According to the excellent Richard Rumelt book; Good strategy/Bad Strategy, A “good strategy” is not about vision, goals or objectives, all useful in their own right. Instead, it is a carefully researched and well-thought-out action plan designed to meet a challenge. It requires research and analysis, hard choices, decisive planning, and action.

In this toolkit we outline the importance of using the budget process to effectively execute your strategy, and set out the key steps to follow, including a draft template you can download and take action.

In our experience a good strategy needs to consider the salient internal and external issues over the short, medium and long-term time frames and, for purpose-led enterprises, consider competitive as well as collaborative advantage.

That analysis leads to Rumelt’s three phases:

1. A diagnostic statement of the challenges or opportunities the strategy needs to address.
2. A strategic solution; a piece of clear thinking and the development of a guiding policy as to how we will focus our resources and technology in a way that will credibly deal with the issues identified in the diagnostic statement. This may involve challenging current assumptions or changing mindset in order to make a breakthrough.
3. If the strategic solution in the guiding policy is clear it should automatically identify the key actions that need to become the priorities in the business plan (and therefore the budget) that follows.

An example of this comes from EVOTIX, the leading health and safety software provider that we successfully exited in 2023 with a return in excess of 3 times.

The strategy session diagnosis was that US growth was weaker than desired, despite good product market fit, due to poor branding, whilst a smaller operation in ANZ (Australia and New Zealand) was distracting senior management resource with little value creation upside. The strategic solution was to put ANZ into maintenance mode and refocus resources (money and people) on US growth, starting with a rebranding exercise and US leadership team investment.

Key budget actions then followed with rightsizing the ANZ cost base, finding budget for a top class rebrand launch and marketing follow up, and investing in sales training to exploit the brand marketing investment.       

An illustration of the suggested strategic process is shown below:

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