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

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

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 know 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. A strategy only emerges once it says with what and at whose expense.

Goals are hoped-for outcomes, not instructions for action. They come out of your ambitions and intentions. That's why the decisive question in developing strategy isn't which goals you're aiming for. It's which challenges you face and which opportunities are open to you. Strategy is not a matter of preference. It's your idea of how you'll meet those challenges and seize those opportunities. The goals follow from that, not the other way around.

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

What does this look like in a family business?

Take a supplier to the furniture industry: 400 employees, third generation. The core business hasn't grown in three years, but it's profitable.

Step 1 reveals: 80% of the contribution margin comes from two customers, both of whom have been pushing on price for years. Revenue doesn't show that. The contribution margin calculation does.

Step 3 reveals: The owning family wants to keep the company in the family, and the next generation is 11 and 14 years old. That rules out anything that requires a sale in the next ten years or sharply increases debt.

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

Step 6 is the uncomfortable one: choosing small batches means losing one of the two major customers over the medium term. Nobody likes putting that in a strategy document, and without that sentence the strategy stays toothless, 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 without those three is a statement of intent.

The sharpest test is a question to the room: what do we stop doing as of tomorrow? If there's no concrete answer, the process isn't finished, no matter how thick the document is.

How does corporate strategy connect to the individual units?

The corporate strategy determines where the money is made. The unit strategies determine what each unit contributes to that and what it gives up for it.

The most common mistake is developing the unit strategies in parallel. Then every unit optimizes itself and nobody resolves the contradictions. The right sequence: decide the corporate strategy first, then derive the unit strategies, then lay them all side by side and work through 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.