Category Archives for : Strategy & Planning

Why do many businesses easily succeed, while many more struggle to survive and eventually fail? A key reason is strategic alignment, or lack thereof. While the best-aligned organizations perform the best, those that aren’t, flounder because they fail to make better forward-looking decisions and change along with the increasingly complex world they operate in.   

Many organizations focus only on challenges existing in the external environment during strategic planning, although the key reason many of them fail is their inability to focus on internal obstacles. In order to achieve positive strategic alignment, an organization must address both internal and external obstacles effectively. 

This post explores how strategic alignment can be developed, implemented, and sustained.

What Is Strategic Alignment? 

Strategic alignment is the prudent arrangement of the various internal and external elements of an organization – from its business strategy to its organizational structure – to best support the achievement of its long-term goals and purpose.  

It requires all stakeholders, both internal and external, to be aligned on and be committed to achieving one goal, or in other words, the vision of the organization.

A pervasive assumption in strategy literature is that a strategy’s appropriateness can be defined in terms of its alignment with the internal and external contingencies. The strategy should be matched with the external threats and opportunities in the business environment, but it should also be in compliance with the organization’s internal processes and structures.

Strategic alignment is inherently a dynamic process. As the strategic choices made by an organization typically influence the counteractions of its competitors (in the form of imitations or more innovations), it necessitates that the organization responds to them in a timely manner. Thus, although the purpose of the organization remains the same, its strategic alignment may shift from time to time, making it a process of continuous adaptation and change. 

Importance of Strategic alignment

Organizations that are well-aligned are able to generate better results because their people and teams are working towards achieving common strategic goals.

Organizations that are not strategically aligned often are confused about what to prioritize, make fewer effective decisions, and face far more conflicts. This may leave employees unmotivated and disappointed.

This is why maintaining strategic alignment is important. In addition to helping inform people who develop products and services, direct marketing and sales efforts, and allocate resources properly and establish best practices throughout the organization, strategic alignment also helps; 

• Focus time, resources, and effort on the right areas in a timely manner. 
• Effectively prioritize tasks and remove conflicting priorities.    
• Increase employee engagement and buy-in in the process of shaping the organization’s future. 
• Eliminate communication silos and foster team collaboration. 

How to Achieve Strategic Alignment  

Strategic alignment is a wise business strategy that helps improve an organization’s efficiency, effectiveness, and profitability. The following steps explain how to ensure strategic alignment in your organization.

Educate all employees of the business purpose, goals, and actions 

Organizations that are strongly aligned have employees who are well-aware of, 

• Organizational purpose; The purpose is what the organization is trying to achieve or where it’s headed (and strategy is how you will achieve it or will get there). Constantly reminding everyone and educating them about the purpose, vision, and values of the organization will help them internalize their importance and keep them on track.   
• Goals; Goals take the company’s overall strategy and break it down into benchmarks based on which employees may plan and execute their work. 
• Actions; Actions entail the action plans outlining the steps to achieving the goals. With clear tangible goals set, it’s important to specify the daily tasks, actions, and behaviors expected of each individual employee to perform their part in reaching the targets.

In order to communicate the strategy – including the above-mentioned aspects that it consists of – at all levels of the organization, develop a sound communications strategy. It should specify details as to how to provide frequent and jargon-free communication of the organization’s strategy on various channels available to the employees. 

This will also help with promoting a culture of alignment where employees at all levels in the organization have clear, unambiguous views of the organization’s strategic goals. 

Involve employees in strategy formation and execution 

In order to ensure that the employees accept the strategy, organizational policymakers should involve them in strategic initiatives, so as to avoid resistance to change when the strategy is eventually implemented. 

Their involvement in the strategic planning and decision-making processes, especially in the initiatives that affect them, helps easily motivate them and ensures that they become more susceptible to buy into the strategy.

Allowing them to share and incorporate their own ideas based on experience will also provide them with a sense of ownership over the strategy and its implementation. 

Ensure that the organization supports the business strategy

When the organization – all its resources, capabilities, and systems necessary for strategy execution – support the achievement of the strategy, it creates a positive environment for strategic alignment to thrive.  

As the strategy repositions, the organization’s personnel, culture, structure, and processes too should adapt accordingly. For example, in an organization seeking to gain a competitive advantage through superior customer service, the teams’ behavior and interactions with the customers should always reflect and reinforce that positioning. 

Therefore it’s important to encourage your employees to take into account and consider how the work they perform on a daily basis impacts organizational profitability and sustenance. To help them get into this strategic-thinking mindset, provide them with the necessary tools; in this case, training and mentoring aimed at educating them on thinking strategically.

Restructure individual goals to align with broader organizational goals

In order to truly achieve strategic alignment, the goals of each individual employee and the actions to achieve them should be mapped back to the higher-level organizational goals.

While broader organizational goals reflect the purpose of the organization, they provide direction and guidance in planning employee efforts. When setting goals for each individual, ensure that they ultimately support the accomplishment of these bigger strategic goals. This ensures that everyone’s on the same page and moving in the same direction.  

When employees understand how their contributions fit into the big picture and the value they bring to the company, it will in turn help keep them motivated and engaged in the long run.

