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Need for strategic alignment

A strategy is the yardstick by which all business decisions are measured.

A business strategy is a matrix of principles and policies used to ensure the scarce resources of the business are used to support its goals and objectives.

The corporate strategy of a business is its attitude towards growth and the markets in which it operates. Is the business wanting to grow, continue unchanged or cut back? Does the business wish to concentrate on its current markets or diversify into new markets – either geographically, horizontally (e.g. complimentary products) or vertically (e.g. expand from manufacturing into retailing)?

Each business unit within the organisation may have its own business strategy, which is its approach to improving the competitive position of products or services within the segment served by that unit. For example, a business unit will decide whether it will compete using low cost or differentiation (its competitive advantage), and whether it will target the mass market or a particular niche (its competitive scope).

Within each business strategy, there will exist a number of functional strategies, for each function within the business unit (i.e. R&D, marketing, HR, finance and operations).

Decisions concerning how to commercialise an innovation must be consistent with the corporate and business strategies of the organisation. For example, if the corporate strategy is anything other than growth based, then a technology that is non-core should be sold or licensed out.

Likewise, core technologies should be licensed into new geographic markets rather than commercialised through direct investment in those markets. Similarly, if an organisation is pursuing a growth strategy, it will depend on the nature of the strategy as to which commercialisation method is best. For example, an organisation pursuing an acquisition based growth strategy might see a joint venture as an appropriate commercialisation method.

Strategy is obviously not the only factor that is important in choosing a commercialisation method. The point is, the method chosen must be aligned with the strategies of the business.