How to Formulate
a Successful
Business Strategy
Contents No matter the industry, every business needs a strong strategy to reach its goals.
Formulating a successful business strategy, however, is often easier said than
3 What Is Strategic Planning done—especially if not given the proper attention and effort.
and Why Is It Important? According to research outlined in the Harvard Business Review, 85 percent of
executive leadership teams spend less than one hour per month discussing
strategy, and half spend no time at all. The research also reveals that most
6 Setting and Prioritizing employees don’t understand their company’s strategy.
Strategic Goals
It’s no wonder, then, that 90 percent of businesses fail to meet their strategic
targets. Organizational leaders must ensure the company’s goals are strong and
10 Keys to Successful Strategy that the plan to reach them is purposeful, executable, and agile.
Formulation Formulating a successful business strategy is a skill that has the potential to propel
your organization forward. Yet, it can be difficult to know where to start. What do
16 Furthering Your Business strong strategic goals look like, and how do you achieve them?
Strategy Education This guide will answer those questions and equip you with the tools, frameworks,
and knowledge to set goals, advocate for the benefits of strategic planning,
formulate a winning strategy, and improve your strategic skill set.
What Is Strategic
Planning and Why
Is It Important?
Before diving into the specifics of crafting a business strategy, it’s important to
understand what the strategic planning process is and how it can benefit your
organization.
What Is Strategic Planning?
Strategic planning is the ongoing organizational process of using available knowledge
to document a business’s intended direction. This process is used to prioritize efforts,
effectively allocate resources, align shareholders and employees on goals, and ensure
those goals are backed by data and sound reasoning.
How Can Strategic Planning Benefit My
Organization?
Strategic planning requires time, effort, and continual reassessment. Given the proper
attention, it can set your business on the right track. Here are three ways strategic
planning can benefit your firm.
1. Creates One, Forward-Focused Vision
One significant benefit of strategic planning is that it creates a single, forward-focused
vision that aligns your company’s employees and shareholders. By making everyone
aware of your company’s goals, how and why you chose those goals, and what they can
do to help reach them, you can create an increased sense of responsibility throughout
your organization.
This can also have trickle-down effects. For instance, if a manager isn’t clear on your
organization’s strategy or the reasoning used to craft it, they could make decisions that
counteract it. With one vision to unite around, everyone at your organization can act
with a broader strategy in mind.
What Is Strategic Planning and Why Is It Important? 4
2. Draws Attention to Biases and Flaws in Reasoning 3. Tracks Progress Based on Strategic Goals
The decisions you make come with inherent bias. Taking Having a strategic plan in place enables you to track progress
part in the strategic planning process forces you to examine toward goals. When each department and team understands
and explain why you’re making each decision and back it up your company’s larger strategy, their progress can directly
with data, projections, or case studies, thus combatting your impact its success, creating a top-down approach to tracking
cognitive biases. key performance indicators (KPIs).
A few examples of cognitive biases are: By planning your company’s strategy and defining its goals,
you can determine KPIs at the organizational level. Those
• The recency effect: The tendency to select the option
goals can then be extended to business units, departments,
presented most recently because it’s fresh in your mind
teams, and individuals. This ensures every level of your
• Occam’s razor bias: The tendency to assume the most organization is aligned and can positively impact your
obvious decision to be the best decision business’s KPIs and performance.
• Inertia bias: The tendency to select options that allow Remember: Although your strategy might be far-reaching
you to think, feel, and act in familiar ways and structured, it must remain agile. As HBS Professor
• Confirmation bias: The tendency to only pay attention to Clayton Christensen asserts in Disruptive Strategy, a
information that supports your viewpoint business’s strategy needs to evolve with the challenges and
opportunities it encounters. Be prepared to pivot your KPIs
If you’re crafting a strategic plan for your organization and
as goals shift and communicate reasons for change to your
know which strategy you prefer, enlist others with differing
organization.
views and opinions to help look for information that either
proves or disproves the idea.
Combating biases in strategic decision-making requires
effort and dedication from your entire team and can make
your organization’s strategy that much stronger. To craft a strategic plan for your organization and
reap these benefits, you first need to determine the
goals you’re trying to reach. The next section will
dive into how to craft and prioritize strategic goals.
What Is Strategic Planning and Why Is It Important? 5
Setting and Prioritizing
Strategic Goals
In an ever-changing business world, it’s imperative to have strategic goals and a plan
to guide organizational efforts. Yet, crafting strategic goals can be a daunting task.