Define employee roles clearly

If employees are not aware of their role expectations, they may tend to avoid their responsibilities or carry them out incorrectly. This will in turn make it difficult to achieve the strategic goals and have a negative impact on the overall organizational performance. 

In order to clearly understand their roles, employees need to understand their goals and processes first. 

1. Clarity regarding goals; employees should clearly understand what the goals are and the correlation among their subordinate goals, tasks and team goals. This clarity helps make employees perceive the importance of goals and motivates them to achieve them.  
2. Clarity regarding processes; clearly understanding the procedure to achieve their goals can boost their confidence and improve their performance. Visualize processes through tools such as flowcharts, workflows, or process maps, to further make the steps simpler to understand and remember. 

A better understanding of the goals they must achieve and the methods in which they need to achieve them can help employees understand their roles and responsibilities more effectively. 

Alternatively, create an organizational chart – teamwise, departmental, or organizational – to visualize the hierarchy, reporting relationships, and roles of employees. Org charts show where everyone fits in within the organization at a glance.

Include additional information about employee responsibilities, skills, and capacity to each shape representing an employee through Creately’s data panel.

Align human resource planning with the organizational strategy 

Hiring and retaining the right people is another key factor that contributes to achieving strategic alignment. Make sure that the existing employees possess the required skills, experience, and knowledge necessary to achieve the strategic goals. If what they lack cannot be fulfilled with proper training and mentoring, you can consider hiring new employees fit for the job. 

Why Does Alignment Matter to Your Organization?  

There isn’t a one-size-fits-all formula for a winning business. However, corporate leaders have begun to consider strategic alignment as the closest to a solution. 

We hope the practices in this post will help you achieve and maintain strategic alignment in your own organization. Share your experience with us in the comments section below. 

Working capital refers to the capital or cash reserves of a business that is utilized to conduct its day-to-day operations. This is calculated by deducting the current liabilities against current assets. An effective working capital management strategy will help an organisation maximise profitability and liquidity. Inventories, trade receivables and cash (in hand and at the bank) are the main components of current assets. Trade payables, bank overdrafts and short-term loans are categorized under current liabilities.

Working Capital Management

An analysis done by the globally renowned auditing firm PwC on the impact of the COVID-19 outbreak states that in times of crisis, businesses should focus on liquidity rather than profitability in the short run. Therefore, an effective working capital management strategy is vital for a company’s survival.

Thriving Vs. Surviving

Whether an organization is thriving or surviving depends on profitability and liquidity. For instance, highly profitable and liquid companies thrive, while businesses that see a dip in profits but manage to maintain a healthy level of liquidity within their operations, survive. The key here is effective management of the working capital.

In certain instances, profitable organizations often experience setbacks as a result of inadequate funding to meet short-term obligations. Especially, in the current context where the global economy has been affected due to the COVID-19 pandemic, exercising a certain degree of discipline when it comes to strategic investments is prudent.

What is a Working Capital Management Strategy?

Broadly, there are three working capital management strategies – conservative, hedging and aggressive. The effectiveness of these three approaches depends on risk and profitability.

Conservative

The conservative strategy relies on long-term financial instruments to source funds for fixed assets, permanent working capital and part of the temporary working capital. Since long-term finances are impervious to the risk of interest rate fluctuations, these prove to be low risk. As there is “no pain, no gain,” such finances also have low profitability.

Hedging

Hedging or maturity matching utilizes long term funding sources to finance long-term assets and a portion of the permanent working capital. Here, the temporary working capital will be funded by short term finances such as trade credit, short term loan. Financing of fixed assets such as machinery and infrastructure will be fulfilled through long term funding. This strategy poses moderate risk and profitability.

Aggressive

Where the aggressive strategy is concerned, long-term funds are used to finance fixed assets and part of the permanent working capital. The remaining portion of the permanent working capital and the temporary working capital will be financed through short term funding sources. This poses a high risk, but increased profitability since the finance cost of short-term funds are comparatively low, and at the same time those could be affected by market trends and interest rate fluctuations.

How to Plan an Effective Working Capital Management Strategy

Factors such as interest rates, market demand for business output, economic status, currency rate, and seasons (or market trends) greatly impact working capital management. Inter-connections between these aspects make managing working capital an intricate affair that requires a great deal of attention. For instance, the pandemic has pushed the global economy into a recession, resulting from border closures, the collapse of trade and travel bans.

Consequently, market demand, interest and currency rates too, have taken a hit as trading has come to a cease. As a result, companies are now navigating through uncharted territories to recover from this situation.

Let’s take a look at the steps that need to be followed to create a result-oriented working capital management strategy.

Analyze Current and Future Funding Requirements

The first step in building a successful working capital management plan is to analyze your future long and short term funding requirements. While rent, utilities, payroll, and supplier payments are classified under short term funding needs; upgrading of machinery and equipment, purchasing real estate for the company and other expansion activities require long term capital. Therefore, an analysis of your current and future funding needs is essential when preparing the organization’s working capital strategy.

Imagine Scenarios and How Your Company Might Navigate Through Those

We are living in a Volatile, Uncertain, Complex and Ambiguous (VUCA) environment. Therefore, it is important to pay close attention to market trends and the status of the industry and economy. Perform a SWOT analysis to understand potential growth opportunities and threats. For instance, if the company had to halt operations due to a possible lockdown (due to pandemic or any other factor), are there sufficient funds available to meet payroll requirements and supplier payments? Or what available funding sources could power an expansion opportunity?

