What Is Strategy
As a wise person once told me, ‘‘definitions of strategy are like vitamins, you get one-a-day and most of them are hard to swallow.’’ Over the years, how many different definitions of the word strategy have you been exposed to? The definition of strategy is the subject of many articles and the cause of many debates. The word strategy is a vague statement that means different things to different people at different times. Much of the cause for debate can be explained as follows:
Many definitions of strategy not only attempt to define what a strategy is, but they also contain information regarding how a strategy is created, and what a strategy is expected to achieve.
For example, Michael Porter, in his article titled ‘‘What Is Strategy?’’ (1996), states that ‘‘strategy is the creation of a unique and valued position, involving a different set of activities.’’ Kenichi Ohmae, in his article titled ‘‘Getting Back to Strategy’’ (1988), states that strategy means ‘‘working hard to understand a customer’s inherent needs and then rethinking what a category of product is all about.’’ In his article titled ‘‘The Origin of Strategy’’ (1989), Bruce D. Henderson states that strategy is ‘‘a deliberate search for a plan of action that will develop a business’ competitive advantage and compound it.’’ In his book titled Strategy and Structure (1962), Alfred Chandler defines strategy as ‘‘the determination of the long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals.’’ Notice that each of these definitions of strategy address how a strategy is created or what a strategy is expected to achieve.
Historically, hundreds of strategists and organizations have used many different approaches to strategy formulation to achieve a variety of strategic objectives. As a result, organizations, consultants and academicians have, over time, given the concept of strategy literally hundreds of different situation specific definitions. The definitions may be appropriate given the specific situation, but rarely does one definition fit all situations.
To overcome the confusion created by this phenomenon, it is important to draw a clear distinction between a strategy, the process by which a strategy is created and its expected results. The distinctions can be drawn as follows.
A Strategy
A strategy is simply a plan. It is an executable plan of action that describes how an individual or organization will achieve a stated mission. A strategy is often perceived as being intangible, as there is nothing to touch and feel—there are no physical attributes associated with a strategy. A strategy is simply a plan—a plan that describes what an organization proposes to do to achieve a stated mission. Organizations often formulate company strategies, product and service strategies and strategies that drive operational, support and management processes.
Creating a Strategy
The process by which a strategy is created is referred to as a strategy formulation process. A strategy formulation process results in the strategy, plan or solution that is to be implemented. Such a process defines the steps to take to formulate what will hopefully be the optimal strategy or solution. The concept introduced in this book is classified as a strategy formulation process. It defines the steps that must be taken in order to produce breakthrough strategies and solutions. An effective strategy formulation process should enable an organization to create strategies and solutions that will strengthen its strategic position.
When individuals define strategy as ‘‘the art of devising plans toward a goal’’ or ‘‘the deliberate search for a plan of action,’’ for example, they are defining the process by which a strategy is created. They are not defining what a strategy is, they are defining the process of strategy formulation. It is for this reason that many individuals have difficulty distinguishing between a strategy as a plan and ‘‘strategy’’ as a series of actions that yield a plan.
The Expectations of a Strategy
The expected results of a strategy are dependent on the strategist, the organization and the situation for which the strategy is required. Strategies are intentionally developed for many different purposes and under a variety of conditions or situations. The desired results are expected to be different in each unique situation. For example, a strategist or organization may require a strategy that will ensure the organization achieves its desired competitive position, lowers its product cost, increases customer satisfaction, creates a sustainable competitive advantage, increases revenue or market share or accelerates the pace at which it delivers value. An organization may formulate a strategy for the purpose of improving company policy, a product family, a specific product or service or an internal process. In a non-traditional sense, a strategy may be required for hiring new employees, improving the product development process, pricing products and services, or selecting a target market or improving relations with suppliers or distributors. The expected results of a specific strategy are not mutually exclusive and depend on what is important to the strategist and the organization at the time the strategy is being contemplated. A company, in effect, executes a variety of strategies at many levels of the organization to serve a variety of purposes.
Making these distinctions when analyzing various definitions of strategy helps to clarify how a specific organization, consultant or academician perceives the role of strategy. The definition of strategy that is used by an individual provides insight into how they think the strategy should be created and what they expect the strategy to help them achieve in that situation.
Regardless of the definition of strategy that is used, an organization’s ability to strengthen its strategic position is dependent on one important factor—its ability to create the strategies that produce the desired results. An effective strategy formulation process is a prerequisite for success. An organization’s strategy formulation process, whether it is formal or not, is the mechanism by which its actions, investments and decisions are determined. This ultimately controls the amount of value an organization creates for its customers, stakeholders, stockholders and others. An ineffective strategy formulation process negatively impacts an organization’s rate of growth and overall competitive position. An effective strategy formulation process may in itself become a competitive advantage. This book is focused on the process of strategy formulation—a process that, when executed effectively, produces a plan that enables an organization to achieve its stated mission.
Over the years, organizations have learned to recognize the importance of creating competitive advantages and core competencies, competing on time, migrating value, crossing chasms and creating strategic intent. Organizations know what they need to accomplish. But what happens when an organization actually attempts to formulate a strategy, define a plan or make a complex decision? Organizations may know what results they are attempting to achieve, but do they know how to create breakthrough strategies and solutions that will enable them to achieve those results?
Ask yourself, within your organization, what processes are used to formulate strategy? How was the strategy formulation process developed or selected? Is a formal process used? What steps are taken to create a strategy? Do different parts of the organization define the concept of strategy differently? Do they have different strategy formulation processes? Are they effective? Do they consistently produce breakthrough strategies?
Since breakthrough strategies and solutions are not all that common, it is logical to conclude that something is preventing organizations from consistently creating them. What are the inhibiting factors? What obstacles are encountered when formulating an effective strategy or plan? What would happen if the obstacles were identified and overcome? We will soon find out. First, let’s examine the barriers that are preventing the consistent creation of breakthrough strategies and solutions
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I really liked your Information. Keep up the good work. Organization Design 2.0
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