Philosophy
Companies must be able to link the essential components of corporate culture to a description of the company's future path and goals. These core elements are key for strategy development and critical as a central, overarching guiding principle for the management and long-term direction of the company. This may sound quite pompous and theoretical, but these can nevertheless be intelligently defined in practice in accordance with the size or complexity of the company. This is because, at its core, it is about setting down in writing why a company exists, what benefits it provides, how it should develop and grow and what the character of the organisation should become in the process. The corporate philosophy, which describes the company’s vision, mission and goals, is the basis for this. Be aware, however: once this is committed to writing, next comes the implementation, which requires consistency and commitment!
As part of the corporate philosophy, these core elements are initially formulated as clearly and simply as possible to ensure that they are optimally understood and anchored in the minds of people working in and with the company. In addition, it is important that the impact period or observation horizon be set far enough into the future to allow enough time for realistic implementation plans, adaptations and working out of the details, rather than just permanently defining new mission statements.
The most essential elements of the corporate philosophy are:
The company and its VISION
No successful company exists solely for the joy of being. Successful companies do not fulfil an end in themselves but create added value for the market. Formulation of the corporate vision poses the central question: "What added value does the company offer its customers?" Many entrepreneurs would respond that they can state precisely what the added value is that they create. When asked whether the other employees in the company would say the same and whether the customers would confirm this, some entrepreneurs will probably only be able to give an evasive or somewhat generalised answer. And when it comes to the question of whether internal action or resource and implementation planning are comprehensibly, bindingly and measurably linked to the creation and maintenance of this added value, at least as many entrepreneurs will have trouble coming up with a response.
The corporate vision is the positively formulated concept for the type of future conditions (added value) the company wants to create. The vision thus sets the direction for corporate development – it must be inspiring and motivating. It is important here to formulate the vision as clearly, concisely and comprehensibly as possible. Avoid wordy content that is not customer-specific. The best-formulated visions developed by successful companies are short, simple and smart.
The corporate vision is the starting point for all other corporate strategic elements. In some companies, the importance and impact of an effective vision that lays the groundwork for all further activities and actions of the company is underestimated. Often at this juncture, insufficient attention is devoted to this; the timeframe is shortened, and only an inconsistent approach is taken to anchoring the vision in reality. Experience shows that this often backfires in such cases, with employee motivation and performance falling short of expectations and valuable resources being directed to the wrong activities.
Examples of effective corporate visions
Examples of less effective corporate visions
The company on its MISSION
Mission or vision? They sound so similar – and this has now become too much a theoretical exercise: Or has it? Perhaps it will help you to better understand if you imagine trying to follow assembly instructions for a piece of furniture in which some of the introductory steps and explanations have been omitted because, in the manufacturer’s opinion, they seem self-explanatory or superfluous. Who hasn’t experienced this, when, on the basis of such unclear instructions, you end up assembling and disassembling the item multiple times and, in a worst case scenario, are left in the end with several miscellaneous unused components. The effect could be similar if a company with no corporate vision and/or mission launches directly into the implementation of strategic target and action planning. If you do not want to risk disgruntled customers leaving negative reviews, you have to devote sufficient time to this. It is the same with vision and mission. While the corporate vision is the concept for what a company wants to achieve in the future (= description of the state of the company), the mission is a formulation of the organisation’s main purpose and focus. Typically, the mission remains unchanged over time and embodies the company’s primary undertaking or business purpose as well as its commitment to certain values.
Examples of effective mission statements from companies mentioned above
The STRATEGY
Terms like strategic management and corporate strategy are firmly anchored in corporate management. Nevertheless, in business practice, operational issues often take precedence and dominate thinking and action. For example, questions arise as to whether products are worthwhile, how work is being done on current projects, which customers are generating the most pressure, or where resources are currently scarce. When it comes to developing a maintainable strategy, however, the most important questions are where the most sustainable competitive advantages will lie in the future, whether the company is truly offering the right products and which key measures and resource blocks will determine the implementation plan for the coming years. The way in which these questions are addressed forms the cornerstone for successful strategic management and the implementation of a realistic, functional strategy.
Experience has shown that strategic management is more successful in companies where a conscious differentiation is made between strategic and operational planning. This applies at the content, process and, where appropriate, functional levels. There is a difference between strategic and operational planning in terms of planning content and approach. The renowned economist Peter F. Drucker described the difference as strategic planning being able to be paraphrased as “doing the right things”, while operational planning involves “doing the things right”. Since it is necessary to first define what the “right things” are before it becomes possible do those things right, strategic planning (strategy) is upstream from operational planning (implementation).
It therefore stands to reason that as part of the process of corporate management, strategic planning must take place before operational planning. It is important to understand that the details of operational planning are adjusted annually or throughout the year, while the cycle for renewing strategic planning is usually much longer. This is an aspect that, in practice, is often handled incorrectly. Ultimately, strategies are meant to be implemented operationally and not be constantly reworked.
The aim of a holistic corporate strategy is to create meaningful goals that make the company’s ambitious yet achievable vision concrete, and, in turn, to support these goals with appropriate implementation steps. The corporate strategy thus contains a plan that defines the specific targets, steps and measures required to achieve the corporate vision. Based on a clear understanding of competitiveness, the corporate strategy sets out a multi-year roadmap for how best to leverage advantages to achieve profitable growth and strong, sustainable value creation. A successful corporate strategy determines the optimal business portfolio, prioritises the right value drivers and establishes resource allocation to translate the vision and goals into concrete actions that ultimately lead to measurable results and real value.