Once you have identified the opportunities and threats, you can conduct scenario and shock analysis to determine how well the organization would face such a circumstance.

Evaluate Your Working Capital Funding Sources

Review your current cash accounts, trade receivables and inventories to ensure that the funds at hand are adequate to meet the organization’s working capital requirements. Diversify where necessary; you may either opt for a short term loan to bridge capital shortfalls or short term investments to gain an additional income. It is also advisable to hold the company’s cash and investments in at least two different institutions to ensure access to credit in tough economic conditions.

Review Account Payables and Receivables

Go digital. Introduce online or electronic payment methods for your products or services to eliminate any delays in trade receivables. Enhancing customer convenience in terms of payment will also result in improving the demand and overall consumer satisfaction. Consider the 5Cs method before approving credit to a customer so that the chances of them being turned into bad debtors will be considerably less.

As for account payables, implement a process or schedule for cash and cheque payments to suppliers which will be subject to an approval process. This will eliminate ad hoc payments while streamlining the payment procedure.

Make Wise Strategic Management Decisions

What works best for a company obviously depends on the strategic decisions made by the organization with regards to its operations and assets. However, managing its working capital is an art that every business entity should master to survive in any industry.

Competitive advantage is at the core of an organization’s performance in markets where there is heavy competition. It sets an organization apart from its competitors and paves the way for higher profit margins, greater return on assets, and accumulating valuable resources.  

There are many ways to achieve a competitive advantage but only two basic types of it. In this post, we will be looking at the concept of competitive advantage and the steps an organization can follow to achieve and sustain competitive advantage through cost advantage and differentiation. 

What is Competitive Advantage

Competitive advantage stems from the value an organization is able to create for its customers. It can come in the form of prices lower than what is offered by competitors for the same benefits or in the form of unique benefits that counterbalance a higher price. In the end, the value created for the customer should exceed the organization’s cost of creating it in the first place. 

This creates a sustainable advantage allowing them to succeed in the market. 

According to Michael Porter, there are two types of competitive advantage; 

• Low cost – where an organization is able to produce its products at a lower cost than its competitors.
• Differentiation – where an organization is able to differentiate its products or service in terms of quality, style, customer service, etc. hence creating superior value to the customers over the competition. 

Cost advantage and differentiation stems from industry structure or how well it can cope with the industry forces that influence its profitability (as introduced in Michael Porter’s five forces model) better than its competition. 

How to Create and Sustain Competitive Advantage 

Creating a sustainable competitive advantage is a laborious process that needs to be continuously attended to. Adhere to the following steps to ensure you get and remain ahead of the field.   

Analyze Competitors 

To successfully compete in an industry, an organization needs to understand its competitive landscape. This means gathering and analyzing information on competitor strengths, weaknesses, strategies, positioning, value proposition, customer perception, and more.  

Equipped with this knowledge, the right strategy can then be developed to achieve a sustainable competitive advantage.  

Learn more about conducting a competitive analysis. 

Map Competitors into Strategic Groups 

A business mainly competes against other businesses that offer similar products or services and follow the same generic competitive strategy. Such businesses that follow the same competitive strategy in an industry belong to the same strategic group. Identifying the other businesses that fall into the same strategic group as it does, is important to an organization in terms of developing a strategy to achieve competitive advantage. 

Learn more about mapping strategic groups.  

Assess the Most Attractive Position in the Industry 

Based on your strategic group analysis, you now know who your direct rivals are and where they stand. Next, you should articulate your position in the industry to succeed in the marketplace. Defining your competitive positioning will help identify areas of opportunity for your business. 

Michael Porter’s five forces analysis helps assess and evaluate the competitive strength and position of an organization. Porter’s five forces model helps organizations understand the intensity of competition in an industry, its attractiveness, and profitability level. It helps identify where power lies in a business situation and hence assess the strength of an organization’s current competitive position and the strength of a position that an organization may look to move into.

The five forces include, 

• The entry of new competitors
• The threat of new substitutes 
• The bargaining power of buyers 
• The bargaining power of suppliers 
• The rivalry among the existing competitors 

Three Generic Strategies for Achieving Competitive Advantage by Michael Porter 

An organization’s relative position in an industry decides whether its profitability is above or below the industry average. Even within an industry structure that is unfavorable, a well-positioned organization may earn high rates of return. 

Michael Porter introduces three generic strategies for achieving above-average performance in an industry and thus creating a competitive advantage. Generic strategies include cost leadership, differentiation, and focus which is divided into cost focus and differentiation focus.   

The idea behind the concept of generic strategies is that competitive advantage is at the core of any strategy. And in order to achieve a competitive advantage, the organization must make a choice about the type of competitive advantage it wants to attain and the scope within which it will attain it. 

Each of the generic strategies highlights different methods competitive advantage can be achieved.  

Cost leadership  

An organization adhering to this strategy aims to become the low-cost producer in its industry. The sources of cost advantage vary here from industry to industry, and may include proprietary technology, preferential access to raw material, increased individual skills, improved organizational routines, location advantages, managerial effectiveness, and more.  

