70% of CEOs say their strategy is clear. (Only 10% of their teams agree.)
That gap?
It’s where misalignment lives. Where priorities get lost. Where momentum dies.
If you’re scaling a company, there’s nothing more dangerous than thinking your strategy is clear— when it’s not.
👉 That’s why my Wheel of Strategy matters.
It breaks strategy down into 4 essential areas.
And challenges you to answer 20 dead-simple, high-impact questions:
🧭 Purpose & Direction 1. Why do we exist? Who actually needs us? 2. What’s our mission in one clear sentence? 3. What do we believe that drives how we operate? 4. Where do we want to be in 3 years? 5. What would success look like if nothing held us back?
📊 Market & Advantage 6. Who is our highest-value customer? 7. What pain are they feeling every day? 8. What’s changing in our industry? How do we stay ahead? 9. Why do people choose us—or not? 10. What can we offer that’s hard to copy?
📈 Goals & Metrics 11. What are our top 3 priorities right now? 12. What does success look like this quarter? 13. What’s the one number that matters most today? 14. How do we review progress each week? 15. What milestone will tell us we’re winning?
⚙️ Actions & Tactics 16. What must we deliver in the next 90 days? 17. Who owns each outcome? By when? 18. What’s currently blocked? How do we fix it fast? 19. What quick wins will build momentum now? 20. When and how will we check in and adjust?
No fluff. No 50-slide decks. Just strategic clarity—fast.
Save this sheet.
Use it in your next: — Leadership meeting — Quarterly reset — Or offsite
If you and your team can’t answer these questions confidently...
It’s time to go back to the strategy table.
Because real alignment doesn’t come from louder messaging.
It comes from sharper thinking.
Credits toEric Partaker, follow for more insightful content.
Discover the goals, challenges, and trends in B2B and B2C sales, and learn how sales professionals are reimagining the customer relationship.
Every sales pro I talk to mentions the same challenges: inflation, rising interest rates, and pricing instability are making it harder to get deals across the finish line. Budgets are tighter, and buyers are more cautious about where they put their money.
While that sounds daunting, there are still serious buyers out there, and they’re more educated and ready to buy than ever before.
To see exactly how these shifts are playing out, we surveyed 1,000 global sales pros for HubSpot’s 2025 State of Sales Report. And, I didn’t just look at the numbers. I also caught up with several sales experts to hear how these trends are showing up in their day-to-day work.
The results are clear: While the economy is putting pressure on sales teams, AI and new strategies are helping them stay resilient — and in many cases, even thrive.
Sales Benchmarks
Before we dig into the key themes that are leading, transforming, and impacting sales metrics, here are some sales benchmarks to help you get a sense of how your business stacks up in 2025:
Sales goals: 59.9% of sales teams are on track to meet or surpass their revenue targets.
Win rates: 91% report win rates are stable or improving.
Deal sizes: 93% say average deal sizes are holding steady or growing.
Lead quality: 68% report that lead quality has improved year over year.
Team growth: Nearly half of leaders (45%) expect their teams to expand this year, while just 3% expect them to shrink.
Budgets: Only 9% of respondents say sourcing budget has been difficult; 42% call it “easy” and 49% say it’s neutral.
Together, these numbers show that while macroeconomic uncertainty is still on everyone’s mind, sales teams are holding steady and in many cases improving — across the metrics that matter most.
Top State of Sales Findings and Trends
Trend 1: Sales success is defined by revenue outcomes (not ops efficiency).
Unsurprisingly, sales pros are laser-focused on outcomes. In fact, 42% say annual recurring revenue (ARR) is the most important success metric.
Rounding out the top success benchmarks:
Average profit margin — 30%
Conversion rate — 29%
Win rate — 28%
Average revenue per user — 27%
Quota attainment — 26%
Sales cycle length — 22%
Average deal size — 20%
What’s most striking is what doesn’t make the list.
Fewer than 5% of respondents said they prioritize pipeline coverage, lead scoring, or sales linearity. That marks a clear shift away from measuring activity for activity’s sake and toward bottom-line impact.
