SNw 004 What IS Strategy? Created by James on 6/13/2013 2:31:48 PM
"Strategy" is a word that is widely used.
Frequently it is used to refer to strategems, devious plots and similar
Most organizations struggle to define their strategy succinctly in one short phrase, or at all
So, WHAT IS STRATEGY -- REALLY?
Recap
In the last three issues I outlined some key considerations in terms of the essence of competitiveness and how to measure it in a way that could be used to bring competitive intelligence to bear on operational data.
Competitiveness and competitive advantage are the essence of strategy and the determination of strategic drivers and the formulation, implementation and operationalization of strategy are a vital part of real competitiveness and therefore success and growth in the years ahead.
This issue will examine what the term "strategy" is about and look at the views of a few "guru's in the field.
What IS Strategy?
Sixteen years ago I wrote a paper on the importance of aligning information technology investments with strategy.
At the time I thought that it would be useful to include a concise definition of strategy but after several hours of frustration and three pages of military metaphor I found that, while I thought I was clear about what I meant by the term "strategy", I could not offer a concise definition.
In the intervening years I have studied the work of various world authorities on the subject and have continued to debate with myself the essential meaning of the concept and term "strategy". I offer the following insights for your consideration.
Strategy is Frequently to be Discovered NOT Invented
As I considered the concept of strategy, facilitated strategic analysis and design workshops and advised organizations regarding the strategic fit, and frequently lack of fit, of their information technology investments, I eventually came to realise that in general strategy is to be discovered NOT invented.
Strategy is the essence of how an organization succeeds, how it competes, how it is different from its competitors and it is present at some level in any organization that has existed for any length of time, particularly in organizations that are thriving or have thrived at some time.
As I inspected failed strategic plans, 90% of which fail to achieve any lasting impact, and considered my own and others facilitation efforts, I came to the realization that strategy is generally to be discovered NOT invented.
Organizations that succeed frequently do so because a group of human beings collectively and intuitively formulate an initial strategy, frequenly without formal facilitation or even formal discussion.
Organizations that start to fail frequently do so because the collective intuitive understanding is diluted or lost resulting in wrong turnings being taken.
This raises important questions about how one discovers strategy and how one formulates plans that honour and comply with it.
Multiple Views of Strategy
Because strategy is so abstract and so conceptually vast there are numerous authoritative views on strategy, its formulation and its execution. However, casual examination of these different authoritative views suggests that they are not all referring to the same reality.
In practice, because of the abstractness of strategy, these views are each distinct specific views from different perspectives and the reality is a holistic integration of these views.
Strategy and Information Technology
Strategy is a "soft", abstract, cognitive concept, it is the essence of why an organization exists.
Computers are enormously fast adding machines that add noughts and ones and switch between options.
Computers are "stupid", they only do what a human being tells them to do, even when the human being makes a mistake.
Accordingly, information technology investments are amongst the harshest critics of strategic plans and are quick to recognize strategic misalignment in I.T. implementations.
One of the major factors in many of the I.T. investment failures that I have investigated during my career have stemmed from a failure of the people implementing the computer systems to understand the strategy of the organization.
Because of the rigour required for undertaking major long term I.T. investments I have, over the years developed methods of analysis which support this requirement. StratNews seeks to share these insights with you over time.
Strategy and Tactics -- Malcolm McDonald on Strategy
Professor Malcolm McDonald, Professor of Marketing Planning at Cranfield School of Management defines strategy as "doing the right things" and tactics as "doing things right".
He states that the right things are determined by customers and markets who pay for products and services at profitable rates.
An organization that "does the right things well" will thrive whereas an organization that does the right things but does them poorly will survive.
An organization that "does the wrong things" will die, it is simply a matter of how quickly. If it does the wrong things well it will die fast and if it does them badly it will die slowly. This definition is profoundly important to understanding why strategically misaligned I.T. and other projects can destroy a business.
Michael Porter on Strategy
Professor Michael Porter, a widely recognized authority on strategy, states that:
"Strategy is the creation of a unique and valuable position involving a different set of activities"
and
"Strategy is making trade off's in competing, and choosing what not to do"
Porter also states that strategy is NOT "the Internet or any technology".
Michel Robert on Strategy
Robert defines ten "strategic driving forces": product, user, market, technology / know-how, production capacity or production capability, sales / marketing method, distribution, natural resources, size / growth or profit.
Robert states that every organization should have ONLY ONE of these as driving force, the others, while most exist in every organization, are managed within the context of the strategic driving force.
Robert has developed an impressive set of tools around this concept.
Strategy is NOT a Forecast or Objective
McDonald states that strategy is NOT a forecast, a forecast is an extrapolation of the past into the future based on current activities.