A low-cost producer must find and exploit all these sources of cost advantage. An organization that can achieve and sustain overall cost leadership, can become an above-average performer in its industry given that it can command prices at or near the industry average. 

By offering their products or services for a similar or lower price than their competitors, organizations following this strategy can maintain a low-cost position in their industry which will, in turn, increase their return. 

A cost leader however needs to consider the bases of differentiation, for if the product is not perceived as comparable or acceptable by its buyers, it will be forced to reduce prices well below its competitors to gain sales. This will in turn reverse the benefits of its favorable cost position. 

Differentiation

An organization that follows this strategy aims to become unique in its industry along certain dimensions that are highly valued by buyers. In this strategy, the organization selects specific attributes that are considered important by its buyers and uniquely positions itself to meet those needs. It is then rewarded for its uniqueness with premium prices. 

An organization can achieve differentiation through the product itself (quality, price, durability), its delivery system, marketing approach, customer service, and many other factors. The logic behind the differentiation strategy requires that the attributes an organization chooses to differentiate itself should be different from the attributes used by its rivals. 

An organization that can achieve and sustain differentiation can be an above-average performer in its industry if the premium price they offer can offset the extra costs spent for being unique. An organization aiming to become a differentiator therefore should adhere to ways of differentiating that lead to a price premium greater than the cost of differentiating. 

A differentiator shouldn’t ignore its cost position for there’s a chance of its premium prices being nullified by the inferior cost position of competitors. To overcome this, a differentiator can reduce costs in all areas that don’t affect differentiation. 

Focus 

An organization following this strategy selects a segment of the industry and tailors its strategy to cater specifically to them while excluding the rest of the market. By optimizing its strategy for a selected group of customers, the focuser aims to achieve a competitive advantage in its target segment although it cannot achieve an overall competitive advantage. 

The focus strategy has two variants; 

Cost focus: here, the organization seeks a cost advantage in its target segment by exploiting its cost behavior  

Differentiation Focus: here, the organization seeks differentiation in its target segment by exploiting the special needs of the buyers

How to Measure and Analyze Competitive Advantage 

The value chain model by Michale Porter can be used as a tool to diagnose competitive advantage and find ways to improve it. The value chain divides an organization into the distinct activities it performs in designing, producing, marketing, and distributing its products and helps identify the linkages among the activities that are central to achieving competitive advantage. 

Porter’s value chain model divides these activities into two categories,

• Primary activities are the activities involved in the physical creation of the product, its sale and transfer to the buyers, and after-sale assistance. 
• Support activities; these are the activities that support the primary activities and each other by providing purchased inputs, technology, human resources, and various organization-wide functions.  

The value chain analysis helps understand the activities that are most valuable and should be optimized to achieve competitive advantage.The firm can then optimize the primary activities that account for the greatest share of production costs and increase profit margins. The analysis can also reveal the support activities that could use more spending to generate better value.

Analyzing competitive advantage 

Here’s how to analyze your organization’s value chain based on how you want to develop a competitive advantage (cost leadership or differentiation). 

Cost leadership 

In order to reduce the cost of internal business activities, 

• First, identify the primary and support activities involved in developing and delivering products and services. 
• Determine the importance of each activity in terms of production cost. Those activities that consume a large percentage of the total cost of production should be addressed first. 
• Identify the cost drivers behind each activity by analyzing how they use the company resources. 
• Map out the connections between the activities to better understand the roles each plays in the overall value chain. This will allow you to detect problems such as how reducing the cost of one activity would cause the cost of a linked activity to increase. 
• Now that you have understood the cost drivers and the inefficient processes in the value chain, you can make informed decisions on how to improve them and reduce production cost.

Differentiation  

An organization following a differentiation strategy can effectively create more value for the buyer by adding product features and improving customer satisfaction by following the steps below.

• Identify the activities in the value chain that contribute the most to creating customer value.  
• Evaluate the differentiation strategies for improving customer value. Strategies like adding more product features, improving customer service and responsiveness, and offering complementary products can be used to increase product differentiation and product value.
• Identify the best sustainable differentiation. Creating superior differentiation and customer value requires the use of many interrelated activities and strategies. Use the best combination of them to pursue a sustainable differentiation advantage.  

Now It’s Your Turn to Develop a Competitive Advantage Strategy 

To gain a competitive advantage is to attract more customers, make more profit, return more value to shareholders than rival organizations do. A company can effectively gain a competitive advantage in one of two ways; by reducing its own costs and by adding more value to its products or services hence differentiating itself from competitors. 

We hope this post will assist you in developing your own strategy to achieve a sustainable competitive advantage. Got anything to add? Let us know in the comments below. 

Innovation is an organization’s path to survival. In a world of rapid change and increasing competition, innovation has become essential to maintaining business growth, competitiveness, and productivity.  

Innovation is one of the key activities in a company’s operations. Innovation is a long and complex process that takes an abstract idea and converts it into a successful product or service. A proper strategy in place to execute it ensures that you do it well. 

In this post, we are exploring 5 effective steps for developing a powerful innovation strategy.

What is an Innovation Strategy

“Innovation transforms insight and technology into novel products, processes and services that create new value for stakeholders, drive economic growth and improve standards of living.”