How do you decide which goals are vital to your company? Which are actionable and
measurable? Which do you prioritize?
To help answer these questions, here’s a breakdown of what characterizes
strong strategic goals and how to select which to pursue.
Characteristics of Strong Strategic Goals
Strategic goals are an organization’s measurable objectives that indicate its long-
term vision. Here are four characteristics of strategic goals you should apply. “The course has completely changed
me. I feel like a new person—with
1. Purpose-Driven a new thought process driven by
A strong strategic goal is driven by purpose. What are you striving for, and why is purpose—committed to doing the
it important to set objectives? What impact do you hope to have on profit, your right thing. I have a purpose today
community, and the environment? Develop and select goals that are guided by the that’s in line with my values. I’ve joined
answers to these questions. forums and groups and met people
who share my thought process.”
“You don’t have to leave your values at the door when you come to work,” says HBS
Mayank Dubey
Professor Rebecca Henderson in the online course Sustainable Business Strategy.
Sustainable Business Strategy
Henderson, whose work focuses on reimagining capitalism for a just and Participant
sustainable world, explains that leading with purpose can drive business
performance.
“Adopting a purpose will not hurt your performance if you do it authentically and
well,” Henderson says in a lecture streamed via Facebook Live. “If you’re able to
link your purpose to the strategic vision of the company in a way that really gets
people aligned and facing in the right direction, then you have the possibility of
outperforming your competitors.”
Setting and Prioritizing Strategic Goals 7
2. Long-Term 4. Measurable
When setting strategic goals, think of your company’s When crafting strategic goals, define how progress and
values and long-term vision and ensure you’re not confusing success will be measured. For instance, the goal “become a
strategic goals with operational goals. While strategic goals household name” is valid but vague. Consider the intended
are your organization’s long-term objectives, operational timeframe to reach this goal and how you’ll operationally
goals are the daily milestones you need to reach to achieve define “a household name.” The method of obtaining data
them. must also be taken into account.
For instance, your organization’s goal could be to create a An appropriate revision to the original goal could be:
new marketing strategy; however, this is an operational goal “Increase brand recognition by 80 percent among surveyed
in service of a long-term vision. In this case, the strategic goal Americans by 2030.” By setting a more specific goal, you
could be breaking into a new market segment, to which the can better equip your organization to reach it and ensure
creation of a new marketing strategy would contribute. employees and shareholders have a clear definition of
success and how it will be measured.
Keep a forward-focused vision to ensure you’re setting
challenging objectives that can have a lasting impact on your
company.
3. Actionable
Strong strategic goals aren’t only long-term and forward-
focused—they’re actionable. If there aren’t operational
goals your team can complete to reach the strategic goal,
your organization is better off spending time and resources
elsewhere.
When formulating strategic goals, think about the operational
goals that fall under them. Are they actionable steps your
team can take to achieve your organization’s objective? If so,
the goal could be a worthwhile endeavor.
Setting and Prioritizing Strategic Goals 8
How to Assess Goals for An estimate can be a valuable piece of information when
deciding which goals to pursue. Although not all strategic
Prioritization goals need to yield a high return on investment, it’s in your
best interest to calculate each objective’s anticipated ROI so
Once you’ve identified several strategic goals, determine you can compare them.
which are worth pursuing. To set the stage, ensure everyone
is aware of the purpose behind each goal. This calls back to 2. Consider Current Events
Henderson’s point that employees’ alignment on purpose When deciding which strategic goal to prioritize, you can’t
can set your organization up to outperform its competitors. overlook the importance of the present moment. What’s
happening in the world that could impact the timeliness of
1. Calculate Anticipated ROI each goal?
Calculating the estimated return on investment (ROI) of the
For example, in 2020, the coronavirus (COVID-19) pandemic
operational goals tied to each strategic objective can provide
and the ever-intensifying climate change crisis impacted
a useful estimate for decision-making. For example, if your
many organizations’ strategic goals. Often, the goals that are
strategic goal is “reach carbon-neutral status by 2030,” you
timely and pressing are those that earn priority.
need to break that down into actionable sub-tasks—such
as “determine how much CO2 our company produces each
year” and “craft a marketing and public relations strategy”—
and calculate the expected cost and return for each.
The ROI formula is typically written as:
ROI = (NET PROFIT / COST OF INVESTMENT) X 100
After determining your organization’s prioritized
In project management, the formula uses slightly different goals, you can begin formulating a strategy to reach
terms: them. The next section will outline several factors to
consider when crafting a business strategy.
