Got strategy? 

If an independent consultant looked across all the relevant business plans and activities in a typical business, would a common or unifying approach be evident?  Would she be able to discern the general policy or theme used to select them for inclusion in its operations (as in, “based on what I’ve heard and observed, my sense is that your approach for competing in this market is….”)?

More than likely she would not because very few companies operate with a true strategy.  This is not only my experience, but is also that of many strategy experts who have written extensively about their work with companies around the world.  More often than not, when asked, leaders of these firms offered goals, actions, aspirations, etc. as their strategies.

For more personal evidence, consider these questions:

• Have you worked in a firm in which there appeared to be no rhyme or reason behind, no common theme or purpose running through the set of programs and activities being pursued?
• How often have you said or heard others comment, “What were they thinking?” upon hearing about a new promotion or tactic?
• How often has it seemed that some of the programs or initiatives underway not only didn’t align, but actually conflicted with each other in the market?

This is what the absence of a strategy looks like.

That most businesses don’t have a true strategy in place speaks not only to the wide-spread misunderstanding of the term, but also the level of work involved and the skills required to develop one.  Don’t get me wrong, many businesses have and continue to wrestle with the many elements of strategy.  What are often lacking are organized, deliberate processes and outcomes that result in a true, properly structured strategy that can be implemented across a company.

With all the marketing, channel, communications, etc. choices available to businesses these days it is more imperative than ever to have a real strategy—a single approach for selecting the set of actions that will best help you achieve your goals.  And since few, if any of your competitors will have one, that alone could be your most important competitive advantage.

Only ONE strategy

There can only be one strategy for a company or business unit to use in dealing with competition in a market.  Referring to almost everything under the sun as a strategy trivializes the importance of what a real strategy brings to the table.  Referring to only a real strategy as your business’s competitive strategy enables its singular importance and contribution to the business to be recognized and ultimately realized.  If all employees are aware of your competitive strategy and use it to guide their day-to-day decisions, operational focus and coordination are almost assured.  Quoting Michael Porter:

“The purpose of [communicating] a strategy is to align the behavior of everyone in the organization and to help them make good choices when they’re on their own…you want them to make the choice that fits the strategy.”

Understanding Michael Porter, 2012

Given the definition and purpose described here, it should be apparent that phrases like, ‘social media strategy’, ‘content strategy’, ‘e-mail strategy’, etc. are incorrect applications of the term.  There should most certainly be plans for each to describe the objectives and tactics to be used in support of the business’s competitive strategy.  But to say that each has its own strategy implies that they are allowed to define their own competitive problem to solve, and that each is essentially empowered to address its own competitive issue without consideration of what else is going on in the business.   It is not the case that your social media ‘strategy’ is competing directly against those of your competitors, but that is exactly what such use of the term implies.  This makes no sense.

Regardless of what anyone says, it’s a certainty that all manner of business and marketing ideas will continue to be mislabeled as strategies.  If you know the difference and act accordingly, then it’s not your problem.  However, if such misuse has left your company without a purposefully chosen overall approach to guide every employee’s decision making, then it is your problem, and that of your business.

For the beginning of this series, please click here.

What does a real strategy contribute?

Your strategy conveys how your business intends to compete to reach its goals.  It describes your approach to doing business—how you believe you must engage your market so that what your offer will be more highly valued than that of your competitors.

Operationally, a strategy is the policy used to consistently guide a business’s decisions and actions in a common direction. It is the filter through which all proposed plans, initiatives, tactics, etc. must pass to be approved.  If the suggested activity supports the strategy (or at the very least isn’t counter to it), then it can move ahead (albeit possibly dropped for other reasons).  If it points to needs, customers, products, services, promotions, distribution, communications, etc. out of line with the strategy’s direction, it is dropped from consideration.  Not actively using a strategy in this way effectively means a business is operating without a strategy—a cohesive approach for dealing with its competition—regardless of what it says in a PowerPoint deck.

A strategy does not state what actions will be taken—specific programs, activities, etc.  These are all part of a plan, and are chosen based upon what is needed to realize the strategy—those actions which will move you closer to your goals.  They are the execution tools for implementing the strategy, and not the strategy itself.

Although a strategy is an abstract concept, its business contributions are most certainly concrete:

• It ensures a business maintains its focus on only those actions which align with and support the acknowledged business challenges chosen to be addressed; more specifically, it:
  • Guides all business decisions
  • Identifies and ranks priorities
  • Coordinates activities—links them all together
  • Assures resources will be allocated in such a way that they build on each other and contribute to the same end result
  • It limits what choices management can make—it forces them to say no to implementing ideas, actions or otherwise good ideas (and sometimes walking away from ‘low-hanging fruit’) that do not support the chosen strategy and would misdirect and dilute their available resources, undermining the organization’s ability to meet its agreed upon goals
    • Many experts believe this is the most important contribution made by a real strategy; Michael Porter again: “The essence of strategy is choosing what not to do”
    • This is the difficult part of creating and adhering to a real strategy, and why it is often not properly addressed, or even avoided by management

The terms focus and limit are the key directives here.