In the simplest of terms, innovation techniques is the process of bringing new, unique, and creative ideas into reality. An organization following an innovation strategic planning tools uses innovation to execute its business strategy. In other words, an innovation strategy guides the process of resource allocation, enabling the organization to achieve its long-term goals through the use of innovation.  

“An innovation strategy guides decisions on how resources are to be used to meet a firm’s objectives for innovation and thereby deliver value and build competitive advantage.” –

Mark Dodgson, David Gann, Ammon Salter (The Management of Technological Innovation: Strategy and Practice)

A company’s innovation strategy should specify how the different types of innovation fit into the business strategy and the resources that should be allocated to implement these innovations.

An innovation strategy paves the way to 

• Improve the ability to retain customers 
• Reduce competitive intensity
• Improve product or service performance  
• Increase the chances of becoming a market leader 
• Preserve bargaining power in an ecosystem and blunt imitators

Types of innovation

• Gradual/ incremental innovation (continuous innovation) is based on abilities that can be easily learned and developed in an organization and has a low-risk low return. 
• Radical innovation (discontinuous innovation) on the other hand may change the structure of an industry dramatically and has a high-risk high return. 

Innovation Matrix

The innovation matrix as introduced by VIIMA helps categorize innovation based on two dimensions; the technology it uses and the market it operates in. It, thus, visualizes the most common types of innovation.

Based on these categories, three major types of innovation an innovation strategy can be based on can be identified, 

• Product innovation; occurs in the development of new products, modifications in established products, or in the usage of new materials or components in the manufacture of established products
• Process innovation; refers to the development of and implementation of significantly improved organizational processes through the integration of new technologies
• Business model innovation; refers to the improvements done to an existing business model or the creation of a new one to better meet the needs of customers

The Innovation Value Chain 

The innovation value chain model provides a framework to identify which innovation approach makes the most sense for a company to adopt. It enables managers to find the company’s weaknesses and become more aware of an apt approach to implement for success. 

The framework includes three phases 

• Idea generation; creating and sourcing new ideas from internal and external environments to achieve a competitive advantage in the marketplace.
• Conversion; selecting and screening the best idea and implementing them. While this involves transforming knowledge into innovations in the form of new products, processes, or organizational forms, special focus should be placed on the company budget and strict funding criteria to avoid shutting down the development of the idea. 
• Diffusion; spreading the idea across the organization. Find the relevant communities in the organization to support and spread the new product or service, process, and practices across geographic location, consumer groups, and channels. 

How to Develop an Innovation Strategy 

Determine the innovation strategy objective 

Developing an innovation strategy should start with understanding the reason behind developing one in the first place or the objectives you want to achieve by implementing it. 

To identify your innovation strategy objectives, examine the overall business objectives that help the company achieve sustainable competitive advantage. This will clear the path for your innovation strategy as it should eventually support the overarching goals of the organization.

Get the executive team onboard 

Engage the leadership team in dialogue and ensure that they are aware of the innovation objectives established and what it means for them as well as the future of the organization. During the discussions also identify, 

• External changes that could be occurring at present and in the future as a result of innovation 
• The implication of such changes on the company 
• Scope of innovation; identifying opportunities for innovation, whether to improve existing products or services or introduce brand new products to new markets
• Business outcomes; financial results, social impact, new economic models, market leadership,  etc. 
• The gaps that must be closed to deliver the chosen innovation scope, especially in terms of processes, skills, and resources needed and company culture
• Barriers to and enablers of the innovation strategy.  Barriers can come in the form of embedded beliefs on how the business should operate and enablers can show up as core capabilities or resources.  

Their involvement is necessary to create a shared vision of success with innovation at the core.

Gather customer insight 

Understanding customer needs will inform the direction of the development of the innovation idea. It will also enable you to formulate a strategy that works and create value-creating innovations that will ultimately generate a good return on investment.

In order to create value for potential customers with your innovation strategy, you need a thorough understanding of your market and the customer segment you are catering to. 

(Utilize a customer persona to gather insight on customers’ demographic characteristics, needs, challenges, and ambitions and apply that knowledge to generate a solution.)

Allocate resources 

When allocating resources for new areas for growth and renewal, reserving resources for the core business growth should also be taken into consideration. By conducting a comprehensive audit on the current innovation landscape of the organization you can determine and understand how much time, effort, and money are allocated to different innovation initiatives. 

The Harvard Business Review has introduced the Innovation Ambition Matrix to determine how to allocate resources based on the type of innovation initiative.

The matrix describes 3 types of innovation and how resources should be split among them,  

• Core initiatives – refer to efforts to make incremental changes to existing products and incremental inroads into new markets. For example, through new packaging or added service convenience. Such efforts can draw on resources the company already has. 
• Transformational initiatives – refer to creating new offers to serve new markets and customer needs. This may require assets the company is unfamiliar with. 
• Adjacent innovations – involves leveraging something the company does well into a new space. This type of innovation allows a company to draw on existing capabilities but necessitates putting those capabilities to new uses.

Research conducted by HBR shows that companies that allocated about 70% of resources to core initiatives, 20% to adjacent ones, and 10% to transformational ones outperformed their peers.

