Why Business Strategy is usually linked to Finance? Is this the right approach?
In this article I will try to express my humble opinion about this issue because I am honestly tired of facing it continuously during the day to day of my work.
What is the definition Business Strategy?
I am sure you will be able to find thousand possible definitions of business strategy and probably most of them will be correct. In my case, because I like simple things, I have selected this one:
"Business strategy is a long term plan of action designed to achieve a particular goal or set of goals"
Based on the above, business strategy requires the establishment of specific goals and the definition of specific actions to be taken in certain time and manner to achieve those goals. These facts could seem obvious for anybody but unfortunately they are mistakenly understood very often.
When in Rome, do as the Romans do
This is a common say which has probably not much to do with the subject but I am using it mainly to attract your attention....I am joking.
Indeed it has some relationship if I give you first a historical note. Do you know Emperor Augustus, more than 2.000 years ago, was having access to detailed financial information about all public expenditure of his Roman Empire? Even their army expenses were carefully registered. This fact can be easily checked through Wikipedia.
Having said that, do you think Emperor Augustus was assigning the strategy of his battles and his whole empire to his head of accounts? I don't think so.
Is the financial knowledge the key skill required for Business Strategic Planning?
To me the answer is clearly NO. Strategic Planning requires other skills much more relevant than the financial knowledge:
- Analytical technical and commercial skills to evaluate in details the company strengths and weaknesses
- Deep knowledge about the market, opportunities, trends, threats, potential clients, main competitors and key suppliers
- Capability to define achievable and measurable set of goals in a comprehensive manner
- Ability to define internal and external initiatives (Actions) as internal improvement measures, partnerships, reestructuring plans, etc. and whatever is needed to achieve the goals based on the actual company capabilities and the market situation.
Of course financial knowledge is required too as all these facts must be finally converted into numbers in a standard format and those numbers must be understandable by anybody, able to be consolidated (in large groups of companies) and able to be tracked.
Do we need a Big 4 accountancy firm to do that work for us?
If you have read my previous paragraphs you will probably know the answer. Of course my answer is NO.
If they can only bring the financial knowledge and the way to convert facts into figures in standard format, let their role be limited to that and only in case we are not able to do it with our own financial staff.
Must the Business Strategy fully depend on the Financial Department of my company?
Again, in this point I am sure you already know the answer, NO.
Then, from whom should depend the the Business Strategy? Business Strategy must be a task directly depending on the Business Development department of any company, it must be closely linked with the company high management and fully supported by the financial department.
Despite of what you are probably thinking, I am not saying that only because I work in Business Development (dirty minds). I am saying that because I really believe it and I think it is daily hurting many companies the lack of involvement in the strategic planning of the people who really know their own businesses.
Lucas Pastor