Uttering the word “strategy” in most business circles generates many different reactions, few of them positive or even interested. That’s because for most of us, the corporate strategic planning process is akin to some strange ritual that happens behind closed doors, if it happens at all, and the result is often of a mystical nature to most employees. Not surprisingly, less than 10 percent of strategies effectively formulated are effectively executed. Do not despair because strategy is a difficult concept to master. Maybe the strategy development process suffers from the fact that few can explain what strategy is. I try to shed some light on the true nature of strategy in the coming paragraphs, with the hope that we should be able to articulate it clearly if we know what it is, and better yet, execute it successfully.
Regardless of how a company’s strategy is generated, it constitutes one of the most important responsibilities of an organization’s senior management. Few military chiefs of staff would ever consider going to war without a strategy; the same holds true for a company’s executive team leading the organization into business. There are several schools of thought on the most appropriate method to articulate strategy. The selected method usually depends on the organization’s culture, on its leader’s style; there are no fail-safe recipes when it comes to defining the elements of a plan that will ensure the organization’s success for many years to come… However, experts agree that the key to success lies in the rigorous and disciplined execution of the strategic plan.
The subject is not new. It has been treated extensively by business management experts such as Dr. Michael Porter, Mintzberg, Drucker. Before them, strategy has received much attention in military circles dating back to Sun Tzu and ancient Greece. A cursory Internet search on the topic will reveal hundreds (possibly thousands) of pages, few of them providing absolute clarity and guidance for those eagerly looking to know. Michael Porter authored two seminal articles on the subject that provide a strategic foundation: What is Strategy HBR November – December 1996, and The Importance of Being Strategic.
Strategy’s focus must be the organization’s uniqueness at delivering value from its customers’ perspective – achieving differentiation. “Strategy is being unique in delivering value to your chosen set of customers to meet their chosen needs.” Its intent is to deliver superior long-term return on the organization’s capital (investment). A successful strategy would maximize the company’s ultimate performance, and its ability to invest dollars to maintain its competitive advantage. Undifferentiated organizations are challenged on every front, constrained to entertain a competitive war of attrition where proponents use essentially the same tactics, suppliers, competencies and technologies to trade blows until both sides limp home, weary from battle, barely surviving, opening the door for the next competitor waiting in the wings.
In the first article, Porter explains that “strategy is the creation of a unique and valuable position, involving a different set of activities [from the competition]. If there were only one ideal position, there would be no need for strategy. Companies would face a simple imperative – win the race to discover and pre-empt it. The essence of strategic positioning is to choose activities that are different from rivals’.” We’ve seen this in many industries. In the second article, Porter goes to great lengths to separate operational effectiveness from strategy – both are essential but they are not synonymous. “However, operational effectiveness is unlikely to lead to a competitive advantage. Why? Because everyone starts to look alike – something I call “competitive convergence. Best practice competition is very hard to win, because it is constant imitation. If you don’t do it, you’ll fall behind. But just doing it doesn’t guarantee a win.” Unfortunately for many of today’s organizations, they cannot escape the spiral caused by the never-ending application of the latest best practices to cut costs. Confused about strategy, they fail to differentiate themselves; they cannot maintain their competitive advantage and face day-to-day trench warfare without direction, seeing their market share and their profitability erode, and their ability to invest in the future of the organization evaporate.
Establishing an organization’s strategic direction, will remain the most difficult and scary of executive responsibilities – “It requires hard choices.” Once a strategy is established, much of the organization’s management’s attention must be devoted on its execution. Strategy execution must transcend the functional boundaries; it’s a matter of alignment and overall collaboration. Just like the conductor who matches the efforts of the strings, the winds, the percussion and the brass elements of the orchestra to deliver a perfect symphony, the chief executive officer must orchestrate the different activities of the corporation – sales, marketing, production, purchasing, shipping, customer service – in a seamless delivery of value for its customers. “Companies with strong fit among their activities are rarely inviting targets. Their superiority in strategy and in execution only compounds their advantages and raises the hurdle for imitators. When activities complement one another, rivals will get little benefit from imitation unless they successfully match the whole system.”
If it all sounds complicated and confusing, do not despair. Few leaders ever design a fail-safe strategy in a single attempt. It’s not a document we dust off and revise at the same time every year, only to return it to the shelf, out of the way of conducting day-to-day operations. Much like any other planning activity, strategic planning requires good information, clarity of vision and purpose, well-defined objectives, outstanding communication and solid risk management. More importantly, it must be executed with discipline within a framework that allows for regular situational assessments; the battlefield is never static – customers’ needs change, new competitors emerge – and requires both flexibility and adaptability. When the organization’s performance falters and the casualty count climbs, look to strategy execution first. Strategy execution must remain at the top of the organization’s priority list. Its success will depend on the degree of engagement of everyone in the organization and on the ability of its leaders.
In my research in various blogs and web pages, I came across some interesting nuggets of information that I believe could help all of us understand the topic better. I provide them here unedited:
Five tests of a good strategy
1. A unique value proposition compared to other organizations
a. A novel value proposition can grow the pie/expand the industry
2. A different, tailored value chain
3. Clear trade-offs, and choosing what not to do
4. Activities that fit together and reinforce each other
5. Strategic continuity with continual improvement in realizing the strategy
Miscellaneous definitions of strategy…
- From Sun Tzu
“Strategy is not planning in the sense of working through an established list, but rather requires quick and appropriate responses to changing conditions.”
“Tactic without strategy is the noise before defeat.”
- The dirty little secret of strategy creation is that there is no theory of strategy creation. Strategy has to come out of a creative process conducted by thoughtful people.
- Strategy is constructing something unique from the same set of building blocks your competitors have.
- Strategy is foresight (and knowing what to do with it).
- Strategy is the art of creating advantage.
- Finding patterns in chaos.
- In a world of increasing noise and instant gratification, strategy is about being clear on the core values you stand for so people get a chance to remember you.
I wish you much success in your strategic planning efforts. Regardless of your role in the organization, strategy is your business. Fundamentally, everything we do as employees must support strategy; ensuring it does is everyone’s responsibility. Taking strategy outside the boardroom, communicating its essence to the entire organization, and allowing creative and innovative input, should ensure clarity of purpose and strategic alignment. As was mentioned earlier, strategy is hard! But it’s essential to the long-term success of the organization. Enjoy!
Michael Porter, What is Strategy, HBR November – December 1996
Michael Porter, The Importance of Being Strategic, New Perspectives)
What is strategy, and does it matter? By Richard Whittington
“Are you sure you have a strategy?” Donald C. Hambrick and James W. Frederickson, Academy of Management Executive, 2001
Balanced Scorecard, Kaplan and Norton
Alignment, Kaplan and Norton