However, the right balance will vary from company to company and according to factors such as industry, competitive position, and the company’s stage of development.

To learn more about striking and maintaining the right balance between the allocation of resources and the innovation initiative, refer to this article here.

Develop an innovation system 

Not all organizations are likely to possess the capabilities to execute successfully at all three levels of innovation ambitions identified above.

However, HBR emphasizes that the companies that have got it right, have usually focused on five key areas of management that help them excel at the three levels of innovation ambition, and hence enable them to maintain a sustainable innovation system with the organization. 

• Talent: includes the skills needed to execute core, adjacent, and transformational innovation initiatives. 
• Integration: refers to organizing and managing the skills in the right way, with the right mandate, and under the conditions that will help them succeed.
• Funding: refers to determining how to fund the innovation initiatives. Core and adjacent innovations can be funded by the relevant business unit’s P&L through annual budget cycles. Transformational innovations, on the other hand, require a sustained investment that comes from an entity (i.e. executive suite and the CEO).  
• Pipeline management: mechanisms to track and monitor ongoing initiatives and ensure that they are progressing according to plan.
• Metrics: what measurements should inform management. While traditional financial metrics are appropriate for measuring core and adjacent initiatives, a combination of noneconomic and internal metrics should be used to evaluate transformational efforts.

Developing an Innovation Strategy 

The innovation strategy of a competitor or an industry leader may not work for you. While you can learn from their best practices, an explicit innovation strategy to match your own competitive needs will be effective in the long run. 

Follow the innovation strategy steps explained above to formulate a robust strategy and better coordinate your innovation process. 

Got anything to add to our guide? Let us know in the comments below.

With the dramatic growth of technology and frequent changes in consumer behavior, organizations today are under increased pressure to constantly innovate. At the core of gaining a competitive advantage in an ever-evolving marketplace, carrying out strategic goals while staying relevant, meeting customer expectations, and increasing revenue, are the company’s resources. 

However, more often than not, organizations wind up compromising on their profits because of the inefficient use of the resources at hand. To reach new heights of successes and avoid leading to bigger losses, any organization must practice effective resource management. 

This post describes practical ways to manage organizational resources and provides techniques that can help better facilitate the process.

What is Resource Management? 

Resource management refers to the proper utilization of organizational resources. It entails planning, scheduling, and allocating both tangible and intangible resources for better performance. Its ultimate target is to maximize the efficiency of resources, hence improving the chances of success of your organizational strategies, projects, or tasks. 

During the process, the business owner or manager determines how to best utilize the available resources, identify the additional resources needed, and identify the resources that are being wasted.

Importance of Resource Management 

Good resource management enables an organization to complete its work in the most efficient way possible and remain competitive with its rivals. Here’s why resource management is essential to your organization. 

• Minimize costs and increase the efficiency of delivering projects by allocating the right resource to the right project at the right time
• Foresee the demand for resources and identify potential challenges such as scheduling conflicts or shortage of resources in advance, hence preventing project failures 
• Allow for the optimal utilization of resources by finding the right balance between maximizing the productivity of your team and at the same time ensuring that they don’t feel overworked   
• Improve transparency and communication, and prevent workplace conflicts. With an overview of resource availability and planned workload, you can avoid over-allocation. 
• Allow for better strategic planning and decision-making by providing visibility into the company resources, their availability, and schedule.

Types of Organizational Resources

An organization relies on several resources for executing projects, and these fall into two categories; tangible and intangible resources. These resources typically include;

Resource Management Process

The Resource Management Lifecycle introduced by Mavenlink, lists down 5 phases “ that mirror the project delivery lifecycle from inception to analysis: Estimate, Plan, Execute, Analyze and Optimize.” 

The Estimate Phase

Effectively managing resources starts with estimating your requirements (types and quantities) of internal and external resources to complete a project. Once the project tasks have been defined, the resources needed to successfully complete them should be identified. 

There are six inputs that need to be used in the estimation of activity resources. These are

• Activity list 
• Activity attributes
• Organizational process assets 
• The enterprise environmental factors
• Project management plan 
• Resource availability

Several techniques are available to estimate the activity resources,

• The judgment of experts; ask experts who have already performed similar tasks and get their opinion on the type of resources required 
• Alternative analysis; this entails considering different options available for allocating resources. You can change the number or the type of resources used and explore different ways to perform a task and decide between different alternatives.
• Published estimating data; understand how many resources you need by referring to studies, articles, and research that has relevant data from other people and organizations. 
• Project management software; these often offer features for project managers to easily estimate the resources needed for a project and identify any constraints.
• The bottom-up estimate; break down the complex tasks into smaller tasks and estimate the resources needed for each individual step. The cost of the individual tasks then can be added together to obtain a total estimate.

The Plan Phase

During this phase of the resource management process, your objective is to identify how to utilize the identified resources in the most efficient manner possible. This means booking your resources for high-level projects based on skill, roles, and availability. 

During this phase, you need to have a clear understanding of your resource pool which encompasses the resources, their skills, roles, and experience, availability, cost rates, and bill rates. You can refer to this resource pool as you allocate available and suitable resources to project tasks.

Resource planning allows you to prevent underutilization and overallocation of resources, and minimize task and resource dependencies.

