Introduction

1 Defining Strategy

Case Study: The Maginot Line

2 History of Strategy

Case Study: Battle of Canne

3 Schools of Thought

Case Study: Encarta vs. Encyclopedia Britannica

4 Tasks of Strategy

Case Study: The Medical Response to George Washington’s Final Illness

5 Generic Strategies

Case Study: The Emergence of the Ultimate Fighting Championship

6 Strategic Thinking

Case Study: Arterial Stents and the Failure to Think About Strategy

Glossary

References

Index

The individualist without strategy who takes opponents lightly will inevitably become the captive of others.

—Sun Tzu, 500 b.c.

This chapter defines the concept of strategy, identifying what it is and what it is not

Strategy: Origins and Definitions

The word “strategy” has a Greek origin: strategia meaning “the general’s art of leading an army.” If a general is to win a war, he needs to have resources, plans, back-up plans, tactics for troop movements, supply lines maintenance, etc. The general’s overall plan to win is strategy.

Strategy involves creating and using a plan to gain an advantage. Strategy is not the objective–it’s how you are going to get to the objective. Strategy is the process–the way that you carry yourself as you try to accomplish the objective or goal. Specifically, strategy is the plan to gain a competitive advantage for your organization.

Further, it is a plan to gain a sustainable advantage. A short-term advantage can be easily gained if you simply mortgage your future. But the advantage has to be a sustainable one. So, strategy is the plan to gain a sustainable, competitive advantage for your organization.

The science of strategy is associated with military operations, and for most of history the study of strategy has dealt only with war and the preparation for war. Today, however, the term has much broader usage. Every activity has a strategy–from getting to work on time to balancing the federal budget. Strategy is the process for going after the goals, pursuing the mission, for accomplishing the end goal.

In football, a coach chooses to have his quarterback throw more passes than usual in the upcoming game, because the opposing team has a weak defensive back-field. That is the strategy.

When you have a job interview, you decide to go in and just be relaxed and be yourself. You want the job (your goal), but part of your strategy to reach the goal is to "be relaxed and be yourself" during the interview.

Organizations make strategy when they prepare themselves for the future, in the midst of heavy competition. Strategy is the careful plan to achieve the goal they desire–it is their plan to attain an advantage over their competitors.

Various disciplines have different nuances in their definition of strategy. In biology, for example, strategy refers to a plant’s or animal's adaptive response. When a plant turns such that its leaves follow the sun all day long, biologists say that the plant's strategy is to turn so that its leaves catch more sunlight, thereby increasing its viability. In biology, then, the term strategy does not mean something that is carefully planned and implemented. It is simply the response the plant has learned in order to survive. The plant has adapted in such a way to achieve viability and sustainability in the environment. The non-adaptive plants, the ones that did not move with the sun, all died out. In fact, some organizations have a biological approach to strategy: they don’t rationally plan their strategy, but when enough of their competitors and predators die out, they manage to survive.

Strategy typically involves a significant commitment of resources; therefore it is not easily reversible. The consequences of strategy have long-term and wide-ranging effects. Most strategies, then, should not be based on whims and knee-jerk reactions. For maximum effectiveness, strategies must be executed carefully and intentionally.

Strategy might involve exploiting the strengths and resources of one’s own organization, pinpointing vulnerabilities in the competitors, or finding niches in the marketplace. Implementing strategy creates an advantage for your organization–by finding the proper position in the marketplace or creating value. Strategy is about the way–the process–that you use to become valuable, viable, and sustainable in the marketplace.

…. If groups are operating with multiple definitions, great confusion can result.

Strategic Thinking versus Operational Thinking

The distinction between strategy and the discipline of business operations must also be made clear. Corral (2001) makes a helpful distinction between strategic thinking and operational thinking. Operational thinking is the day to day, problem solving, managerial kind of work. Strategic thinking is broader and more holistic. It takes the view from high above so that the whole picture can be seen. Strategic thinking looks not only at one’s own organization, but also at the competitors, the business environment, and the marketplace. See table below.

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People often make the misjudgment that strategic thinking is somehow "better" than operational thinking. The reality is that both kinds of thinking are necessary in the workplace. One kind of thinking is not better than the other. Both strategic thinking and operational thinking are necessary for organizations to survive. However, few people can do both kinds of thinking well. Typically, a person is more at home in one kind of thinking or the other.

Mission, Objective, Strategy, and Tactics

Strategy must also be distinguished from mission, objective or goal, and tactics.

Strategy is Not the Same as Mission. The mission of the organization is the reason for "why the organization exists." Mission is the cause for being in business. Strategy should always support the mission. The mission does not change substantially from year to year, but your strategies may shift depending on the situation that the company is up against. No matter what strategies an organization has, they should always support the mission.

Strategy is Not the Same as a Goal. A goal is the objective–the desired result, the end point, the final target–strategy is how you get to that objective. A football teams’ goal is to win the game. Its strategy may be to pass more on third-down, rush the passer more, or do whatever is required to counter the strengths of the opposing team.

