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​In Pursuit of Profit

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1/13/2020

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Understanding Strategic Business Drivers

 
business drivers
If you've mapped out your company's operating  strategies before considering your strategic business drivers, you may be putting the cart before the horse. Your organization's strategy is a critical statement that outlines how you expect to achieve certain goals. But what are the underlying drivers of your company's beliefs, actions, and desire for success? Defining these should come first, and then your corresponding strategies and projects will follow.

What Are Strategic Business Drivers?

Your business' strategic drivers are the collection of people, conditions, and information that initiate and support activities that will help your company define and accomplish its goals. These drivers represent the key influences or factors that matter to the success of your organization. Some of the most common strategic business drivers include:

Financial Objectives

  • Increase Shareholder Value. Many people believe that the sole reason for a business to exist is to turn a profit. While this makes logical sense, a company that is only focused on the bottom line is likely going to alienate their clients and ultimately fail. If you exist as a hedge fund, this might work. Otherwise, having profits as a strategic business driver is fine provided it isn't the only factor that is influencing your company's strategies.

  • Growth. It’s often said in business, if you’re not growing you’re dying. Growing companies are better able to serve their customers, employees and owners with new and innovative products, more jobs, higher salaries and better returns. Companies not focused on growing are often left behind by their competition and ultimately lose customers and employees.

Customer Objectives

  • Brand. Your brand is the collection of values, symbols, customer experience and reputation that creates recognition and awareness in the marketplace of your company and its products or services.  Some organizations are driven to build a particular brand image or reputation, often including visual representation to enhance recognition. This is particularly true with consumer brands. Some of the world's most powerful brands are recognizable based on logo alone, including Nike, McDonald's, and Apple.

  • Customer Focus. A customer centric organization is focused on the overall customer experience from product or service design to marketing awareness to purchase process and post-purchase follow up. It means putting the customer experience first. Examples of customer centric companies include Amazon, USAA and Hilton.

Product/Service Objectives

  • Value. A company that wants to increase the perceived value of its product or service to build a competitive advantage would have value as a strategic driver.

  • Products/Services. Product or service centric companies take the approach of designing and creating the best product or service they are capable of delivering, paying less attention to external market factors, then attempting to find a market for their product or service. These companies have a product roadmap that is focused on continuous improvement and/or producing additional features.

  • Market. The market in which you operate may in itself be a strategic business driver, manifesting through market forces such as competitor pricing, distribution issues, and access to promotional outlets.

  • Intellectual property. If your company is involved in producing valuable technology or other products that may be subject to patents, copyrights, or licenses you may be concerned about holding onto those and other intellectual property ownership rights. The same may be true for organizations that license such intellectual property if it’s core to the business.

  • Production Capacity. A company that has substantial investments in fixed assets needs to keep those assets working as much as possible to reduce costs. Examples of these types of concerns include manufacturing facilities and airlines.

  • Resources. On the other end of the spectrum from the previous driver, your company might be driven by access to certain resources. An example of this is an oil and gas company or a precious metals mining concern.

  • Threats. There may be certain threats that could impact your business so substantially that they become strategic business drivers. These might include security threats, the influence of inclement weather, and even government regulations.

Employee/Internal Objectives

  • People. Aside from serving customers, a company may also be driven by a desire to serve other stakeholders. This might include investors, employees, business partners, suppliers and even members of their community.

  • Technology. Technology is a strategic driver that almost every modern organization should consider putting at the top of their list. This refers to your firm using technology and innovation to serve clients better and gain a competitive advantage in your market.

  • Social/Environmental. Your organization's goals may be driven by some issues that lie beyond your products and services. These include social and environmental issues such as equality and sustainability.

How an Organization Chooses its Key Drivers

Strategic drivers are shaped by both internal and external forces. Internal drivers may include mission, people, and profit goals. External drivers include markets, competition, taxes, regulations, technology, and customer needs. Once you choose the particular drivers for your business, you can prioritize them and create strategies around them.  The following are examples of several common strategic drivers and strategies that stem from those drivers.

Strategic Driver - Strategy Examples

  • Profits - A regional bank has a goal of achieving a 20% annual growth rate in profits.
  • Customers - A business wants to maintain a 90% or better positive customer satisfaction rating.
  • Social/Environmental - An automaker vows to make 10% more of its vehicles each year either hybrid or EV.
  • People - A construction firm promises to reward business partners and employees for exceeding production goals.
  • Technology - A chip manufacturer has a goal of producing a CPU that is 10% faster than anything currently on the market.
  • Threats - A business in the cannabis industry invests in a fintech firm to protect its financial interests.
  • Ownership - A biopharmaceutical company commits to hiring additional staff to handle and monitor drug patents as well as the FDA approval process.

Aligning Projects with Strategic Business Drivers

Most companies undertake a variety of short and long-term projects that are either internal to the organization, external, or some combination of the two. If you've ever been involved in a project that has fallen off course, you know how frustrating, time-consuming, and expensive that can become. One of the best ways to ensure that your firm's projects remain on track is to align them with your company's strategic business drivers.

Agreeing to launch a new product or begin a project just because it's convenient or advocated by management may not make sense once it is viewed with a fresh pair of glasses. Before a project is even considered, the first step should be to confirm that it aligns with your firm's top strategic business drivers. When your company follows a formal process to prioritize and agree on the right projects based on this strategy, you will have fewer missteps and a higher success rate with each venture.

Examples of Strategic Business Drivers in Success Businesses

Many well-known companies have defined their strategic business drivers and used them to generate long-term success. For example, GE clearly wants to serve its clients in as many capacities as possible (Customer driver). They are an example of a company that offers a portfolio of basic and value-added services to customers such as technology assessments, strategic planning, and even capital investment. If you want to focus on the social/environmental aspect of your business, look no further than Siemens as a benchmark. The German industrial conglomerate is known as the most sustainable company in the world even though its businesses range from power plants to medical imaging machines.

For an organization to find success, it should clearly define the strategic value that it brings to its stakeholders (e.g., clients, employees, suppliers) and the marketplace at large. One of the first steps to defining your company's goals is to identify and prioritize its strategic business drivers. These in turn serve as the basis for strategies, tactics, and programs/projects necessary to run and grow your business.

These strategic drivers are the DNA of your overall business. If they are poorly defined, your goals may run off course, and your business could fail. It's essential that you have a method in place to monitor your business drivers and make adjustments as needed. We'll explore those topics in depth in Parts 2 and 3 of this series.
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