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3 Critical Stages of Strategy: Planning, Decoding, and Execution for Business Success

3 Critical Stages of Strategy: Planning, Decoding, and Execution for Business Success

Every company must have a strategy. Otherwise, you have no idea where you’re going. And then, even the slightest breeze can make you anxious.

What’s the state of businesses with a strategy, and what about entrepreneurs who have one? Have you ever seen those who go on a pilgrimage? They have a clear vision in their eyes and unwavering faith in their hearts. Even if they’re dressed in rags, even if they face hardships, they remain incredibly resolute, humble, and spiritually fulfilled.

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As an entrepreneur, a manager, as an individual, we all need strategy and direction. How do you formulate a strategy? Who are the right people to execute it? What are the common misconceptions in personnel management during the execution of a strategy?

01-How to Formulate a Strategy

Have you ever heard statements like these?
“Don’t talk to me about strategy; everything is a strategy when you have results, and without results, any strategy is useless.”
“The internet industry changes too fast; there’s no time for strategy.”
“Instead of discussing strategy, we should focus on dissecting the business model, where the wool comes from the pig.”

These statements seem to convey the idea that strategy isn’t all that important.

According to Mr. Wang Yue, when he conducts strategy training for companies, he often starts with a small exercise. He asks the executives of the attending companies, “Does your company have a strategy?” Most of them say yes.

Then, he gives each person a sticky note and asks them to write down their understanding of the company’s strategy in three sentences or less. After they’ve written their notes, he puts them on the wall and reads them out loud for everyone to hear.

The results are interesting. Even though these executives claimed, “We have a strategy,” what they wrote was completely different, and there was no unified understanding. Some of them even wrote vague phrases and slogans like “transformation and upgrade,” “recreate something,” or “become a leader in China’s industry.”

You might wonder, is it okay to not take strategy seriously? In the past, it might have been acceptable.

Why was that?

Because there used to be a dividend. During the first half of the internet era, the market was in a growth phase. Many people who had not yet been connected to the internet were brought into the online world. They generated a massive traffic dividend, creating substantial demand and numerous business opportunities.

People rushed to seize this traffic and were making money hand over fist. Some early-stage companies rose rapidly due to resource accumulation, such as mining, land, bank loans, and demographic dividends, which allowed them to accumulate capital and expand easily.

Many companies in their early stages had a limited understanding of strategic management. They were too busy with their daily operations and cash flow. They didn’t bother with questions about strategy; they just wanted to focus on making money.

As for future strategic management of the company, it was more about intuition than in-depth research. But that doesn’t work anymore.

As the growth phase tops out, the market starts to shift into a phase of competition for existing market share. Many people have started complaining that making money is getting tougher, and future challenges and uncertainties are growing. The dividend has turned into a battleground, and profit margins are shrinking as competition intensifies.

You can’t rely on resources and demographic dividends for growth as you did in the past. In these circumstances, walking by intuition is likely to lead to failure.

So, what should you do? It’s time to get serious about studying strategy, management, and execution and put in the hard work in these areas. Having a strategy is like having a map in the jungle; you need to follow it to have a chance to find the way out.

So, how do you formulate a strategy?

02 – The Three Rings of Strategy: Planning, Decoding, Execution

A good strategy should be divided into three stages: strategic planning, decoding, and execution.

Strategy requires planning, and planning involves setting organizational goals. But where do these organizational goals come from?

When many employees in companies receive KPI (Key Performance Indicator) tasks, they often react with frustration, thinking that these goals must have been arbitrarily set by the bosses, seemingly illogical and demanding.

In jest, during my business interactions, I sometimes ask if these goals are randomly chosen by the bosses’ gut feeling. If the boss can’t do it alone, why not let everyone decide? But even collective decision-making doesn’t always work. Goals should not be based on feelings; they require a rigorous process.

So, how do you set goals? You need to start with the foundation of your corporate strategy.

The existence of a company is to provide valuable products and services to customers. If a company can’t provide value, it has no reason to exist. Therefore, you need to start by looking at customer needs and market demands. These needs collectively form the market’s big “cake.”

Can you find your slice of that cake? This is the primary problem that strategic planning needs to address.

In simpler terms, it’s about identifying where your business opportunity lies. This requires market and customer insights, understanding your target audience, and what they need. Then, you must evaluate the size of this market and whether it’s worth your passion and effort. Is this market just a “small pond” that can’t sustain a dragon?

This is a crucial question.

Of course, if you find that the market you’ve chosen has a huge potential and is attractive, congratulations. But don’t get too excited just yet.

