What Is Strategy?
Strategy can be a confusing topic. Countless books and
articles are still being written explaining what strategy is
and how to do it. New strategy models are constantly being
developed and sold like snake oil as the cure for all
corporate ills. Early in my career, I watched an executive
off-site derailed over the confusion between a strategy and a
goal. Additionally, examples can found everyday where
companies struggle because they lack a clear understanding of
strategy.
Since strategy is such an important topic, people are afraid
to ask: “what is strategy” and “how do I do strategy”? This
article provides a simple definition of strategy, and outlines
various corporate activities associated with strategy. All of
these activities are happening everyday in organizations, but
most people lack an understanding of how these activities fit
together.
This articles doesn’t address the “art of strategy”, which is
how to choose the right strategy. Also, this article doesn’t
address why strategies fail in execution and how to improve
your success. The first step is to understand the basic
framework of strategy before tackling these other topics.
Simple Strategy Definition
Strategy is simply: how you intend to achieve your goals. The
four key components are:
Goals: a strategy needs a clear goal. You need to
clearly define what you are trying to accomplish. Your
goals are distinct from the strategy by which you wish
to achieve these goals. For example, some companies
state their strategy as “growing by 20%”. This is
actually a goal that they want to achieve, but it
doesn’t explain how they intend to achieve this goal.
Achieve: this is how a company intends to win. Winning
can be accomplished by deceit, flanking maneuvers,
overwhelming force, surprise attack, lowest cost, etc.
Most strategy models and tools fall into this category.
These models show you how to achieve your goals. The
classic strategy model is Michael Porter’s 5 Forces,
where an industry’s competitiveness and attractiveness
is assessed utilization 5 factors. These strategy models
guide decision-making by capturing a unique insight
about the world and by providing a simple framework to
understand the insight.
Intend: strategy requires an overt act of decisionmaking. If you accidentally discover a great innovation,
that isn’t a strategy. However, once you recognize the
innovation and begin to develop a plan to utilize the
innovation, then your activities are intentional and are
a strategy.
How: these are the activities necessary to achieve the
goal. Strategy requires marshaling the team, equipping
the team, placing them in position and giving them
execution orders. Without understanding the activities
necessary to achieve the goal, a strategy is simply an
idea.
Strategy in Business
Within organizations, numerous formal activities are part of
the strategy process. Below is a summary of the primary
activities involved with strategy. These activities are
normally performed by some combination of the CEO, finance
organization, corporate development, or marketing. BU leaders
and product managers engage in similar activities for their
respective organizations.
Strategy Objectives (Goals)
Vision. The CEO articulates a vision for the company,
establishing its long-term direction. The vision may be
formalized in documents or may be ascertained from the
CEO’s speeches and talking points.
Mission Statement. The mission statement articulates a
variety of core principles about the organization, such
as its purpose and core values. This informs the
employees and the public about what is important and
where to focus their energy. For example, many mission
statements declare a customer centric focus to the
company.
Corporate Goals/Priorities. The CEO sets strategic
priorities for the next year and coming years. These
priorities focus the company’s attention and resource
allocation. Some CEO(s) prefer setting “big hairy
audacious goals” forcing a company to stretch to achieve
these stretch goals. The priorities usually establish
3-5 new projects or things that must get done for the
year. For example, a priority can be entering an
emerging market segment or cutting 10% for the operating
expenses.
Strategy Development (Achieve)
Industry Landscape. As part of strategy development,
companies assess the competitive landscape and assess
their positioning in the market. Getting a realistic
assessment of the industry and competitors is essential
for knowing how to win. For example, if your company is
in a highly competitive market with a slow growth rate,
your company may look to diversify into different
markets. On the other hand, if you are the market leader
in a high growth market, your company may focus efforts
on capturing more market share and consolidating your
position in the market through M&A.
Market Segmentation. Companies assess where they can
position themselves (play) in the market. By segmenting
the market, a company is assessing whether it can
discover any patterns and opportunities. The market
segmentation can be by customer, geography, white space,
vertical, emerging technologies or other segmentations.
A detailed analysis of the different segmentations is
essential and can reveal insights into how to attack the
market.
Competitive Advantage. Companies decide how they will
compete, i.e., the low cost leader, new product
innovator, entire solution, etc. The competitive
positioning will drive the corresponding activities,
such as marketing, financials model, product design, and
all other related activities. A unique competitive
advantage will significantly increase a company’s
chances for success.
Core Capabilities. Companies assess their core
capabilities to isolate what makes them unique. These
capabilities can be the distribution model, the sales
model, the engineering capabilities or anything in the
organization. Identifying core capabilities enables a
company to assess how they won and provides valuable
insights for potential expansion plans.
Other Models. Countless other models exist for strategy
development. These models cover every imaginable
scenario, such as growth options, creating a new product
market, M&A strategies and countless others. All these
models are providing some insight into how to achieve
your goals.
Strategy Management (How)
Corporate Roadmap. To enable a winning strategy,
companies need to establish a corporate roadmap as the
execution plan. This process ensures that everyone
understands what it takes to be successful and their
role. A good corporate strategy will lay out all the
steps necessary to achieve the goals.
Functional Strategy. In functional organizations,
companies often have functional strategies for how they
will support the corporate strategy. This process
ensures that the functional teams understand what it
takes to be successful and their role in the corporate
strategy.
Strategic Planning. The strategic planning process is
essential for establishing financials metrics and budget
allocation. Strategic initiatives must be given the
funding necessary to be successful or else these
initiatives will likely fail.
Portfolio Management. With large and diverse
organizations, a core function of corporate strategy is
portfolio management. The business unit’s are individual
companies that need to be managed as assets. One of the
primary decisions is resource allocation among the
different BU(s), which includes setting the P&L
parameters.
With a basic strategy framework, you will significantly
improve your decision-making and execution by providing a
clear understanding of what you are trying to accomplish and
how to achieve these results. You will also understand how the
new strategy models fit into the overall strategy framework
and whether the latest models are relevant to your
organization.