Strategy is also NOT an objective. A strategic objective is the position in the future that the organization aspires to on the basis of planned future change.
What IS a Strategic Plan
A strategic plan is the path to competitive advantage, it is a realistic trajectory of continuous improvement within business constraints taking account of the forecast and objective future positions.
Fundamentally a strategic plan is an exponential curve tangential to the current organizational state and direction -- the ability of human beings to change is a fundamental constraint on business change.
Strategic plans must be future focused and actions and projects are the mechanism whereby an organization brings about change towards the objective -- such projects MAY include information technology investments.
Michael Porter states that "the essence of strategy is integration - the ability to see in a complex holistic way".
Historical Differentiators
As reported in the January 2006 issue of StratNews, the differentiators of past decades have included:
- 60's Production
- 70's Sales
- 80's Finance
The 90's and 2000's present an environment characterised by excess supply which a single business division cannot solve. A boom such as that of the 60's is unlikely! and strategic issues are therefore vital.
Future Differentiators?
The World Competitiveness Report and other authorities state that the future differentiators of business will include:
- Effective, market focused strategy
- Effective utilization of the human resource
- Effective management decision making
This requires appropriate information in order to make the right decisions and is one of the reasons why creative and effective application of information technology is a significant opportunity at this time.
Market Focussed Strategy
The concept of market focus and strategy go hand in hand -- it is the people who are customers for the products and services of the enterprise that determine whether its strategy is viable or not.
The natural process of selection by customers, users or voters ensures that those organizations that comply with the true needs of people are the ones that survive and thrive. Previous issues of StratNews have discussed how these concepts can be applied and noted that true competitiveness is a gut response of buyers to their personal internal assessment of value.
Strategic Constants and Variables
The comprehensive strategic landscape of an organization comprises strategic constants such as why it exists, its essential value proposition, its strategic driving force, its values and other enduring properties.
Many authorities hold that the essence of strategy is constant for decades.
There are also variables in the strategic environment, factors which change progressively over time. These items are NOT the strategy of the organization but they interact with the strategy to create the living impulses of the organization in response to its environment.
Strategic variables include the strategic vision and objective (where are we going) and specific measures of the strategic context such as owner, market, supplier, external and internal environmental, strategic capability, governance and other factors.
Measured individually but in context and viewed through the filter of the core strategy and core drivers and conditioned by the strategic objectives of the organization these variables provide the information on which an informed planning process can build -- as set out in previous issues.
This, in turn, if taken through a systematic process of analysis and design will result in short, medium and long term plans that can be translated into long range competitive advantage.
The fact that few organizations apply this sort of rigour and rely on "seat of the pants" navigation potentially represents a major opportunity for organizations wanting to differentiate themselves at the next level provided they combine this with effective intuitive leadership.
What is NOT Strategy?
Strategy is NOT strategems (wheeling and dealing or manipulation), it is NOT a way of doing things or a method or a way of running projects or operating a business.
Strategy should NOT change every year and it is certainly NOT three days at a conference venue once a year.
What the Organization Will NOT Do
The overall strategic context of an organization can, and according to some authorities, should include a statement of the things that the organization will NOT do and, at the very least, effective strategic governance will ensure that every opportunity is filtered through the essential strategic definition and be excluded if it is not a good fit.
What IS the Essence of Strategy?
Strategy is multifaceted, complex, abstract, holistic, it requires cognitive thinking to define, describe and translate into action, it describes the essence of the market forces that impact the business and how the business interacts with the market in order to succeed and plans to interact with the market in the future.
Strategy impacts every facet of the organisation.
YET the essence of strategy is concise and simple.
Most authorities hold that the essential strategy of an organization should be expressed in at most a short statement. The challenge is to find that short statement.
Once found, it will frequently be found to be an intuitive "blinding glimpse of the obvious".
In one case study the strategy of a highly successful airline in the United States is summarized as "bums in seats, planes in the air".
Who Should Know Your Strategy?
There is a school of thought that says that an organizations strategy should be known only by a select few, the senior executives.
Another school of thought says that an organization does NOT really have a strategy until it is known by every staff member down to the person who sweeps the floors AND by your competitors.
The essence of the latter view is that it is essential for your whole team to pull together and, since strategy embodies the essence of how your organization came into existence and has succeeded in competition, your competitors must have a different core strategy, otherwise the two organizations would NOT exist independently -- they would merge.
Strategic Alignment
If you don't know where you are going, any road will get you there!
Strategic alignment is about defining where the business wants to go and then aligning all activities to support the business to reach that destination.
Strategic alignment of information technology is absolutely vital.
Conclusion -- What is Strategy?
Strategy is the essence of why an organization exists and how it thrives.
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