Where’s the money in the strategy?

We all hear about management pointing to the ROI, sustainable profit, financial growth etc. in their mission/strategy statements. On one hand it sounds really logical, company has to make money to survive. On the other hand it somehow sounds strange, how making money is related to our vision? Do we wake up everyday thinking we’ll make more money today? Is it really the meaning of life? Something doesn’t fit…

Organizations have to come up with some statements which summarize its intention and motivation. Usually these statements are communicated as vision, mission, strategy, goals, etc. Coming up with such statements is not rocket science. Everyone is doing it. However, it’s not very easy to create a strategy which organization can really use – not only as a motivation statement, but also for doing modeling, planning, executing, controlling. It’s also not very easy to create a strategy which will lead to success – perfectly execution of a strategy may lead to failure as well, this is where business skills and innovation has big role.

Modeling the strategy starts from vision. Vision is the anchor, everybody in the enterprise agrees on it, not only the organization but also the customers, partners, regulators etc. Vision is a three word statement and it doesn’t come along. Together with the vision, values of the enterprise must be defined, too. Once the enterprise vision and values are defined, role of the organization within the enterprise needs to be defined. Every actor in the enterprise has a role, so does the organization. Mission statement is then describing how the intended role will be fulfilled. Success of the mission is measured by goals – ends which are measurable.

All of these statements must be connected. One can not define a mission like “we here to sell insurance”.  Mission must connect the vision to day-to-day work. It must guide the organization towards a goal of achieving something. Organization may fail because goals are not achieved, and may be goals are achieved but the strategy was not good enough. Strategy must direct organization towards success. As one cannot make a mission like “go and make a profit”, there cannot be goals like “increase profits”, “sustainable profit” etc. These kind of statement shows the failure of making strategical decision and leaving organization in chaos.  With no strategy provided, middle managements of the organization are either lost in chaos, or try to make their own strategies which is also destructive for the organization. Survival is not possible if every department in the organization have a different target, different values etc. The worst thing is that it’ll all appear that everybody is following the same strategy “making-money”, and going towards same direction. You’ll always see that there’s something wrong, but never can find what.

Shareholder value, revenue, profits,.. all these financial indicators are not there for measuring the success of day-to-day work, but for measuring the success of the strategy. Therefore has no place in strategy, mission statement, goals, tactics.