The Execute Phase

By now resources are scheduled and the project plan has been implemented. During this phase,

• Track the performance of the resources as the project progresses. Re-allocate resources that are improperly assigned to improve performance
• Check-in frequently with the resources to ensure that they are performing well and have the necessary tools to execute their responsibilities
• Create a list of resource backups in the case of conflicts that may arise during the project

The Analyze Phase

This phase is dedicated to analyzing the accuracy of resource allocation, their performance, and their contribution to the success of the project. To execute this phase effectively, you need to gather insight and data throughout the resource management lifecycle; this includes information such as hours worked, task due dates and completion dates, increases in skill levels, etc. 

Holding a retrospective to reflect on the wins and failures of resource management during the project can help uncover more insight that can be utilized for future training or hiring purposes and resource planning purposes.

The Optimize Phase 

Based on the analysis made, you can take action to optimize your resource management process further. Identify where you need to implement change using Kotter’s 8 step change model to prevent issues and where in the process you need to make improvements.

Resource Management Tips 

The tips mentioned below are to help you better implement resource management in your organization.

Get an overview of the available resources

A clear overview of the resources you are currently working with makes it easier to plan your projects around your goals. Moreover, the knowledge of all the resources available to you will help, 

• Quickly identify the right resources to assign to the right project task
• Detect potential bottlenecks early on and get a better understanding of upcoming commitments 
• Make more accurate long-term plans and forecast resources more reliably

Create a Centralized Resource Pool

A resource pool provides a clear overview of resources available to be assigned to project tasks. It helps the project manager when allocating resources and planning multiple projects. A centralized resource pool enables everyone in the team to understand the “big picture”, where they fit in, what role they have to play, and the limitations involved. This in turn helps motivate them to perform at their best to complete their individual tasks in a timely manner. 

Develop a contingency plan

Unexpected events can occur that may result in conflicts, and eventually lead to project failure. Have a proactive contingency plan in place to be prepared for resource shortages and negative circumstances in case of an emergency.

Continuously monitor project progress

Track the performance of each individual resource throughout the project to identify situations of overallocation or under-allocation. By tracking actual performance against projected performance will enable you to get a better understanding of where time is being lost and make adjustments to your allocation accordingly.

Ensure transparency

Align your team and ensure that they are working collectively towards achieving the same goal to foster transparency and trust. This also means involving the entire team during the project planning and delivery process, encouraging open communication when discussing potential risks to project resources, and ensuring that the team is aware of the project priorities.

Using a Visual Workspace for Resource Management 

A single, shared workspace to collaborate on brainstorming, planning, executing, and analyzing around your resource management plan helps centralize your resource management workflows and assets. This in turn streamlines cross-team collaboration and communication, allowing for a smoother resource management process. 

An infinite visual workspace like Creately lets you have your work breakdowns structure, resource breakdown structure, team charter, and task management boards side by side as you move through planning and executing your project with your team. Creately offers custom-made templates for various resource management and project planning tasks that teams can use right away to fast-track their work.  

Visual Techniques to Streamline Resource Management

The following visual tools can be used to better understand the status of your organizational resource utilization and resource requirements, allocate them better, and track project progress effectively. 

Work Breakdown Structure 

The work breakdown structure helps break down large projects into smaller and more manageable parts which contain the project deliverables or outcomes that it will complete. This will help quickly identify the resources needed to complete each individual project deliverable.

Refer to our Easy Guide to Work Breakdown Structures to learn how to create a WBS step-by-step.

Resource Breakdown Structure 

The resource breakdown structure represents the list of resources that will be required to execute a certain project. It hierarchically breaks down resources that will cost money (i.e. people, equipment, and material) by category and type, thus helping estimate what the project will cost and inform the budget.

You can create multiple resource breakdown structure using Creately’s resource breakdown structure templates.

Skills Inventory

The skills inventory is a human resource management tool that is used to record information on the skills, education, and experiences of current employees. This enables you to quickly assess whether the current staff can meet project requirements and allocate them appropriately.

Read our guide on Human Resource Planning Process to learn more about the manpower planning process and tools.

Kanban Board 

The Kanban board lets you visualize your workflow across multiple stages of the project (i.e. to do, in-progress, and done). In terms of resource management, the Kanban board is helpful when managing a project with scarce or limited resources that need to be utilized wisely.

Refer to our guide on How to Better Manage Your Projects with Kanban Boards to learn more about creating and using Kanban boards.

Gantt Charts 

Gantt charts provide a quick overview of the scheduled project tasks, their progress, and who’s working on them. The ability to assimilate the entire workload of the whole team at a glance makes it easier to detect areas where resources have been overallocated or underutilized.

Ready to Improve Your Resource Management Process?

 The practice of resource management is invaluable to all organizations, as resources are crucial to accomplishing organizational goals, meeting customer needs, increasing revenue, and growing the business. 

Proper resource management aids in terms of increasing team efficiency, preventing miscommunication mishaps between team members, managers, and clients, making accurate forecasts, and ironing out bottlenecks before they occur during projects. While it offers many benefits, if not done properly it can cost you a lot as well. 

We hope this guide will help you get a better grasp on your resource management process and improve your projects. 

Got more tips to share? Let us know your comments below.  