ROI = [(FINANCIAL VALUE - PROJECT COST) /
PROJECT COST] X 100
Setting and Prioritizing Strategic Goals 9
Keys to Successful
Strategy Formulation
A successful strategy can set your organization on the right track for years to come,
but creating one is often easier said than done. According to a survey by Bridges
Business Consultancy, just 68 percent of professionals believe their organization is
good at developing strategy—down from 80 percent in 2012.
Formulating a strong strategy doesn’t need to be daunting or difficult. Here are five
factors to consider for successful strategy formulation.
1. Start with Purpose FORMULATION FRAMEWORK
When setting out to create a winning strategy, the first The Triple Bottom Line
question to ask yourself is, “What’s my organization’s
The triple bottom line is a business concept that posits
purpose?” In Sustainable Business Strategy, Henderson
firms should commit to measuring their social and
discusses the importance of starting with purpose when
environmental impact—in addition to their financial
building your business strategy.
performance—rather than solely focusing on generating
“We see this pattern in a wide range of firms,” Henderson profit, or the standard “bottom line.” It can be broken
says. “The leaders and firms who are driving real change and down into “three Ps”: profit, people, and the planet.
often reaping the benefits of being first-movers are motivated
as often by the driving desire to make a difference as they are
to make money.”
One example of a company that formulated its strategy
using purpose is Unilever’s Lipton brand. “It started with
the feeling that, for communities, we could do a better job,” PROFIT
says Kevin Havelock, president of refreshment at Unilever, refers to the financial
in Sustainable Business Strategy. “It didn’t start with the return a company
generates for its
business case. We then said, ‘Hang on—how do we bring this shareholders.
to life?’ If it’s the right thing to do for these people and for the
planet, then we should bring it to life for the brands.”
Instead of jumping into logistics, Unilever put its values
and mission of producing sustainable tea at the center of
its strategy development, enabling it to take steps to reach
that vision. Henderson notes that this intersection of “doing PEOPLE PLANET
refers to a company’s refers to the impact
good” and “doing well”—often referred to as the process commitment to making an organization
of creating shared value—has the potential to be a highly a societal impact in makes on the
lucrative space. communities locally and environment.
abroad.
Keys to Successful Strategy Formulation 11
2. Consider Global Events 3. Examine Data, Case Studies,
Business doesn’t exist in a vacuum—it’s influenced by and Trends
politics, policies, laws, and relationships between countries.
Because those relationships can be extremely nuanced, it’s In addition to current global events, a successful strategy
important to closely follow news related to countries where must take into account the information and knowledge you
you do business and consider global events as you formulate have about your organization, other firms, and fundamental
a strategy. theories of economics.
Political leaders’ decisions can impact taxes, labor laws, raw Understanding this information enables you to orient your
material costs, transportation infrastructure, and educational company in the business landscape and learn from others’
systems. mistakes and successes.
One hypothetical example presented by HBS Professor “As you think about going out into the world and using
Forest Reinhardt in Global Business is that if the Chinese these tools of experimentation, the first thing is to think of
government decided to subsidize Chinese dairy farms, it yourself as an experimenter,” says Nava Ashraf, an associate
would impact dairy farmers in all surrounding countries. professor at HBS who’s featured in the online course
This is because, with extra funding, Chinese dairy farms may Economics for Managers. “Change your mindset of what it
produce a surplus of dairy products, causing them to expand actually means to look for data from the world that helps you
their markets to neighboring countries. If you’re crafting know whether something works or doesn’t work.”
a strategy for your Mongolia-based dairy business, this When crafting your strategy, examine your organization’s
dynamic is important to consider. financial statements, along with historical strategies that
It’s both exciting and intimidating that the nuances of have been successful and unsuccessful. Also, analyze case
international politics, policies, and relations can impact your studies of other businesses and the economic principles that
business. Stay informed and incorporate new knowledge into underlie them.
your strategic planning process as it arises.
Keys to Successful Strategy Formulation 12
FORMULATION FRAMEWORK
The Value Stick and Value-Based Pricing
Value-based pricing is a means of price-setting wherein a
company primarily relies on its customers’ perceived value
of goods or services being sold—also known as customers’
willingness to pay (WTP)—to determine the price it will
charge. Because it revolves around customers’ priorities,
it’s occasionally called customer-focused pricing.
When crafting a value-based pricing strategy, one
framework to keep on hand is the value stick. The value
stick comprises four components: willingness to pay, price,
cost, and willingness to sell (WTS). Where on the stick
each of these points falls determines how a sale’s value is
split between a firm, its customers, and its suppliers.