“Leads have gotten better, thanks to stronger partner channels and a clearer ICP [ideal customer profile]. I’ve gone from chasing every possible deal to focusing on fewer, higher-value opportunities, putting more energy into strategic conversations instead of volume-based outreach,” Wickliffe says.
This trend signals a maturity in how sales organizations define success. Outcomes are a bigger focus than activity.
Trend 2: Value is the key to sales success.
Sales today is all about proving value. The top two deal-killers come down to perception of value: no product fit (37%) and poor value for money (35%).
Yet, it’s clear sales teams have managed to adapt to these maturing buyer expectations, with 60% reporting they are meeting or exceeding their sales goals.
Some of those shifts include:
Offering expanded self-serve tools like free trials, pricing pages, and customer stories (40%) to meet customer expectations.
Focusing on solution-based selling (35%).
Waiting to attempt upsells until right after delivering value to ensure clients are receptive (37%).
And if you’re wondering about the other top upsell drivers, understanding customer goals (42%) and providing consistent value (39%) round out the top three.
Our experts concur that value is mission-critical in 2025. M. Shannon Hernandez, founder and CEO of Joyful Business Revolution, says, “Referrals and relationships are gold. In a crowded market, nothing cuts through like delivering value that gets people talking.”
Hernandez shares that messaging is an important part of showing that value, noting that when it’s spot on, it results in “a leaner pipeline, higher deal quality, and sales conversations that move faster because prospects already see themselves in the offer.”
And while value remains the ultimate differentiator, sales reps are also leaning on new tools — especially AI — to deliver it more consistently.
Trend 3: AI is a mainstay of the sales rep’s tool belt.
So, what else feels different this year? AI isn’t just a buzzword anymore. Last year, everyone was asking if it would change sales. Now, the conversation is all about how we use it to work smarter, move faster, and build stronger connections with buyers.
AI isn’t hype. It’s here, and it’s producing results. Where last year the conversation was about how AI was gaining traction, this year, it’s clear that people are using it to focus their time more effectively.
In fact, only 8% of the sales reps we surveyed reported not using AI at all. Here’s what else they say:
37% of reps use AI tools, more than any other sales tool category.
AI was rated the highest ROI tool (31%).
84% say AI saves time and optimizes processes.
83% say it personalizes prospect interactions.
82% say it surfaces better insights from data.
But how people are using it is fascinating. Everyone I spoke with uses it slightly differently.
For example, Hernandez reports using AI to cut admin: “Instead of spending 2 hours consolidating notes into a proposal, AI now captures the key details live during my calls, which has cut my post-call time by 80%.”
On the other hand, Wickliffe calls AI his “silent sales partner,” noting that his AI tools handle research, prep, scoping, and follow-up so he can focus almost entirely on closing.
Trend 4: AI helps buyers research, but humans still close deals.
With AI tools like ChatGPT, buyers are better informed than ever. 74% of sales pros believe AI is making it easier for buyers to research products.
As a result, the seller’s role is evolving from pitching to confidence building:
36% say their primary job is helping buyers feel confident in decisions.
33% say it’s navigating internal buy-in.
Matt Hall, founder of Common People, sees this playing out with buyers spending more time to ensure they make the right decision.
“The buying cycle is a bit slower … buyers are spending more time exploring options,” Hall says.
Kali Tucker, owner of The Waterworks, sees two primary factors in B2C sales trends this year.
“Everyone wants that good deal, but they also want a real human connection,” she says.
She has also noticed a change in how research affects the sale: “People are making buying decisions in advance of physically coming into the showroom. Our role really becomes about building that relationship and connecting the dots to a deal.”
Trend 5: Social media has permeated the entire sales journey.
Social selling has become the channel of choice. While awareness is important, response, lead quality, and revenue are factors that play a significant role in its success for salespeople.
42% say social media delivers the highest cold outreach response rate (vs. 26% via email and 23% on the phone).
35% say social media is their top source of high-quality leads (up slightly from last year).
45% rate social media “very effective” at driving sales. That’s higher than in-person meetings (44%) or video calls (35%).
