Learn to take strategic decisions!

We often hear about corporate strategy. In this pill, we will try to give a concrete definition in business. At the end of this brief reading, you will be able to understand what a strategic decision is and when it can be considered strategic or not. Knowing how to make a strategic decision is important both in private and professional life. We will address the discussion here mainly from the business point of view, but it will be easy to translate it into the private context.

First of all, a company must have in mind which are the Vision, the Mission, and the Objectives it wants to achieve. Starting from these bases, in order to emerge in the market, it is necessary to create a competitive advantage against competitors. In order to obtain this advantage, it is necessary to accurately create the right business strategy, which then becomes the key to success for every company.

But what is a strategy? A strategy at the business level is a long-term plan composed of a coherent set of strategic decisions, which aim to identify a goal and a direction that the company wants to achieve, maintaining superior performance to those of competitors.

So a business strategy aims to create a competitive advantage over competitors, and to do so I need to have superior performance to them.

Instead, a strategic decision is a long-term, multi-dimensional decision with non-reversible effects on the organization’s final result. It usually requires the use of large amounts of resources and the involvement of top management.

How can I tell if the decision I’m making is strategic?

There are 3 parameters to understand if a decision is strategic:
1) Reference time horizon: the effects of a strategic decision must be visible in the long term;
2) The relevance of the impact: it must have a significant impact on the company’s objectives, changing its status within the market;
3) Irreversibility of the impact of the effects: the impacts of the decisions are not easily reversible and once implemented a strategic alternative it is very difficult to go back.

Example of strategic decision VS non-strategic decision:

  • if you need to redesign the entire production plant or decide to move it to a new location abroad, in this case, a strategic decision is definitely required;
  • if instead for space optimization, you decide to move a machine within your company’s production center, you are certainly not making a strategic decision.

Conclusion

A strategic decision, as we have seen, is a decision that affects the objectives of the long-term decision-maker, relevant and not easily reversed. Knowing how to make a strategic decision also involves the conviction and commitment to implement it, so that it can give the desired results.

See you at the next pill!

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