Strategy: A Widely Misunderstood Business Term

By October 11, 2018Strategy

Strategy is about setting yourself apart from the competition. It’s not a matter of being better at what you do – it’s a matter of being different at what you do.” Michael Porter

There’s a lot of bad ‘strategy’ efforts out there.  Here’s what you should avoid.

bizstrat

As I have shifted the focus of Apex Consulting to focus on coaching via the Four Decisions Methodology, I am amazed at what passes for ‘Strategy’ in most businesses.   Many companies struggle to get this right.  In addition, a quick google search of ‘business strategy’ makes it clear that many writers and analysts – so called business experts – don’t have a good grasp of the concept either.

What is Strategy?

Let’s start by defining strategy in basic terms.   My two favorite definitions are from Michael Porter (Harvard Business School) ;

“Strategy is the creation of a unique and valuable position involving a different set of activities (from competitors)”

And from Jack Welch (author and former CEO of General Electric)

“Strategy is not a lengthy action plan, it is the evolution of a central idea through continually changing circumstances”

So, strategy must be differentiating and evolutionary.

Poor Definitions of Strategy

Years ago, I was involved in a conversation where my friend Eric, from McKinsey Consulting, was asking a number of us who were running businesses about our strategy.  In response to “low price”, he quickly responded “That’s not a strategy”.    That got me thinking – could that be true?   Is low price ever a strategy?  What about WalMart?  The real answer is complex.  The short answer is that if you choose lower price at part of your strategy, you will need to develop additional strategic components to create an overall strategic plan.

Another answer I often hear when leaders are asked about their strategy is some version of “Quality”.  Well, let’s test that using the definitions above….does everyone else in your space aspire to high quality?   If so, this is NOT differentiating.   And, I would also suggest that your business’ quality does not evolve via changing circumstances.

Let’s look at some other flawed concepts of strategy

  • Our strategy is to internationalize
  • Our strategy is to lead in R&D
  • Our strategy is to grow by 50%
  • Our strategy is to be the world leader
  • Our strategy is to provide the best product/service

To each of these, I would ask “Why?”  And “to whose benefit?”   It is critical not to confuse strategy and tactics.  Both are necessary (and they are often related) but they are absolutely different.

OK, so now what?

Obviously, it’s easy to build a weak strategy or a plan that is not even a strategy at all.  What about building a great strategy?  Well, it’s basic but not simple – and I’ll show how it can be done well in my next blog later this month.

If that’s not good enough for you and you’d like to ask a direct question….or if need to develop a great strategy ASAP, email me at bob@apex-consulting.biz and I’d be glad to help you out.

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