Because in China, business competition is exceptionally fierce. As soon as you spot an opportunity, you need to calm down and consider a few questions:

  • Who will compete for this piece of the cake?
  • Why do you think you can claim a slice of it?

This leads us to the second question in our strategic planning: analyzing the competitive landscape.

Suppose you’ve analyzed it and believe you have a competitive advantage. In that case, you might wonder, “How do I achieve this goal?” This brings us to the third question: your business model.

This involves the combination of products and services, pricing strategies, channel selection, cost structure, and ultimately, profitability.

Once you’ve answered these three questions, you can determine if your business is viable and has room for sustainable growth. But that’s not all; you also need to consider the “time cycle.”

What’s the “time cycle”? You didn’t start a company just to go bankrupt, right? You probably want it to last, make profits, and thrive over time. To achieve this, you need to break down your operations into different stages.

The most common approach is to establish a corporate vision, a long-term goal. Then, you’ll shorten the time frame, such as developing a 3-year plan, looking at the next five years, thinking about three years, and executing diligently in the first year.

What will your company look like in three years? What will your market share be? Where will you stand in the competition? This leads to the fourth question: defining strategic objectives, and it’s not just a single goal; it’s a system of goals.

The essence of strategic planning isn’t about creating a bunch of impressive PowerPoint presentations or simply making plans. It’s about accurately seizing opportunities and translating them into goals that every member of the organization wants to achieve.

Through analysis, you transform the uncertainty of the future business environment into the certainty you desire. This is what strategic planning is all about.

Planning involves thinking about what our goals for the next year are, what we should do, and how we should do it. You can use various strategic analysis tools to help with your decision-making, such as SWOT analysis and the BCG matrix.

So, strategic planning doesn’t seem that difficult, right? You can hold meetings, have discussions, conduct research, and step by step, analyze and arrive at results.

But why do many companies still struggle with their strategies? Because the real problems often arise during the execution phase.

That’s why we say that strategy needs to be “decoded.” Why? Because strategy shouldn’t be a mystery. It should be something that everyone can understand and execute, whether it’s financial goals, industry status, or other performance metrics.

However, in practice, strategy often faces obstacles during implementation.

First, as information is passed down from top to bottom, it tends to weaken at each level, leading to misinterpretation and misalignment of understanding.

Second, traditional strategic models often encourage each department to operate independently. However, this approach overlooks a crucial fact: an enterprise is like a value chain, and different departments need to collaborate and work together.

When everyone goes in different directions, they often create many problems. When you strip away the external facade of the strategy, you’ll find that the organization is already riddled with holes.

That’s why we emphasize “decoding” strategy. Strategy should be clear and understandable to everyone, especially those who are actually executing it. Modern employees have changing values and educational backgrounds. They need to understand why their work is essential and what its significance is. The era of “just follow orders, don’t ask why” is long gone.

Without strategy decoding, employees who don’t understand the organization’s purpose will just focus on their daily tasks. The task of strategic decoding is to achieve two things:

  1. Ensure alignment between top and bottom, with information cascading down clearly.
  2. Foster collaboration among different departments within the organization’s value chain.

This process is complex and challenging. You need to identify key tasks and implementation paths for a 3-5 year strategic cycle. Most importantly, focus on the following year, breaking down the big strategy into specific small campaigns so that everyone knows what they need to do.

This turns strategy into an executable operational plan, and the organization’s “must-win battle” emerges. But executing a strategy also comes with challenges.

One common issue is organizational structure. After a strategic change, the organization may need to adapt. For instance, if you’re shifting from a single product to multiple products, does the supply chain need restructuring? Do you need to establish quasi-business units?

Then, there’s the issue of talent. New strategies may require new skills, sometimes requiring the departure of some employees and the introduction of new ones. The integration of old and new employees and adaptability changes in the company’s culture are also important.

Strategy execution is an interlocking process that requires leadership support. Leadership isn’t just the responsibility of the boss; it’s a shared responsibility among the management team. It involves guiding and motivating employees to collectively achieve strategic objectives.

Ultimately, performance is the key measure of strategic success. Even if the strategy is perfect, if it can’t be translated into actual business performance, it’s just talk. Within the strategic cycle, there may be periodic adjustments, but the ultimate goal is to achieve stable growth.

Strategic planning is a complex process involving many facets. Only when these three elements—strategic planning, decoding, and execution—are closely integrated can the success of a strategy be ensured. This is the logic of the three rings of strategy.

