Developing a corporate strategy: seven steps with examples from mid-sized companies

What is a corporate strategy, and what isn't it?

A corporate strategy answers three questions: Where will the company make its money five years from now, what will it give up to get there, and how will it tell along the way whether it's working?

What it isn't: a collection of goals. "Double revenue, become market leader, push digitalization" is a wish list. It becomes a strategy only once it says with what and at whose expense.

And it isn't the same as your mission statement. A mission statement says what you stand for and rarely changes. A strategy says what you'll do over the next few years, and it has an expiration date.

Which seven steps lead to a strategy?

The order matters more than completeness. If you start at step four because the idea is already on the table, you'll pay dearly to make up the first three later.

What does this look like in a family business?

Take a supplier to the furniture industry: four hundred employees, third generation. The core business has stopped growing over the past three years, but it's profitable.

Step 1 shows: Eighty percent of the contribution margin comes from two customers, both of whom have been pushing on price for years. Revenue doesn't reveal that. Contribution margin accounting does.

Step 3 shows: The owner family wants to keep the company in the family, and the next generation is eleven and fourteen years old. That rules out anything requiring a sale in the next ten years or a sharp increase in debt.

Step 4 delivers three paths: backward integration into upstream production, opening up a second industry using the same manufacturing, or specializing in small batches with higher margins.

Step 6 is the uncomfortable one: Choosing small batches means losing one of the two major customers over the medium term. That's not something people like to put in a strategy document, and without that sentence the strategy has no consequences, because sales keeps chasing large orders.

How do you spot a strategy that rules nothing out?

By three phrases that show up in almost every weak strategy document:

• "We want to grow in every segment." That isn't a decision, it's the absence of one.
• "Both, and." When two options contradict each other and the document names both, the decision has been postponed.
• No number, no date, no name. An initiative missing those three things is a statement of intent.

The sharpest test is a question to the room: What do we **stop doing** tomorrow? If that gets no concrete answer, the process isn't finished, no matter how thick the document is.

How does corporate strategy connect to the individual business units?

The corporate strategy defines where the money is made. The unit strategies define what each unit contributes to that and what it gives up in return.

The most common mistake is developing the divisional strategies in parallel. Each division then optimizes for itself, and nobody resolves the contradictions. The right sequence is: decide the corporate strategy first, then derive the divisions, then lay them all side by side and settle the conflicts.

How do you anchor it in the budget?

By making the three most important initiatives line items in next year's budget, each with its own amount and its own owner.

The test takes ten minutes: put the budget and the strategy side by side. If you can't find the strategy in the budget, it won't happen next year, no matter how convinced everyone was when the decision was made.