Picturing each of these factors as sliders on a stick enables
you to test out different scenarios and aid in strategic
decision-making. If you lower the production cost, will the FACULTY INSIGHT
customer’s willingness to pay decrease? If you raise the
production cost and price, will the customer’s willingness to “As strategists, we really ask three questions: How
pay increase? If so, is it worth it? can my business best create value for customers?
How can my business create value for employees?
Understanding the relationship between the supplier, And how can my business create value by
business, and customer, and how each entity gains value collaborating with suppliers? Think of a company’s
from your product, is an important exercise during strategy strategy as an answer to these three questions.”
formulation.
HBS Professor Felix Oberholzer-Gee
in Business Strategy
Keys to Successful Strategy Formulation 13
4. Set and Effectively 5. Think of Strategy as an
Communicate Goals Ongoing Process
As discussed in the previous section, selecting strategic Once you’ve formulated and communicated a strategic plan,
goals is an important step of strategy formulation. Just as it can be tempting to assume the strategic planning process is
important is the ability to effectively communicate those complete. According to HBS Professor Clayton Christensen,
goals to your organization. Research outlined in the Harvard strategy is a continual process of development. In the online
Business Review shows that, on average, 95 percent of course Disruptive Strategy, Christensen notes that in a study
employees don’t understand their company’s strategy—a of HBS graduates who started businesses, 93 percent of
staggering statistic, considering that successful strategy those with successful strategies evolved and pivoted away
execution requires organization-wide effort. from their original strategic plans.
Crafting a strategy is crucial, but it can’t be successful unless “Most people think of strategy as an event, but that’s not the
it’s effectively and artfully communicated to all employees way the world works,” Christensen says. “When we run into
so they feel empowered and responsible for reaching the unanticipated opportunities and threats, we have to respond.
company’s goals. Sometimes we respond successfully; sometimes, we don’t.
But most strategies develop through this process. More often
than not, the strategy that leads to success emerges through
a process that’s at work 24/7 in almost every industry.”
Periodically reassess your company’s strategy to adapt
to new challenges and opportunities and continue
communicating its evolution to your broader organization.
Keys to Successful Strategy Formulation 14
FORMULATION FRAMEWORK The formulation of your strategy must constantly
Disruptive Innovation evolve—and so must your strategic skill set. The
next section will explore how to select a business
Disruptive innovation, a term coined by strategy course that’s right for your needs and
Christensen, is the process by which a smaller strategic focus.
company—usually with fewer resources—moves
upmarket and challenges larger, established
businesses.
The process begins with a small company entering
the low end of a market (low-end disruption) or
creating a new market segment (new-market
disruption) and claiming the least profitable
portion as its own. Because the established,
incumbent companies own the most profitable
segments, they most likely won’t fight the entrant
for that market share.
The entrant then improves its offerings and moves
upmarket with increasing profitability. Once the
incumbents’ customers have widely adopted the
entrant’s offerings in the mainstream market,
disruption has occurred.
Understanding the disruptive innovation
framework can empower you to create a strategy
for disrupting an industry or avoiding disruption.
Keys to Successful Strategy Formulation 15
Furthering Your
Business Strategy
Education
As a business owner, manager, or employee, taking a business strategy course is an effective
way to hone your strategic skills and make a positive impact on your organization.
With so many options out there, how do you select the right course
for your specific needs? Here are two categories of factors to consider
when selecting a business strategy course.
Furthering Your Business Strategy Education 16
Finding the Right Course for You BUSINESS INSIGHT
Consider how each course option could work with your current Are Online Courses Worth It?
situation and what components could lead to a positive learning
A third of all students now take online courses. Although the
experience. Some factors and questions to consider include:
reasons why vary, there are several key benefits to learning
Time commitment virtually—from increased flexibility to lower costs. But
• How much time will I spend on the course material on a online courses aren’t for everyone.
daily and weekly basis?
If you’re mulling over the decision to take an online class,
Cost
it’s essential to weigh the pros and cons against your career
• How much does the course cost? Is this within my budget?
goals and preferred learning style. To help you decide, here
• Is my employer willing to reimburse me for this are some advantages and disadvantages to learning online.
professional development opportunity?
• Are there financial aid options? Pros:
Course format • You can learn on your own time.
• Is this course in-person or online? • You can learn at your own speed.
• Do I have the transportation and childcare options to attend? • You can save money.
• If it’s online, is the course content streamed live, or can I • You can break down geographic barriers.
learn on my own schedule?
• You can practice technology skills.