But there’s a crucial point: you need the right people to execute the strategy. If you have the right people, things will work out. If you have the wrong people, even the air will become toxic. Many entrepreneurs have stumbled in the process of identifying and utilizing talent.

03 – Common Misconceptions in Talent Acquisition and Management During Strategic Execution

In the process of strategic execution, many companies encounter similar challenges related to talent acquisition and management. Some of the common misconceptions and pitfalls include:

Misconception 1: Blindly Trusting Big Company Backgrounds

In the realm of company management, selecting and effectively utilizing talent is a significant challenge, especially for entrepreneurs in startup companies. Many founders find themselves perplexed when it comes to finding the right talent.

Often, these founders are preoccupied with product development and sales, lacking expertise in identifying and utilizing talent. They often rely on their gut feelings. They may believe that hiring individuals with backgrounds from large companies is the key to avoiding mistakes.

However, candidates from large corporations may not necessarily adapt well to the dynamics of a smaller company. While they might excel in a big company, their skills and experiences might not align with the needs of a small organization. Some founders make the mistake of hiring executives from renowned corporations and expect them to perform miracles without considering whether they can adapt to the new environment.

In some cases, entrepreneurs even hire senior HR professionals from large companies to manage their HR function. These HR professionals tend to transplant their previous management styles, which might not be suitable for a smaller company. This can result in organizational chaos, decreased efficiency, and hindered business development.

Therefore, it’s essential for founders to remove the halo effect when considering candidates from large companies and assess whether their experiences genuinely fit the current situation of their own company. Don’t just focus on their past success in a large corporation; consider whether they can adapt to the new environment. Sometimes, rushing to hire “big-name talent” can lead to unintended consequences.

Misconception 2: Halo Effect

The “halo effect” is a cognitive bias where our initial impression of a person influences our perception of their other qualities. For example, if you initially find someone intelligent, you may unconsciously assume that they are excellent in all aspects.

This effect is prevalent in the corporate world and can lead to hiring mistakes. Entrepreneurs often fall into this trap. They may form impressions of individuals based on their past experiences and then assign tasks without considering whether the tasks are a good match for the individuals.

For instance, imagine a biopharmaceutical company venturing into the new field of cell therapy. The founder might have a positive impression of an employee who performed well during the company’s early entrepreneurial stage. This employee was primarily involved in sales at the time. The founder believes that the individual is “innovative and bold.”

However, the company’s current situation is entirely different from its early days. The founder hasn’t thoroughly communicated with this employee, and their understanding is still based on the past. Consequently, when this employee takes on the new role, they rely on their past methods, which are ill-suited for the current task. The outcome is less than satisfactory.

To avoid this pitfall, it’s crucial to be cautious of the halo effect. Don’t assume that a person’s competence in one area translates to excellence in all areas. Instead, consider the current situation, gather input from the HR department, and listen to feedback from employees who have recently interacted with the individual. This way, you can more accurately evaluate whether someone is suitable for a particular role.

People can change and develop over time, so relying solely on past impressions may not provide an accurate assessment.

Misconception 3: Valuing Homogeneity Over Diversity

During the early stages of a startup, many founders tend to prefer hiring individuals who share similar professional backgrounds, educational experiences, personalities, and risk preferences. They believe that this approach fosters better cooperation and higher efficiency within the team.

While this may seem like a sound strategy initially, over time, it can limit a company’s growth. When everyone in the organization is too similar, there’s a lack of diverse perspectives, fresh ideas, and the ability to explore new business avenues.

For example, I’ve heard of a game company whose founder had a strong interest in traditional Chinese culture and traditional Chinese medicine. The founder’s team members were aware of this interest and decided to study these subjects as well. Consequently, when hiring, the founder showed a preference for candidates knowledgeable in traditional Chinese culture and medicine. As time passed, the company’s employees became increasingly homogenous.

Eventually, there were no innovative product managers or technical experts in the organization, and they could only rely on a few old games to sustain the business. The company faced difficulties expanding into new markets because it lacked employees with diverse backgrounds and fresh perspectives.

As a leader, it’s crucial not to judge people solely based on your own standards. It’s essential to bring in talent with various backgrounds and capabilities to ensure a comprehensive and innovative company culture. Companies should actively seek diverse voices and ideas to avoid becoming stagnant and facing limitations in their development.

In conclusion, making accurate judgments about talent is both a “correct” and “challenging” endeavor. To succeed in talent acquisition and management during strategic execution, it’s essential to avoid the aforementioned misconceptions and biases, consider the current context, and value diversity in your team.

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