In my first lesson, I typically discuss strategy. But what exactly is strategy? It involves making judgments about the future. The CEO plays a crucial role in this process and is often referred to as the Chief Strategy Officer of the company. If a company makes strategic mistakes, it’s usually the CEO who bears responsibility.
Strategy can be divided into two parts: an upper part that includes mission, vision, and values; and a lower part that encompasses organization, people, and performance management. These two parts must be integrated seamlessly for success. While the upper part is essential, without proper deployment of organizational resources or effective talent development systems and performance management practices in place, winning becomes impossible.
Mission
The mission of an organization is to answer the question of why it exists. It serves as a critical point that unites the entire organization, providing clarity on what customer values are being created and how they can be improved upon.
It’s important for every enterprise, regardless of size or industry, to establish a clear mission. For instance, even a small restaurant can have a simple yet powerful mission: to make good food that satisfies every customer. The purpose of the mission is not just for external stakeholders but also for internal ones such as the CEO, founder, team members and staff who must strongly believe in it.
To ensure its effectiveness, we need to make sure that our mission statement is tangible and actionable. This means making sure all business strategies align with it so that every movement pivots around achieving this goal.
Vision
Vision should follow mission and have a minimum requirement of at least a 3-year goal. For instance, one may want their company to become profitable within three years with a certain amount of revenue. It is important to consider employee growth, customer acquisition, and reputation in society when developing the vision. The clearer and more logical the vision, the better it will be. Designing a 5 or even 10-year vision can be challenging.
A clear mission and vision are crucial for making strategic decisions as they provide guidance, logic, and long-term perspective. Chaos can arise without them as there is no understanding of how to win or lose. A well-defined strategy map allows for quick fixes if something goes wrong.
Values
What are values? They are the shared methods and principles of doing things that bring people together with common goals. Despite different personalities and backgrounds, it is important to do things in the same way.
Enterprises with a sense of mission and vision can attract excellent and super first-class individuals, who may be unconventional. Working together can be challenging for such individuals, but if they can collaborate effectively, success is likely.
Values cannot simply be set by the boss. Instead, it is important to gather input from colleagues about why they work together, what they appreciate about each other, and what actions should never be taken.
Company values must not only exist on paper or walls; they need to be assessed regularly. This assessment helps shape company culture. Both performance and values should be evaluated for bonuses, stock options, promotions — this creates a comprehensive assessment mechanism.
Organization
Some companies fail not because of their competitors, but due to their reluctance to change despite market and competitive changes. As a former CEO, I prioritized organizational change in response to evolving situations within 3–6 months. This involved determining what should be kept, given up, and prioritized — the top three tasks that must be done. Often there are more potential business opportunities than leaders available for delegation; thus some initiatives must be abandoned.
Reorganizing an organization is more challenging than defining business strategies as it involves changing roles or restructuring teams which can cause tension and conflict among employees. The real challenge for a CEO is how to unite the team instead of dividing them.
Many companies face the dilemma of having too much work with limited personnel resources. A good organizational structure can help bridge this gap by functioning as backup when there’s a shortage of people and vice versa. Human resources (people) and effective organizational structures can support each other in achieving success.
People
The most important asset of a company is not the products it manufactures, but its people. It is people who make decisions about products.
Therefore, a company should invest its resources and focus on developing its employees. This investment includes creating a positive work environment, fostering a strong corporate culture, implementing fair play mechanisms and establishing an effective training system. All of these factors are crucial for success.
One effective management review mechanism involves evaluating managers’ performance every three months. During these reviews, business performance is put aside in favor of discussing people and team development plans such as training programs and succession planning. The goal behind this approach is to encourage managers to adopt a holistic perspective that considers both business objectives and employee development.
As the saying goes: “repair the roof when there’s sunshine.” When businesses experience rapid growth, it can be difficult to determine whether this growth stems from internal factors or external leadership influence. One way to test this hypothesis is by relocating leaders to other business units facing challenges in achieving growth. Although this decision may be tough, it can yield valuable insights into leadership effectiveness.
It’s important to remember that the best managers are often developed internally rather than hired externally. A good company cultivates talent through organizational structures and business practices — what we call “borrowing the false to cultivate what is true”. While organizations and businesses themselves may be considered “false”, well-trained employees represent the ultimate truth for any successful enterprise.
KPI(Performance Management)
Lastly, let’s discuss KPIs. They should be taken seriously as they encompass all the essential components of a business, including its mission, vision, values, organization and people — what needs to be retained and what must be relinquished. All these aspects are represented by KPIs.
To set KPIs effectively, you need to determine your own goals as well as those of your employees and clients while unifying their interests from three perspectives. “Bargaining” is a two-way communication process that must take place when setting KPIs; if managers decide on them alone, employees will miss out on valuable training opportunities.
When delivering KPIs to teams or organizations, it is crucial to ensure that they do not suffocate or overwhelm them. The purpose of setting KPIs lies not only in achieving business results but also in motivating people and utilizing their talents so that innovative ways can achieve desired outcomes.
Monthly reviews are necessary for monitoring progress against established KPIs which should be directly linked with incentive mechanisms: incentives for desirable outcomes and penalties for undesirable ones. As previously mentioned, we applaud the process but pay the bill for results.
In conclusion, there are three key elements at the top level of strategy: attracting people; managing people; aligning mission and vision with exceptional individuals who embody these abstract concepts at their core. At lower levels of strategy execution involves securing missions’ visions’ values through talented personnel functioning optimally within an organization. A good strategy integrates all these elements seamlessly together.
Curated by Alibaba Global Initiatives
Author: Jack Ma, founder of Alibaba Group
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