Some of the experts I spoke with agree that social media is a valuable sales channel.
“One LinkedIn post about a client’s messaging shift led to a DM, then a $33K engagement. That’s the power of thought leader positioning and a cohesive messaging strategy that shows prospects the results they want — before they ever reach out,” shares Hernandez.
Wickliffe adds, “Posting behind-the-scenes insights on LinkedIn has turned into an unexpected lead magnet, sparking conversations that move directly into the pipeline. People like people. Me posting about what I know about and what I’m passionate about drives business and also drives referrals.”
But not everyone agreed.
For one, Tucker had a different take. “We’ve found lead quality declining from paid social, but our greatest success has come from collaborations with other local businesses with ancillary products and services to our own. The resulting real, unfiltered behind-the-scenes content helps people get to know us as people, creates better visibility—and in turn, creates more personal connections before people ever connect with our sales teams.”
Hall agreed with Tucker. For her, social selling hasn’t been a big priority this year.
“Without human connection, the value of social platforms seems to be limited to entertainment or dopamine dependency — values that seem unsustainable in the long term. Those who can maintain real human connection right now seem to be doing okay,” Tucker says.
What does all of this mean?
If you can use social media to help your customers feel connected with your brand or sales reps, you’ll have a leg up on those who focus on it just for awareness.
Trend 6: Macroeconomic anxiety is real — but so is adaptability.
It’s impossible to have a conversation about any kind of sales without addressing the economic elephant in the room. Most of the biggest sales concerns relate directly to perceived economic instability:
Recession concerns — 74%
Inflation — 75%
Interest rates — 70%
Supply chain issues — 69%
Tariffs/trade — 69%
What’s striking is how high these numbers remain across the board, a reminder that economic anxiety is both global and persistent.
Yet the story doesn’t end there. Resilience is the bigger story:
60% of sales pros report they’re on track to meet or exceed sales goals.
67% say they’re very or extremely adaptable.
76% say they understand how macro trends affect their industry.
79% say their org communicates those impacts effectively.
This also illustrates the importance of value (Trend #2) and how companies that deliver on value are well-positioned to thrive in the future.
Here’s the surprising twist: even with those economic fears, core sales metrics are holding steady — and in many cases, improving.
Key success benchmarks are holding steady or improving:
91% say win rates and close rates stayed flat or improved.
93% say average deal size grew or stayed consistent.
68% say lead quality improved.
When it comes to team investment, the picture is equally encouraging:
45% of leaders expect the number of reps per manager to grow this year.
52% expect team size to hold steady.
Only 3% anticipate team size shrinking.
As for budgets, just 9% say sourcing budget is harder this year. The majority say budget sourcing is either easy (42%) or neither easy nor hard (49%).
Other Trends to Watch
While the seven core trends define the big shifts in sales for 2025, the data also revealed several smaller but equally telling patterns.
These don’t warrant full sections on their own, but together they paint a sharper picture of how sales teams are adapting, thriving, and preparing for the future.
1. Teams are redefining sales culture as a differentiator.
Sales success isn’t just about metrics or budgets. The 2025 data shows how culture plays a huge role in longevity, morale, and the bottom line.
Top motivators include:
Trust in leadership — 30%
Healthy competition — 30%
Career development — 28%
On the flip side, toxic competition (28%) and lack of collaboration (29%) can sink performance. Leaders who double down on culture will have a clear edge.
2. Social may have a leg up on email for prospecting.
Email, live events, and outreach by phone aren’t going anywhere. However, social outreach now outranks email for response rates (42% vs. 26%), showing a clear shift in where buyers engage.
Sales teams that still rely primarily on cold email may be missing the channels where buyers are most active
3. Promotional experiments are here.
Promotions aren’t limited to discounts anymore. Companies are experimenting with activities like social media challenges (28%), contests (24%), and even giveaways to generate leads and drive engagement.
Yes, everyone loves a deal, but as margins get tighter, there are new ways to create a buzz.
4. Free tools and trials drive strong conversion rates.
Buyers want to evaluate value independently before they engage with reps, which means that free options continue to prove their worth in pipeline creation.
Nearly 38% of sales leaders say free tools convert best, outpacing free widgets (27%) and free content (25%). Buyers want a taste of real value, not just gated PDFs.
5. Enablement content is getting smarter.
Generic collateral and content are losing ground. With AI making it easier to get answers, the kinds of content that move deals forward most effectively include market research (35%) and product demos (32%).
6. Emotional intelligence sets good salespeople apart.
While tools and tactics evolve, the human element is still decisive. Reps report that understanding customer goals (42%), providing consistent value (39%), and building trust (30%) are the top drivers of repeat sales and upsells — all core aspects of emotional intelligence.
This reinforces what many leaders already know: Empathy, active listening, and genuine relationship-building separate good salespeople from great ones.
“Empathy is the number one thing I look for in my sales team,” says Tucker. “You need to listen to the client, and understand what they want, and what they’re not saying. When you can, you can tie the offer directly to their motivators, and that is the win right there.”
Hernandez echoes this, “The sales edge will go to leaders who build trust systems, or processes that keep founders and their sales teams in a prospect’s world for months or years without going cold.”
8. These traits will set high-performing salespeople apart.
We dug deeper into research on high- and low-performing salespeople to identify the traits and tactics that set them apart. While specific data points might change as AI and efficiency processes mature, these soft skills aren’t going anywhere.
Most notably, here’s what high-performing salespeople are doing this year.
Building Trust and Rapport
Of respondents, 40% said that establishing trust and rapport is the single most effective upsell/cross-sell strategy. This suggests that relationship-building and emotional intelligence remain critical differentiators, even in a year dominated by AI and automation.
Providing Consistent Value for the Long-Term
Close behind, 39% pointed to providing consistent value. That means top sellers aren’t just “checking in.” They’re proactively offering insights, tools, and recommendations that make customers’ lives easier.
Clear Communication, Sales Goals, and Team Alignment
Of sales leaders, 27% cited improving alignment between sales reps and sales leadership as a top goal. To translate this: high performers stand out when they communicate well upward and across teams, ensuring that strategy doesn’t get lost in execution.
Prioritizing a Coaching and Mentorship Mindset
Of sales leaders, 30% list supporting reps as a primary goal, which is notable given the importance of both receiving and giving feedback. High-performing individuals lean into coaching, mentorship, and peer-to-peer learning to accelerate success.
Sales in 2025 is about finding your balance.
We can safely say that AI adoption is no longer up for debate. It’s the starting line. The real differentiator now is how sales teams use AI to work smarter, reclaim time, and sharpen decisions.
Still, efficiency alone won’t define the next era of sales. Emotional intelligence, trust, collaboration, and culture matter just as much, if not more. Buyers may come to the table more informed, but they still rely on salespeople to give them confidence, clarity, and connection.
So, what’s the real story this year? It’s that even in the face of global economic pressures, sales pros aren’t pulling back. They’re adapting, hitting targets, and doubling down on growth.
A surprisingly simple technique for a rockstar product vision: The Ladder of Needs
I was recently asked, “what’s the most important quality of a product manager?” My answer came very quickly: the ability to sell your team on a vision. Why? Because all the other skills we expect in a product manager don’t matter if you can’t sell the team on your vision.
And, beyond selling your team, the skill that most product managers are looking to develop is setting a compelling product roadmap. So, how do you create a compelling vision and roadmap that drives your product to get stronger over time?
Combining two all-star tools:
To answer this question, I have always loved Clay Christensen’s classic framework of ‘jobs to be done’. What job has your customer hired your product to do? His model boils down to this quote:
“When we buy a product, we essentially “hire” it to help us do a job. If it does the job well, the next time we’re confronted with the same job, we tend to hire that product again. And if it does a crummy job, we “fire” it and look for an alternative.”
This is a fantastic framework to start with, but I have found it to be even more powerful when you combine it with Simon Sinek’s ideas from Start with Why. When combined, these two tools create what I call The Ladder of Needs.
The Ladder of Needs
The ladder has three rungs, read from the bottom up:
Let’s see this framework in action for a few companies by reading up from the bottom of each ladder. [Note, these examples are all for the initial incarnation of the company and represent my own perspective.]
Understanding the why behind your product is the fastest way to sell your vision, but more importantly, it also allows you to plan a more strategic product roadmap. It allows you to consider whether your initiatives are a new ‘what’, improvements to ‘how’, or product extensions that further support your ‘why’.
This ladder of needs also shows a path to some of the more genius product moves we have seen. And luckily, it’s a repeatable technique that you can apply for developing your own product roadmap. Let’s look at Amazon and Rent the Runway for two examples:
What is your product’s ‘why’?
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The three levels of strategy is a framework used for strategic planning that dates back to the 1960s. Since then the business environment has dramatically changed requiring leaders to adopt new approaches.
The three levels of strategy is based on a top-down strati planning process. But in today’s fast-paced and more complex world there are several problems with the top-down approach as demonstrated by these statistics:
Research from the Economist Intelligence Unit found that
61% of executives admit their organisations often struggle to bridge the gap between strategy formulation and implementation.
The case studies tell the tale: Nokia, Yahoo, Blockbuster, and Kodak are just a few of the companies that ended up on the scrap heap.
A recent study by McKinsey found that the average life-span of companies listed in Standard & Poor’s 500 was 61 years in 1958. Today, it is less than 18 years.
Furthermore, McKinsey believes that, in 2027, 75% of the companies currently quoted on the S&P 500 will have disappeared.
Many corporates are failing to adapt to market conditions and disruptive competitors.
Over the last 20 years,
52% of companies on the Fortune 500 list have disappeared due to various factors like technological advancements, poor strategic decisions, and market shifts
Research shows that incumbents fail because leaders do not have rigid mindsets, do not have capabilities that translate market intelligence into operational changes, and of course rigid strategic plans.
The old top-down, hierarchical strategy plans are redundant and need to change to be more agile and adaptive.
Why? First, the environment and context of business is very different to when this strategic framework was developed.
Second, organizing today is very different and requires more agile and adaptive structures to enable more bottom-up and top-down planning such as OKRs.
But it is not just planning that has to change.
It is the fundamental way of organizing a firm that has to shift to meet the complexity of today’s complex business environment.
The New Paradigm For Corporate Strategy – Ecosystem Organizing
The New Paradigm of Strategy
Today’s business environment is fast-paced, unpredictable, and constantly evolving. Strategy is no longer a fixed plan but a flexible, adaptive approach to navigate rapid market changes.
Companies face global competition and must respond to shifting customer demands, technological advancements, and economic uncertainty.
Digital technologies have reshaped how organisations operate, from AI and cloud computing to data analytics and automation.
This digital transformation allows for greater efficiency and innovation but also challenges organisations to stay agile and integrated.
Cross-functional teams, real-time decision-making, and collaboration are now crucial to breaking down silos and responding swiftly to the market.
The traditional way of organizing as a hierarchy is giving way to more dynamic models, such as ecosystem structures, which allow for faster decision-making, more adaptive operations, and a greater capacity to innovate.
As an example, A notable example is Haier, the Chinese appliance giant, which transformed its operations through the “Rendanheyi” model.
This approach breaks down the company into small, independent micro-enterprises that operate like startups.
Each micro-enterprise is responsible for its own P&L, and employees are encouraged to act as entrepreneurs. The focus is to structure the whole organisation around the customer: to enable zero distance to the customer.
The Ecosystem Organization
Ecosystem organising is not just a trend; it’s the future of corporate structure. Firms that fail to shift to this model within the next decade risk obsolescence. By decentralising operations into self-managed, agile micro-enterprises, companies unlock adaptability, speed, and innovation—key to thriving in today’s market.
Traditional, siloed hierarchies cannot compete with this level of flexibility and customer-centric focus. Like Haier, those embracing ecosystem organising will lead, while those clinging to outdated structures will fall behind, struggling to respond to rapid change and market demands. The choice is simple: adapt or fail.
The Difference Between Strategy and Strategic Planning
A Plan Is Not A Strategy
It’s important to distinguish strategy from strategic planning.
Strategy involves defining long-term goals and the approach to achieve them.
Strategic planning, on the other hand, is more systematic, focusing on the procedures and frameworks to put the strategy into action.
Introduction to the Three Levels of Strategy
The concept of the “three levels of strategy” comes from theories in strategic management by scholars like Igor Ansoff and Alfred Chandler in the 1960s.
Ansoff’s work, Corporate Strategy, identified corporate, business, and functional strategies as a multi-layered approach to strategy planning.
Chandler’s Strategy and Structure explored how company structures support strategic goals, focusing on a layered view.
Michael Porter later clarified the differences between corporate and business strategies in his work on competitive advantage, shaping the framework still used in both business and academic settings today.
Strategy shapes organisational choices and aligns resources effectively. Michael Porter defined strategy as “the creation of a unique and valuable position involving a different set of activities.“
In contrast, Henry Mintzberg argued that strategy often emerges through unplanned actions and adjustments rather than precise planning. Both perspectives highlight that strategy is not static; it must evolve based on internal and external influences.
The Three Levels of Strategy: Corporate Strategy
Corporate strategy shapes a company’s overarching direction, defining its purpose, structure, and allocation of resources. Alfred Chandler’s principle that “structure follows strategy” suggests that a company’s structure should support its strategic priorities.
Vision, Mission, and Values
A corporate vision sets the desired future state, while the mission clarifies the company’s current purpose.
Values guide decision-making and behaviours, influencing both culture and strategy.
For example, Apple’s emphasis on innovation shapes its product strategy, while Patagonia’s sustainability-driven mission sets a foundation for social impact.
Culture’s Role in Strategy
Corporate culture either drives strategy or poses challenges to its execution.
Edgar Schein described culture as shared assumptions guiding behaviour. When aligned with strategic goals, culture becomes a powerful enabler.
Under Jack Welch, GE had a culture focused on results and growth. However, as markets evolved, this same culture became rigid and limiting. This shift shows that culture must evolve with strategy to remain effective.
Portfolio Management and Resource Allocation
Portfolio management optimises the mix of business units, ensuring resources like capital, talent, and technology support strategic goals.
Tools like the BCG Matrix help categorise business units based on their market position, guiding decisions to invest, divest, or hold.
For example, Johnson & Johnson balances has a diverse units across pharmaceuticals, medical devices, and consumer products to minimise risk and drive growth.
Resource allocation remains critical.It’s important to place the right bets and focus resources in the right areas.
McKinsey research found that dynamic reallocation boosts shareholder returns by 30%. However, many companies struggle to adapt their resource distribution to evolving market needs, often leading to stagnation.
CSR and Sustainability as Strategy
CSR and sustainability have taken a more central part of corporate strategy. Aligning CSR activities with core business objectives can enhance brand reputation and foster customer loyalty.
Unilever’s “Sustainable Living Plan” is a strategic example, integrating social responsibility to drive both profit and social benefits.
Roadmapping
In simple terms it helps break down complex goals into actionable steps, facilitating clear communication across teams.
Roadmapping in corporate strategy provides a visual pathway to achieve long-term goals. It outlines key milestones, timelines, and the initiatives necessary to realise strategic objectives, ensuring that all business units align their activities with the corporate vision.
A roadmap offers both a guide for execution and flexibility for recalibration as market conditions or priorities change.
Partnerships and Ecosystem
Partnerships and ecosystems enable firms to tap into resources that would otherwise be costly or time consuming to develop. Moreover, they often incur additional costs and resources that sit outside the core capabilities of the firm.
Forming alliances with other organisations, such as suppliers, technology firms, or industry peers, provides access to new markets, technologies, and shared resources.
For instance, Apple’s ecosystem relies on partnerships with app developers, manufacturers, and suppliers, enhancing its product value and reach.
Companies can create dynamic value chains, leverage complementary strengths, and increase innovation potential. But they can also grow the market beyond their own capabilities and increase the ‘pie’ rather than simply compete for a slide of it.
Mergers and Acquistions
M&A is a key aspect of corporate growth strategy, often aimed at entering new markets, acquiring new technologies, or consolidating market share.
Acquisitions enable quick access to new capabilities or customer bases, while mergers can create synergies and operational efficiencies.
Mergers and acquisitions (M&A) also drive growth, but come with risks – 70% of M&A deals fail to meet their intended value due to poor integration or strategic misalignment, according to a Deloitte report.
The Three Levels of Strategy: Business Strategy
Business strategy focuses on how a specific unit competes in its market, delivering value and differentiation.
It asks: “How do we compete here?” This level of strategy aligns with corporate goals but remains adaptable to market needs, a concept first introduced by Igor Ansoff.
Strategic and Financial Flexibility
Strategic degrees of freedom give units the flexibility to change market positioning quickly.
Netflix’s pivot from DVD rentals to streaming and content creation is a good example of this sort of adaptability.
Changing business priorities also requires changes in financial flexibility. This is where dynamic budgeting and pricing strategies allow business units to adjust to market changes effectively.
Defining the Playing Field and Growth
Another aspect of the business strategy level is identifying the right market segments where it is possible to gain a competitive advantage.
Strategies at the business level focus on market penetration, product development, and diversification to expand a business’s reach.
Amazon’s entry into cloud computing, groceries, and entertainment shows how it harnessed the core capabilities to expand into new markets.
Developing The Business Strategy
Building a strong business strategy requires careful analysis, alignment with corporate objectives, and a readiness to adapt.
Functional strategy focuses on optimising specific business functions like marketing, finance, operations, and human resources to support broader business unit and corporate strategies.
Each function develops its strategy to ensure alignment with higher-level objectives while enhancing its operational effectiveness.
Aligning Functional Goals with Business Strategy
A key element of functional strategy is ensuring that departmental goals align with the business unit’s competitive positioning.
For example, if a business strategy focuses on creating a differentiated value proposition through its customer experience, then the marketing function must prioritise brand positioning and customer engagement tactics.
Meanwhile, HR would focus on building customer-centric skills within the workforce. Hence, the synergies across the functional strategies complement each other and contribute to achieving the overall business units strategic goals.
Process Efficiency and Resource Allocation
Functional strategies also concentrate on process efficiency and resource allocation.
For example, the operations function aims to optimise production processes, reduce costs, and manage supply chains to support product availability and quality.
Finance functions focus on managing cash flow, capital investments, and risk to align with corporate growth targets. Therefore, cross-functional coordination becomes critical, as improvements in one area can affect the performance of others.
Functional Strategy as a Driver of Innovation and Agility
It is important to recognizse that often the people at a functional level have the knowledge, skills, and insights to that enable innovation ideas to surface.
Functions that remain adaptable and forward-thinking are better positioned to support the business’s overall ability to respond to market changes and strategic shifts.
Measuring Performance and Impact
Functional strategies need to have clear performance metrics to measure progress and impact on overall corporate goals.
KPIs (Key Performance Indicators) and OKRs (Objectives and Key Results) are commonly used frameworks to track achievements and identify areas for improvement – see post on OKR vs KPI.
This ongoing assessment ensures that functional activities contribute to business unit goals and, in turn, the corporate strategy.
A New Level 4 – The Operational Strategy
Defining Operational Strategy in the Digital Era
The Operational strategy is focused on transforming business objectives into efficient, high-quality processes.
In the context of the todays fast-paced digital era, this transformation heavily relies on the integration of technology and that means organisations need to quickly adapt and evolve based on the changes in markets and customer demands.
Digital transformation is a now a core capability and focus requiring a distinct strategy to ensure fit with the overall vision and mission of the firm.
Digital Transformation and Its Impact on Operations
Digital transformation leverages technologies like artificial intelligence (AI), the Internet of Things (IoT), blockchain, and cloud computing can enhance operational efficiencies, customer experience, and business scalability.
According to MIT Sloan, 89% of executives recognise the need for a “digitally empowered organisation.”
However, digital transformation is not just about adopting individual technologies; it is about achieving synergy between multiple digital tools to transform core business activities.
The Multiplier Effect: Blockchain, IoT, and Platforms
The convergence of technologies like blockchain and IoT can create a “multiplier effect” on operations.
For example, in supply chain management, IoT sensors can track product movement in real-time, while blockchain ‘logs’ the movement and critical checkpoints and also verifies transactions. This provides automation, transparency of tracking shipments.
Companies like Walmart now use blockchain to track produce from farm to store so that they have full supply chain transparency.
Platform Ecosystems as Operational Strategies
Platforms are a powerful operational strategy which allow companies to create new and innovative products and services.
For instance, Apple’s App Store provides a platform for developers to create innovative apps, expanding the value of Apple’s devices without Apple developing every feature itself.
This model leverages external capabilities, allowing developers to build, test, and distribute apps at scale. The App Store creates a diverse ecosystems which enhances Apple’s capabilities and multiplies its innovation capability by harnessing millions of developers worldwide.
Industry 4.0: Transforming Production and Manufacturing
Industry 4.0 represents the next wave of operational transformation.
Whilst previous waves of technology have focused on functional improvements to the firm and the customer experience, Industry 4.0 connects demand with supply and also enahnces the capabilities to innovate and drive huge efficiencies.
Industry 4.0 leverages technologies like robotics, AI, IoT, and smart manufacturing to create highly automated and intelligent production systems.
A 2021 Deloitte report highlights that companies implementing Industry 4.0 practices improve their productivity by up to 25%.
For example, Siemens utilises smart factories where machinery and systems communicate autonomously, reducing errors, improving flexibility, and increasing production speed.
A New Level 5 – Microfoundations Strategy
Microfoundations are the underlying individual actions, decisions, and routines that drive an organisation’s overall capabilities and performance.
Microfoundations are now the “how” and “why” behind firms gaining a competitive edge.
They turbocharge decision-making, improve performance, and drive adaptability at the ground level.
By focusing on the individual actions, skills, and decisions of employees, companies can directly link daily behaviours to strategic goals.
This approach enhances agility, empowers quick and effective choices, and accelerates the ability to respond to market shifts.
Simply put, mastering microfoundations is key to unlocking organisational potential and fuelling sustainable growth.
Microfoundations Level and AI
At the microfoundations level, decision-making quality is paramount to strategy execution.
AI is increasingly transforming this layer by enhancing data-driven decision-making, improving employee productivity, and optimising ground-level behaviours.
McKinsey reports that AI adoption can improve decision accuracy and efficiency by 10–20%, enabling better alignment with overall corporate and business strategies.
AI in Operational and Behavioural Improvements
AI technologies like machine learning (ML), natural language processing (NLP), and predictive analytics are transforming decision-making. They provide real-time insights, helping businesses make quicker, data-driven choices. In customer service, AI-powered chatbots handle routine inquiries, freeing human agents for complex tasks, boosting efficiency, and enhancing customer satisfaction.
In sales and marketing, AI analyses customer behaviour, personalising recommendations to drive engagement. Salesforce’s AI-based CRM helps sales teams make informed decisions fast, aligning sales strategies with broader goals.
In production, AI optimises operations through predictive maintenance, reducing equipment downtime and improving quality control. For example, General Electric’s Predix platform uses AI to monitor equipment health, ensuring cost control and efficiency.
The Problem with The Three Levels of Strategy
The Historical Perspective
If we rewind to the 1960’s, businesses were built for stability, not speed. Large, monolithic companies managed every part of their value chain, relying on manual processes with limited automation. These structures required vast workforces, leading to rigid hierarchies and big, functionally driven departments.
Strategy flowed strictly top-down, with long-term plans set in stone, as the market environment was predictable and stable. Siloed functions like marketing, finance, and operations operated in isolation, hindering communication and collaboration.
The primary focus was on economies of scale, driving cost efficiency and mass production, but sacrificing flexibility and innovation. This approach ensured control but left businesses slow to adapt to change.
Unlike the rigid structures of the past, today’s businesses must be nimble, customer-centric, and ready to pivot as needed to stay competitive.