Strategy is Not the Same as Tactics. A tactic is a scheme–a specific maneuver. A strategy may be to "make our products better known in the local community." Some tactics to meet that strategy might be to put up flyers in local businesses or take out advertisements in the local paper. Strategy is the overall plan for deploying resources. Tactics are the actual things done to deploy those resources.

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Therefore, the tactics are how you will execute the strategy. The strategy is how you will accomplish the goal. The goal is how you will live out the mission.

Here are some examples:

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What Strategy is Not

As defined in this book, strategy is distinct from other business concepts.

Strategy is Not Organizational Effectiveness. Seeking to be effective–to do things well–is different than the plan to achieve the goals. To be operationally effective is to find a better marketing image, a better way to serve customers, or a better bolt to screw into the engine. Operational effectiveness is doing things better–a great goal! Every organization should seek to be more operationally effective. But organizational effectiveness is not the same as strategy.

Strategy is Not Efficiency, and efficiency is not a strategy. Efficiency is introduced to lower costs, reduce waste, and eliminate duplication of effort. If your operations happen to be expensive, fat, and wasteful, then making things more efficient is a good goal. But efficiency is about operational effectiveness, not strategy. Strategies are your unique directions which will give your company sustainability or an advantage. Efficiency, for all its lore and hype, will only give a company an advantage in extremely rare cases.

Strategy is Not Strategic Planning. Unfortunately, the term strategic planning is often used as a synonym for strategy. One of the difficulties in organizational strategy-making is that there are no universal definitions for terms so you need to understand what people mean when they use certain terms.

Strategic planning is usually defined as a process of breaking down an initiative into small, manageable parts, and assigning the responsibility for those parts to individuals. The strategic plan holds individuals accountable for carrying out the strategic initiatives.

This is not the same as formulating a strategy! Strategic planning comes after a strategy is set, not before. Planning for carrying out the strategy is what you do after you have a strategy. Strategic planning is how you operationalize your strategy–breaking down the strategy into components, so that the strategy can be implemented. Strategic planning is a good tool for helping implement the strategy, but you need to have a strategy before you can implement it. Strategic planning is one tool for implementing a strategy; it's not a tool for creating the strategy in the first place.

Strategy is Not the Same as Constraints. Constraints are obligations that a company must do to survive. For example, "achieving a balanced budget" is not a strategy, it's a constraint–a balanced budget is required to continue operating. "Making money for the stockholders" is also not a strategy but a constraint for public companies needing investors. "Obeying governmental regulations" is not a strategy–it's a constraint. Constraints are made up of the things a company must do. Strategy, however, is made up of the things that produce a sustainable advantage.

Strategy is Not Policy. Policy is an organization’s internal strategy. Policy is made up of the guidelines, procedures, and rules that the people within an organization live under. Policy should make organizational life easier (but frequently doesn't!). Policy should be consistent with strategy (but frequently isn't!).

Strategy is Not Wishful Thinking. Some people get carried away in strategy meetings. Just as in the football locker room every play goes for a touchdown, in the corporate boardroom every idea always works wonders. "Sure, we've been growing by 2% every year for the last 20 years, but I think we can grow 25% next year." Many fall victim to the temptation to turn strategy into wishful thinking.

Every Business has a Strategy

Every business has a strategy, whether they know it or not. Their strategy is not always written, discussed, or put into company memos, but each business has one. It is this strategy that usually dictates the success or failure of a business.

Sometimes strategy is conscious and intentional; other times the strategy is unconscious and unintentional. Sometimes strategy is written down, and other times it is not. A matrix might look like this:

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Written and Conscious Strategy: Usually discussions about strategy-making refer to a strategy that is intentional, thought-through, planned out, and then written down. Most larger organizations engage–or try to engage–in this kind of strategy. This is an intentional approach to create the strategy and then record it so that it can be communicated with others and referred to again and again.

Written and Unconscious Strategy: This results when an unfortunate company creates a strategy at some point, but then forgets where it was recorded. Companies that do this create a strategy because they feel they should, or feel they are supposed to. They go through the motions of putting a strategy together but it will be only for show. No one will refer to it again, no one will remember what they wrote, and the document will gather dust on someone's bookshelf (or be erased off a hard drive).

Unwritten and Conscious Strategy: The classic example of this involves a small, nimble business, put together by an entrepreneur. The entrepreneur knows what needs to be done, knows the necessary tactics. The strategy is conscious, because the entrepreneur is thinking about it day and night. However, the business is small enough with a tight-knit group of employees that nothing needs to be written down.

Unwritten and Unconscious Strategy: Some companies, usually small and flatline or declining, have strategy, neither written nor conscious. Their employees have not gathered to create a strategy for how to interact with the marketplace. Strategy is a pattern of activities; it may be that the company's strategy is to "get through the day" or, perhaps, "to cover up crises quickly" or "to make it look like nothing's wrong." Having a strategy that is unwritten and unconscious is never a good thing. These companies are probably deteriorating; if they succeed, they owe their success only to good luck.