Sometimes we need more than a big picture vision to guide the actions of a company. A powerful mission and lofty goals may provide direction for an organization but do little to clarify the everyday tasks needed to get you there. 

An organizational strategy is a plan that helps bridge the gap between a company’s vision and actual work. It is a dynamic, long-term plan that aligns the actions of a company and specifies how your business will allocate resources (money, labor, and inventory) to support infrastructure, production, marketing,  and other business activities.

An Effectively Devised Organization Strategy Would Allow a Company to:

Set Direction and Priorities

Without clear direction, a business can continue to do many tasks without achieving any meaningful change. An organizational strategy provides your business with priorities. It defines success and shows you what activities you should execute first in order to move your business toward your eventual goal.

Align Teams and Departments

One of the most difficult things to achieve in any business is getting teams and departments to work towards a common goal. Without an organizational strategy that’s nearly impossible. When you set an overarching strategy — even if it’s board, it gives employees something to get behind and creates alignment within and among departments.

Simplifies Decision Making

One of the most difficult things to achieve in any business is getting teams and departments to work towards a common goal. Without an organizational strategy, that’s nearly impossible. When you set an overarching strategy — even if it’s broad, it gives employees something to get behind and creates alignment within and among departments.

A clear organizational strategy allows you to make decisions that are in line with achieving your goals. It helps reduce choices and provides a way to assess different options more accurately. 

Allows Adaptability 

A focused organizational strategy allows teams to be more nimble and adapt to obstacles much better. It continually measures the distance between where you currently are and what your eventual goal is. It allows you to take corrective measures when certain aspects of your business are going off track. 

Three Levels of Strategy:

An organization should base every decision it makes on its overall strategy. If the strategy is poorly chosen or formulated, it has cascading effects on the effectiveness of employees in pretty much every department within the organization. There are three levels of strategy that exist in every organization.

Corporate-Level Strategy 

Corporate strategy deals with the big picture questions like what business an organization should be involved in, how to gain competitive advantages in an industry, and how to establish the optimal set of business practices.

Functional-Level Strategy

A functional-level strategy aims at improving the internal operations of a company. It is concerned with the efficiencies within a department and usually consists of several sub-strategies related to each department like, ‘Marketing Strategy’, ‘Human Resource Strategy’ or ‘R&D Strategy’. The goal is to align these strategies as much as possible with the greater corporate strategy.

Business-Level Strategy

Broadly speaking, a business-level strategy answers the ‘how do we’ questions of an organization. In order to answer these questions, it is important to first have a good understanding of a business and its external environment. Business-level strategy is aimed at gaining a competitive advantage by offering true value for customers to gain sustainable and inimitable competitive advantages within the competitive landscape.

The Pyramid of Clarity

The Pyramid of Clarity is a strategic thinking tool developed by Asana. It is used as a framework to connect everyday tasks to strategic objectives. Everyone in the organization can now understand how and what they are doing ladders up to the company’s vision. It helps teams stay on the same page, build confidence in strategy and execution, and help individuals make decisions that are in line with the big picture.

Every task is connected to a project, which is part of a portfolio, which is connected to a goal that supports the company’s vision. 

The Pyramid of Clarity can serve as a guiding light that helps teams decide what to work on every single day. Team members use it to prioritize tasks that help achieve their Key Result Areas which in turn helps achieve annual objectives which ultimately help achieve a company’s mission. 

Strategy Mapping 

A strategy map is a visual representation of an organization’s overall objectives and how they relate to one another. It is a powerful strategic planning tool that showcases the entire strategy of an organization in one place. It illustrates the cause and effect relationship between the components of an organizational strategy.

A strategy map forces the organization to think about how the various functions interact with and support each other and therefore results in alignment around the strategy, which makes for much easier implementation and execution.

A typical strategy map organizes objectives or perspectives into four categories, including:

• Finance
• Customer
• Internal Processes
• People/Learning & Growth

The first two perspectives deal with the ‘what we are getting’ questions while the latter two are more about ‘what we are doing’. A strategy map is read from the bottom up because what you do directly affects what you get.

Finance

It’s standard to use two measures of financial strategy: revenue growth and productivity. It could be a broad goal of increasing shareholder value or a more specific one of acquiring a certain number of new customers. You can then work backward to build your strategy with this final focus in mind.

Customer

The customer value proposition should be at the core of your strategy. By focusing on what your customer’s needs are, you can build those values into the earlier stages of the strategy map. Companies usually focus on achieving one of these three customer value propositions.

• Product leadership
• Customer intimacy
• Operational excellence

Processes 

After deciding on your value proposition you now have a clearer idea of what you need to do to get there. You can then develop a better understanding of the work that needs to be done and the number of team members you need to do it.

Learning and Growth

This is the foundation of the strategy. It includes the organization’s culture, technology, and employee knowledge and competencies needed to support the organization’s strategy.

For an in-depth guide on how to plan and execute a strategy map, check out our previous blog post here.

Tell Us About  Your Experience with Organizational Strategy

A sound organizational strategy is important to have across all sizes of companies, operating in all industries. It begins with the big picture you want to achieve and then the steps you need to take.  Have you had experience planning and executing an organizational strategy? Tell us some of your biggest learnings in the comments below.