The first post in a series based on the National Center for the Middle Market’s research report, Strategic Planning for Growth: How Middle Market Companies Map Their Futures, this article explores the need for and benefits of a clearly defined strategy.

Pop quiz time: Can you clearly state your corporate strategy? At a minimum, you should be able to concisely articulate your company’s objective, scope, and advantage, right off the top of your head. If you can’t, it might mean that your strategy isn’t as well-defined as it could or should be. And that is likely costing your business in more ways than one.

In our latest research, the Center found that more than one-third of middle market businesses operate without the advantage of a well-defined overarching business strategy. And they pay the price: their average growth rate is 6.8%, a rate 26% lower than the 8.6% average reported by peers that do have a well-defined strategy to guide business decisions.

Indeed, the research revealed that a clear strategy is inextricably linked to better corporate performance in several important ways:

First, a well-defined strategy helps companies optimize their finite resources.

It’s impossible for companies, and especially middle market companies, to be everything to everyone. Organizations that wish to thrive long-term need to make choices and tradeoffs between offerings, markets, and customers. They need to understand what they will do—and what they won’t do—in order to create a competitive advantage, focus their resources on the best opportunities for profitable growth, and avoid spreading time and money too thinly over too many strategic initiatives. A succinct strategy that clearly describes the basic elements of where the company competes, what it sells, how it wins and defends markets, and how it sets itself apart from the competition is the cornerstone for better decision-making that will help achieve growth objectives.

Second, clear strategy enables companies to articulate their value proposition, and grow even faster as a result.

More than three-quarters (76%) of middle market companies with a well-defined strategy can clearly speak to how they add value for their stakeholders, compared to just 26% of companies with a less-defined strategy. Companies that can clearly articulate their value proposition boast an annual revenue growth rate of 9.3%, which is 50% higher than peers not able to easily communicate the value they offer.

Third, companies that understand their strategies also understand their challenges and how to address them.

Companies that are good at defining their strategies appear to have a much better grasp on the hurdles they face going forward. They are more than twice as likely as peers without a well-defined strategy to say that they have a clear understanding of the challenges facing the firm (58% compared to 23%). They are also much more likely to understand what activities, assets, and resources are needed to overcome those challenges (61% vs. 26%). In short, companies that know who they are and what they hope to accomplish have more realistic, feasible plans for achieving their objectives.

Finally, a well-defined strategy is easier to execute.

Companies with well-defined strategies are more confident that their strategies will lead to success. And they are right: When strategy is well-defined, satisfaction with strategy execution triples from 23% to 77%. The correlation works the other way, too. Companies that say they execute strategy well are highly likely to say they have a well-defined strategy.

Get tips for making your strategy crystal clear in our full report.

To learn more about the importance of a well-defined strategy, see how it factors into overall strategic success and growth, and get a list of questions you can ask to put your strategy to the test, download the Center’s full report, Strategic Planning for Growth: How Middle Market Companies Map Their Futures.






This post is part of a larger research project by the National Center for the Middle Market. Get the full picture through the resources below: