Achieving internal fit within a business strategy is essential for businesses to achieve their goals and
objectives, optimizing their organization to the best outcome. Internal fit refers to the alignment of
various elements of a company's strategy, including its goals, objectives, resources, and operations. To
achieve internal fit, businesses need to use various tools such as Activity Systems and Value Chains.

For an article on Internal, External and Dynamic Fit click here.
https://www.linkedin.com/pulse/key-tools-frameworks-strategic-success-chris-thomas/

An Activity System is a framework that helps to identify the key components of a business’s strategy and how they work together to achieve internal fit. It provides a holistic view of the business’s strategy, including the various components that need to work together to achieve the desired outcome. The system is used in various contexts, including new product development, marketing campaigns, and business expansion. To create an effective system, it’s essential to define the business’s goals and objectives, identify the key components of the strategy, conduct a detailed analysis of the business’s resources and operations, assign tasks, and monitor progress regularly.

It is important to align the activity system, its activities and strategic goals as it can be that one strategic goal conflicts with another. One example would be to aspire being the supplier with the best quality and want to have the lowest cost to expand margins, or the desire to be first to market in developing technologies and are restricting research. 

The Value Chain is a series of activities that a business performs to deliver a product or service to its customers. It includes all the steps involved in creating, delivering, and supporting a product or service, from the initial raw materials to the final delivery to the customer. The value chain helps businesses identify the specific activities that add value to the product or service and those that do not. By optimizing each activity in the value chain, a business can achieve internal fit within its strategy, ensuring that all the various elements of the strategy are aligned and working together towards a common goal.

To achieve sustainable success in a competitive market, businesses should look to have multiple competitive advantages for their products. Relying on a single competitive advantage is risky because it can be easily copied or become outdated (remember Kodak?). By having multiple competitive advantages, businesses can reduce their risk and increase their chances of success.

A silver bullet approach is the belief that a single idea, product, or strategy will solve all of a company’s problems and lead to success. This approach is risky because it ignores the complexity of the business environment and the need for a comprehensive strategy. It also creates the risk of overreliance on a single idea, product, or strategy, which can lead to failure if it doesn’t work out as expected.

If you have a patent on a problem, this is great until the patent expires – what do you do then?

In conclusion, to achieve internal fit within a business strategy, businesses need to use various tools such as Activity Systems and Value Chains. These tools are interdependent and rely on each other to achieve internal fit. An Activity System helps to identify the key components of the strategy and how they work together to achieve internal fit, while the Value Chain helps businesses identify the specific activities that add value to the product or service and those that do not. To achieve sustainable success in a competitive market, businesses should have multiple competitive advantages and avoid relying on a silver bullet approach.

How to get started?
Implementing an activity system and value chain in a small business can significantly bolster strategic alignment and enhance competitive advantage. Here’s a simplified yet professional action plan for achieving this:

Activity System Implementation

• Identify Core Activities: List all the activities your business engages in, from production to marketing to customer service. Understand how each activity contributes to delivering value to your customers.
• Map Interactions: Create an activity system map to visualize how these activities interact and complement each other. This helps in identifying synergies and potential inefficiencies.
• Assess Internal Consistency: Ensure all activities are aligned with your business’s overarching strategic goals. This includes evaluating whether your resource allocation, processes, and organizational structure support these activities effectively.
• Identify Competitive Advantage: Analyze the activity system to determine which activities or combinations thereof give your business a competitive edge. Focus on strengthening these areas.
• Continuous Evaluation: Regularly review and update your activity system map to reflect changes in your business strategy or market conditions. This will help maintain internal consistency and adapt to external shifts.

Value Chain Implementation

• Understand the Value Chain: Break down your business operations into primary (e.g., inbound logistics, operations, outbound logistics, marketing and sales, service) and support activities (e.g., procurement, technology development, human resource management).
• Analyze Each Component: For each activity in the value chain, assess how it adds value to your product or service. Identify areas of strength and weakness.
• Optimize for Efficiency: Look for opportunities to reduce costs or enhance differentiation within each activity. This could involve automating processes, improving supplier relationships, or investing in technology.
• Enhance Linkages: Examine the connections between activities to ensure they are coordinated effectively. Streamlining these linkages can lead to cost savings and better customer experiences.
• Align with Strategy: Ensure that your value chain supports your overall business strategy. This means aligning activities with your strategic objectives, whether they focus on cost leadership, differentiation, or niche targeting.

Implementation Steps

• Workshop and Training: Conduct workshops with key team members to explain the concepts of activity systems and value chains. This ensures everyone understands their role in implementing these frameworks.
• Collaborative Mapping: Work collaboratively to map out your business’s activity system and value chain. This promotes buy-in and ensures a comprehensive understanding of how each part of the business contributes to overall strategy.
• Monitor and Adjust: Set up a system for ongoing monitoring and adjustment. Regularly review both the activity system and value chain against performance metrics and external changes in the market or industry.

Things to consider

Implementing an activity system and value chain is not a one-time task but a continuous process of alignment and improvement. These frameworks should guide strategic decisions, helping your business to remain agile, efficient, and competitive in a changing market.

#InternalFit #BusinessStrategy #ActivitySystems #ValueChains #CompetitiveAdvantages #SustainableSuccess #Strategy