All this said, some license can be taken in deviating from an operating strategy.   However, this should only be for carefully selected reasons, and must be very limited in number and scope.  Otherwise, as was mentioned above, you would effectively not be operating under any strategy at all.

For Part 4 of this series, please click here.

So what IS a Strategy? 

A strategy is really an abstract concept—it does not allow you to create a mental image of anything specific or concrete, like a task to be done or a measurable goal to be achieved.  It’s a subject that takes some effort to understand and internalize so that it becomes a working part of one’s business acumen.

At the broadest level:

“A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge.”

“A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them.”

“[A strategy is] a cohesive response to an important challenge.”

Richard Rumelt, UCLA Anderson School of Management,

Good Strategy, Bad Strategy, 2011

The original concept of strategy arose out of military warfare.   Your strategy was the answer to the question, “given your strengths and weaknesses, those of your enemy and the environment in which you will do battle (terrain, weather conditions, etc.), what overall approach will you use to defeat your opponent?”  The one chosen was thought to make best use of your strengths, most exploit your enemy’s weaknesses and best use the local conditions to your advantage.  For example, one option was, ‘divide and conquer’; another was, ‘envelop and squeeze’.  You got a sense of ‘how’ victory was to be achieved, but with no indication of exactly what would be done to accomplish it.

It’s the competition, stupid

Over the last 30 years there has been significant advancement in the understanding, characterization and application of the concept of strategy to business.  It is now generally agreed upon that the presence of competition is strategy’s reason for being.

 “If you don’t have competition, you don’t need a strategy”

Joan Magretta, Harvard Business School,

Understanding Michael Porter, 2012

You probably need a plan, but not a strategy.

When applied to business, the ‘obstacle’ and ‘challenge’ mentioned in the broad examples above translate to ‘competition’.  So assume that when the term strategy is used here, it means the ‘Competitive Strategy’ of a business—or business unit, if the company has multiple business units (this is not to be confused with Corporate Strategy, which is a completely different animal).

In business then, your strategy is the answer to the question, “given your strengths and weaknesses, those of your competitors and the business environment in which you operate (relative competitor size, relative position vs. competitors, customer perceptions of the players, etc.), what approach will you use to most profitably compete in your market?”

“Strategy explains how an organization, faced with competition, will achieve superior performance.”

Understanding Michael Porter, 2012

Here are examples of strategy in several business-related areas:

• Minimize your maximum regret—this is the strategy of a global company’s Foreign Exchange office, those responsible for moving cash between countries.   Their approach is to not take big risks in hopes of making a killing in foreign exchange; instead, be safe, bet small and most importantly, don’t lose money.  The currency traders were not told what to do, but their marching orders were clear.
• Low cost, convenient service—this was Southwest Airlines strategy in establishing and initially growing its business—it provided guidance for setting priorities and making decisions because you knew what the end result of your decisions was eventually suppose to be; from personal experience, I would argue that the low-cost piece is not part of today’s strategy
•  The customer is always right—the guiding principle here for setting priorities and making decisions is to (almost) always make sure you accommodate the customer; to be a real strategy, however, this must only apply to the subset of customers being targeted, not all customers

It should be noted that during this 30-year period of advancement, the similarities drawn between business strategy and military battles and sporting events have been shown to be inaccurate and dangerously misleading.

In business, you don’t have to destroy your competitors to be successful (, i.e., more profitable).  Unlike in sports, where both teams must play by the exact same set of rules, in business you can choose which set of rules to use for competing: the customers you choose to serve and the set of needs you choose to meet.  And since there are multiple segments and multiple sets of needs, there can be multiple winners.

Your perception of what a strategy is greatly influences how you go about developing and executing on it.  Thinking that you need to destroy or beat your competitors distorts the realities of business competition and causes people to behave incorrectly, focus on the wrong measures of success and make choices which can actually defeat their goals.  More on this later.

For Part 3 of this series, please click here.

One of the culprits guilty of fostering this misuse is the business press itself—the ‘experts’ who should know better than to incorrectly apply the term to all manner of business plans and activities.  A few examples right off the internet:

• Five Direct-Mail Strategies You Can’t Ignore
• Rethink Your Digital Advertising Strategy
• Social Media Strategy – A Definitive Guide

But they’re not alone.  Business leaders frequently offer phrases like these as strategies:

• Be the market leader
• Expand into new geographic areas
• Grow through acquisition
• Grow revenue at least 20% per year
• Delight our customers with creative solutions
• Expand our social media presence

Why are these not strategies?