Active and social components
• You can achieve similar career outcomes to those
• Does this course provide opportunities to engage with the
who’ve taken an in-person course.
content?
Cons:
• Is it important to network and build relationships with my
classmates? If so, does this course’s platform allow me to • You may have limited, if any, interaction with faculty.
interact with peers? • You can’t be disorganized.
• You need to do significant research to find the right
Taking a business strategy course is an investment in your skills online course.
and career. The better the course’s structure, cost, and timing • You might need to fight against misconceptions about
align with your lifestyle, the more likely you are to engage with, online learning.
retain, and benefit from its content.
Furthering Your Business Strategy Education 17
Types of Business Strategy Courses
Once you’ve determined your
requirements, consider what
type of strategy course will
most benefit you and your
organization.
Reflect on your experience,
your organization’s goals, and
any strategy frameworks or “The course made me think more
concepts you’d like to learn THE FOUNDATIONAL PRIMER carefully about how I could create
about. What will be most useful a competitive cost structure and
If you’re new to business strategy or need
to you? Remember to choose make appropriate plans before
a refresher, there are many 101-style
entering the market. Having a
a course that will interest courses that can provide a solid foundation. better business vocabulary and
and engage you so you can From introducing key terms, formulas, and understanding the underlying
apply your new knowledge to equations to explaining basic economic concepts has really helped me
organizational challenges. principles that shape your business’s pricing contribute more productively to
Here are four types of business strategy, an introductory course is a great conversations and decisions.”
strategy courses to consider option to bolster the fundamentals.
Nicholas Grecco
when making your selection. HBS Online example: Economics for Managers
Economics for Managers Participant
Furthering Your Business Strategy Education 18
THE PROCESS DEEP DIVE
A more granular option is a course that
focuses solely on one aspect of the
strategy process. These courses provide a
deep dive into each phase of the process,
making them a practical choice for
professionals with enough experience to
know which one they need to improve. “I’ve utilized the knowledge I gained from
Strategy Execution by regularly reviewing
For example, Business Strategy hones in my notes to tweak my approach when
on the formulation phase and bridges the making decisions at work for optimum
gap between formulation and execution, outcomes. Strategy Execution provides
while Strategy Execution focuses solely learners with tools and frameworks based
on implementation. on real-life business situations. This
directly affects the value of the course, as
HBS Online examples:
Business Strategy the takeaways are applicable—not just
Strategy Execution theories you can learn in other courses.”
Jemma Martin
Strategy Execution Participant
Furthering Your Business Strategy Education 19
THE FRAMEWORK ANALYSIS
For professionals who want to reimagine an
existing business strategy or diversify their
foundational knowledge, taking a course on
a specific framework could be a good fit.
“I work as a business development
One such course is Disruptive Strategy. The
manager, so the nature of my job is to
course thoroughly explains the disruptive be constantly on the lookout for new
innovation framework and prompts strategies that will improve our business
learners to apply strategic concepts to their and profits. The concepts I learned in
industries and companies. the course will help me to identify and
HBS Online example: analyze strategies in a healthier way. I feel
Disruptive Strategy more equipped to examine the new ideas
and decide which will create the best
value and most profit for the business.”
Esra Ugurlu
Disruptive Strategy Participant
Furthering Your Business Strategy Education 20
THE GOAL-ORIENTED GUIDE
If you’re a professional with a strategic
goal in mind, consider taking a course
that covers how to formulate and execute
a strategy to reach it. The topics of these “I now have a better
courses can include sustainability, global understanding of sustainability
markets, and macroeconomics. and which companies are doing
it right. I’m armed with talking
HBS Online examples:
Sustainable Business Strategy points proving that sustainability
Global Business is good for business, the
environment, and its people.”
Brooks Wallace
Sustainable Business Strategy
Participant
Find a business strategy course that fits your logistical needs and targets your personal and organizational weaknesses.
Expanding and strengthening your skills can enable you to formulate winning strategies.
Furthering Your Business Strategy Education 21
Mastering
Strategy Formulation
Remember that formulation is just the first step in
the strategy process. After mastering the contents
of this e-book, you can progress to the next phase:
strategy execution. After all, even the strongest
strategic plan can fall flat when poorly executed.
To jumpstart your education, read about the keys
to successful strategy execution on the Business
Insights Blog.
From purpose to plan and communication to
reassessment, know that by committing to the
strategic planning process and expanding your
skills, you’re investing in your organization’s future.
To learn more about what HBS Online
can do for you, visit online.hbs.edu.
