Does the poster at the left describe how your organization thinks about strategy? When I speak with managers and executives about the topic of strategy, (or when I ask a group to describe during a workshop what a strategy is) I find there is a lack of understanding about what strategy is, and why we need to create one. If I am honest about it, I think my understanding of strategy was pretty superficial at the time when I first was taught it during my MBA program, and I think perhaps I was not alone. Many of us need to re-learn the basic concepts.
I find often people can’t describe the strategy, or translate it into what they should do within their departments that supports strategy execution. For many of us, strategy is an annual event that feeds information upward together with a set of budgets and pro-forma financial statements.
What Strategy is, and Is Not
Ask yourself if YOU can define what strategy is, in just a couple of sentences. Then, watch this brief video clip featuring Michael Porter talking about what strategy is and what some of the main mistakes are that people make.
Would you change your definition after watching this?
Strategy Must Be in Response to External Forces
While it is fine to ask what it is YOU would like to do, or how you would like to create your own business. However, it must also be developed in response to those pervasive external forces (we call drivers) that are influencing your industry and your business. These forces are seldom ones we can control, but our understanding them helps us imagine what we must do in response.
Here is Professor Porter speaking about the five main forces that drive (or should drive) strategy. It has to do with understanding the external forces from competitors, suppliers and customers that drive profitability in your business.
How much do you know about your what things are driving not only you, but your customers, suppliers, and competitors as well?
You can’t Please Everyone
I don’t think I can think of any organization with unlimited resources (financial, or human). So, almost by definition, strategy is about making CHOICES between possibilities that define:
- What your products and services are (or not).
- What customers you wish to serve (or not) (all markets are consisted of segments that all want something a little different. In the airline industry, business travelers and personal vacation travelers are distinctly different. We want to buy from people who UNDERSTAND us, and this is much easier to do and to project when you are deliberate about who you are serving.)
- How you create value for those you are serving (some people call this your value proposition. It answers the question “why would anyone want to buy from you?”)
- How you will choose to deliver your value (this is not just a set of operating approaches, but reflects a set of deeply held values about how you want your organization to be)
This last point helps inform your thinking about tactical execution. Remember this quote:
“Good tactics can save even the worst strategy. Bad tactics will destroy even the best strategy.” —General George Patton
Deciding on what business you are in is not that difficult. The hard part is exerting the organizational self-discipline to risk being drawn into new product-market segments without deliberation and purposeful effort. When you end up chasing all opportunities that seem like could make a profit, you can end up unfocused, and stretching scarce resources in too many directions. The best way to do a poor job with any one is to try to do a good job for everyone.
In addition to knowing what business you are in, the second issue has to do with what you want your brand to be about. (How do you want customers to see and think about you?) You can choose to compete based on being the highest quality, lowest cost, best service provider, or the most cutting edge technology provider, as some examples. Wal-Mart and Nordstrom are both mass merchandisers, but provide two very different shopping experiences, and appeal to different customer demographics. Here again, there is not necessarily any right or wrong choice, but you need to make one, and then act consistently with it. If your goal is to be the low-cost provider, you may not want to be investing in elaborate corporate jets, or luxurious store decorations.
It is a team sport
It is fine to have senior execs with a strong vision, but even these people have difficulty getting everyone top-to-bottom understand it in the same way – and so, execution suffers. A better approach is to engage people from across your organization in the process. It can work if top execs define what, and ask the rest of the team to define HOW. However you approach it, I think lower level people will almost always surprise you if you let them.
Not an Annual Event
If you are living your strategy every day, then it is unlikely that strategy can be an annual event at budget time. Strategy is an organic thing. The second you publish your strategy, the world is changing in ways you may not have anticipated. So, the strategy must be flexible, and subject to revisiting whenever new things are happening that cause you to question some of the assumptions upon which it was initially based.
Requires Thinking and Action TOGETHER
One of my favorite strategy quotes comes from General Erwin Rommel when talking about battle plans (the Army version of a strategy is: “Every [strategy] is a good one, until the first shot is fired.” This is true in business as well. We form a plan and begin to execute it. But instantaneously, the market shifts, competitors react to our moves and the situation us highly dynamic. So we need to think about strategy as being a circular, not linear, process. We learn as we go, and continue to adapt tactics and strategies in real-time. Think – plan – do – learn – re-think . . . etc.
(Sometimes these classics are well worth re-reading. I hope some new flashes of insight will appear for you.)
What is Strategy , from HBR by Michael Porter
Strategy Safari, by Henry Mintzberg
What Strategy Is, by Balajhi Narayanasami, Business Week