each objective. For instance, each objective should have clear deliverables (milestones/outputs), timelines and resources (financial, human, technological) allocated to them.
+ Actionable Tips
- Limit your objectives to a handful
- Focus on the midterm (with the long term in mind)
- Make the hard calls
- Address critical vulnerabilities
- Have concrete steps
+ Strategy Alignment Validator
Once you have created goals and objectives, it is important to check the alignment of your new strategy within your company setup. To do this, you can use the Strategy Alignment Template. This tool helps you to see if your strategy promotes or hinders alignment between your business model, governance structures, strategic assets and other key sustainable growth abilities.
+ Strategic Project Ranking
To help you with selecting strategic projects to help you achieve your objectives, you can use the Strategic Project Ranking Template. Based on the contextual analyses of your internal and external environments, rank projects based on their risk and reward (in terms of value creation and the goals that you created).
This step will help you to formalise a selection process, enabling you to:
- Focus on low risk, high reward project
- Explore high risk, high reward projects
- Valuate low risk, low reward projects
- Avoid high risk, low reward projects
Step 4: performance measurement and learning
Now that you know that your strategy is aligned with your vision, strategic assets and organisational capabilities, you need to set performance metrics. These metrics will help you know if you’re on track and help you create validated learning opportunities to improve your strategy. The metrics should include a target and set measurable indicators to gauge if the target was met.
By monitoring your performance, you will soon be able to validate your strategy and execution. This will help you double down on successful endeavours and amend your strategy where necessary as new information comes to light.
+ Actionable tips
- Communicate your plan clearly
- Get buy-in from the entire top team
- Each performance metric should allow for the following features:
- Relevance i.e. the metrics should be material
- Replication i.e. measurements should be repeatable
- Rigour i.e. results should be meaningful
- Consistency i.e. measurements should be reliable
Sustainable strategies models align company actions to long-term goals. Creating a sustainable strategy involves four distinct, but connected stages.
- The first stage involves creating a vision for your operations and defining what your sustainable future should look like.
- The second stage involves a situational analysis of you external and internal environments. The aim of this stage is to understand how you can use and enhance your internal features to capitalise on and mitigate external factors. The crux of this process results in understanding your unique and sustainable competitive advantage so that you can develop your strategy around this.
- The third stage involves exploring strategic options, and setting goals and objectives. Essentially, this process aims at aligning your actions to achieve your vision in the context of your situation.
- The fourth stage is to measure your performance and feedback results into your strategy process. This activity will help you gain valuable insights through validated learning and provide a monitoring platform to gauge if you're on track to meet you strategic sustainable goals.
To do this, this toolkit provides you with sustainable strategy creation templates that guide you step-by-step through the process.