The above statements are goals to be achieved, objectives to be met and even aspirations to be realized.  These are not statements of strategy. They give no sense of the overall approach, the guiding idea used to select the actions which will most effectively help achieve these goals (that is, the strategy behind them).

Why the sloppiness?  First, calling something a strategy confers more importance on it than does referring to it as a plan or an initiative—and everyone wants to believe that what they’re working on is important.  Secondly, and possibly more insidiously, it is meant to imply that the person using the term has gravitas—he should be taken seriously because he’s referring to something of such high impact (and, if a consultant, paid at a premium over someone working on a ‘plan’).  Important people work on strategies, everybody else works on plans.

“To make matters worse, for many people in business, education and government, the word ‘strategy’ has become a verbal tic [emphasis added].  Business speech has transformed marketing into ‘marketing strategy’, data processing into ‘IT strategy’ and making acquisitions into a ‘growth strategy’.”

Richard Rumelt, UCLA Anderson School of Management,

Good Strategy, Bad Strategy, 2011

Does it really matter?

So what harm is done if the term strategy is loosely applied to all manner of business goals, activities and ideas as long as the meaning or intent of the referenced statement is understood?  After all, everyone knows what ‘grow through acquisition’ or ‘social media strategy’ means, regardless of how they’re labeled.

Yes, it DOES matter.  It matters a great deal.

It is common wisdom that you need a strategy (or strategies) to run a successful organization.  It’s just part of the current business culture to do the ‘strategy thing’.   However, if you incorrectly refer to these other business components and ideas as strategies, there is a very good chance you have not developed a real, honest-to-goodness strategy to guide your business.  That is, calling all these other things strategies gives a company a false sense of security that it’s operating with a real, properly designed strategy, when in reality it’s not.

It deceives management into thinking they’re benefitting from the contributions made by a real strategy (whatever they may be), when that is just not the case.  Simply slapping a strategy label on something that isn’t is like buying life insurance from someone pretending to be an agent and thinking you’re covered, when the truth is you have absolutely no coverage at all (the document says ‘Policy’ on it, so it must be a real policy… right?).

This is not an argument about semantics

The fundamental purpose of a strategy is to enable a company to create a competitive advantage—a way in which it can differentiate itself in the market.  It makes that singularly unique and critical contribution to the long term success of an organization.  No other business concept, idea or notion has this responsibility (or capability).

Your competitive advantage is the reason your targeted customers prefer buying from you than from your competitors.  It allows you to:

• Charge a premium (because your perceived value is greater) , or
• Sell at a lower price (because your costs are lower)

Either way, customers see your offering as the superior value, and as a result, reward you with higher profitability than your competitors.

And being more profitable than you competitors is strategy’s definition of success—not bigger, not growing faster, not larger in market share than they are.  Those are possible outcomes of being more profitable, but none are the primary goal. Being more profitable is.

So if misapplication of the term results in the failure to develop a properly formulated strategy—which is what most often happens—an organization unknowingly undermines its ability to be more profitable than its competitors.

And that’s why it matters—and why it’s bad for business.  Your business.

For Part 2 of this series, please click here.

Positioning: The Battle for your Mind, Al Ries and Jack Trout

Positioning is not solely established by what you say about your product.  It’s not that simple.  It is strongly influenced by how you price, package and offer it to the market.  Positioning comes from what the prospect ‘concludes’ about your product from everything you say and imply about it.

Here is a great example of how positioning can make or break a product’s success.

In the early 70s Volvo introduced the 262C, a much sportier car than their existing boxy (and very safe) sedans, the 242 and 244.  It was described as a new, sportier offering from the company and was priced somewhat above those standard models. The 262C was available in only silver or black to help establish its uniqueness.

It sat like a rock in dealers’ showrooms.

At some point they realized changes were needed.

So what did they do?  First, they decided that if they wanted it to be perceived as a special, very different offering from their other vehicles, they needed to price it accordingly.  So the selling price was dramatically increased.  Next, they strongly promoted the fact that it was designed by a well-known Italian sports car designer, Bertoni.  Finally, rather than saying it’s a Volvo with a sporty flair, it was described as a SPORTS CAR, but designed with Volvo’s legendary emphasis on safety.

The result: they couldn’t make them fast enough to meet demand.

Remember, they didn’t change the product.  It was the same car.  That bears repeating.

It was the SAME car.

Poor positioning can cost you a bundle.  Make sure you know what is most compelling to your prospects and that all aspects of your positioning are pulling in the same direction.

To read Part 2 of this blog, please click here.