In other words, corporate strategy is a unique plan or framework, long-term in nature and designed with the objective of gaining a competitive market advantage while delivering on promises to both customers and stakeholders.
Another, much simpler view of corporate strategy is to see it as a set of decisions and measures upon which a company bases its focus and actions for the future. Given that every organisation has a limited number of resources, the decision on how to prioritise the use of these resources will vary from company to company.
Without a clear corporate strategy, companies lose sight of their main objectives and lack the drive and focus a well-designed corporate strategy provides. A holistic strategy enables the company to establish practical performance and resource management. Finally, is serves as a kind of employee manual and clarification of the company’s plan for employees as well as external stakeholders.
In the area of people management, corporate strategy plays a key role in engaging, motivating and aligning employees. It aids in optimal communication of the company's ideas, perceptions and intentions, enabling employees to clearly and measurably recognise, evaluate and optimise their own contributions to the achievement of the corporate strategy. Especially in modern, agile and self-organised corporate structures, a well-functioning corporate strategy is an essential foundation for the success of the entire organisation.
The Path to Strategy Development
1. VISION, MISSION
In established companies, the vision statement, at the very least, and ideally, the mission statement as well, should already have been defined within the context of the corporate philosophy. If not, these would be the first tasks to accomplish on the path to strategy development.
2. STRATEGISCHE ZIELE
From the point of view of corporate planning, a one- or two-sentence vision statement does not represent sufficiently formulated goals. The main characteristics of effective strategic goals are that they are clearly linked to the achievement of the corporate vision, that they are detailed enough allow implementation measures and requirements to be derived and that they are clearly measurable. When defining strategic goals, a direct link must be established to the market, the products, the customer benefits (added value), the company’s own competitive position and its organisation. This means it is important to not only know what achievements are desired but also to be able to assess the company’s position in the market environment. In contrast to downstream goals (often called overall and sub-goals), strategic goals rarely focus on individual business units, products or markets. Strategic goals are usually higher-level goals that affect the entire company. Within the so-called target pyramid, they are therefore also at the top. Depending on the size and complexity of the company, strategic goals are subsequently underpinned by goals in the individual markets, products or organisational units (business unit strategy, product strategy, etc.).
The most common tool for deriving strategic goals is probably the SWOT analysis:
Strategic goals have the following characteristics:
Strategic goals are often defined in categories:
The number of valid strategic goals must be limited to a reasonable and useful count, since the content of the goals will be subdivided and broken down in further development of the strategy. If the number of strategic goals is already high or even too high, there is an acute risk of “explosion” in terms of overall planning. A tried-and-tested approach for the sensible management of top-priority processes is to remain in the single-digit range, i.e. <10>
3. CORE MEASURES
Core measures are overarching, robust bundles of measures necessary for achieving the strategic goals. In line with the SWOT analysis, this includes measures for seizing opportunities and possibilities as well as for avoiding threats and for reducing risks. In the process of developing these, it is essential to also consciously define core measures that map out necessary further developments in the corporate organisation or culture. It is a common shortcoming in corporate practice that within the strategy, organisational, structural or cultural measures are not planned and treated on a par with business or product-related measures.
The art of deriving effective core measures involves:
A common tool used for visualising, planning and tracking core measures is the so-called “strategic roadmap” that also identifies responsibilities.
4. RESOURCES
Strategic planning, including a vision, strategic goals and core measures, enables the estimate of dedicated resources with a view to successful strategy implementation. At the strategic planning level, it is not yet necessary to have precisely detailed plans or individual requirements. At this point, it is initially a matter of facilitating a gap analysis and determining rough demand figures. This is not only important for later operational planning but also for the evaluation of strategic feasibilities or obstacles. This rough estimate of resource requirements also supports the necessary focus on the most essential items that can be achieved with limited resources.
A strategic resource requirement is therefore not equivalent to a job requirement plan or to individual investment budgets. These will be determined based on downstream planning activities.
5. PERFORMANCE
Within the context of strategy, the topic of performance is often quoted, frequently desired and yet repeatedly inadequately mapped. Performance indicators (KPI) are often only derived directly from the formulation of the strategic goals. This is effective for determining achievement levels or doing a gap analysis of the strategic goals. However, it does not always suffice for identifying and analysing achievement, progress and the possible need for correction with regard to the core measures.
Key performance indicators (KPI) for measuring and evaluating strategic performance should:
6. PLAN
The representation of the corporate strategy is the plan – although it is not a single document or source, but usually consists of several parts. These include the profit and loss plan (P&L), the action plan (roadmap), the investment framework and the human resources framework. As with the roadmap, the focus of strategic planning is on overall numbers and framework budgets. All detailed downstream plans follow as part of operational planning (sub-goals, action plans/sprints or similar, liquidity plan, personnel development plan, etc.), which usually takes place after the strategy has been defined or has been periodically updated.
The art of strategic management is a targeted combination of the thinking involved in both strategic and operational planning, thus operationalising the strategy in a structural and binding manner, i.e. making it implementable. This may sound banal, but in practice, it is frequently a failing. It is not uncommon to find that no link, or only an inadequate link, has been established between the creation of visualised strategy slides and the development of concrete operational action. In these cases, strategy reviews or annual reviews can quickly turn into journeys of discovery in which actively controlled effects are rare occurrences.
