Strategy is a word that has prestige. Being a strategic thinker is often a key step on the way to the C-suite. For the marketer, it can separate you from the pack.
If you put the word "strategic" in front of almost any other term—such as strategic thinking or strategic analysis—it sounds more impressive. Considering the importance of strategy to most organizations and CEOs , consultancies that are known for strategy (such as McKinsey & Co., Bain, and Boston Consulting Group) command high regard in the marketplace—as well as a price premium (read: high billable rates).
Yet what's interesting about the word "strategy" is that there is no universal, agreed-upon definition. Many pundits, academics, and business people define it differently, with some definitions overly complex and convoluted, while others consisting of a simple checklist.
My aim in this article is to define some of the general parameters of strategy and attempt to put some sort of working definition around it in relation to terms such as "goal" and "objective."
Most marketers understand the power of words—fretting over a definition and its connotations and denotations is serious business, make no mistake.
Define Your Terms
It's been said that over 50% of all competitive debates are definitional debates. In other words, it's all about defining your terms. In general, the most powerful definition is the one that is conventional vs. a dictionary definition of some sort. Nevertheless, it's always interesting to see how various dictionaries define a particular term.
Two definitions of the word strategy on dictionary.com are a good segue into its derivation or etymology:
- The science and art of using all the forces of a nation to execute approved plans as effectively as possible during peace or war
- The science and art of military command as applied to the overall planning and conduct of large-scale combat operations
Given the military flavor of the definitions above, it's not surprising that the word strategy comes from the Greek word strategia or strategos, which means "generalship" or the "art of the general."
Since there is no one definition of strategy, the dictionary definition above is not enough, especially for use in the business arena. To synthesize a more comprehensive definition of strategy, I will review the following:
- The origins or roots of business strategy
- A brief history of strategy in the business world
- How numerous strategists and institutions define strategy
- A strategic question set
I'll end with some foundational questions that all companies should ask themselves, and a synopsis of this article.
The Roots of Business Strategy
Military historians and strategists have been studying and defining strategy for centuries.
You can't begin a discussion of strategy without mentioning the famous general Sun-Tzu. He lived in northeastern China about 2,500 years ago and was considered an expert in military strategy due to his many victories on the battlefield. Sun-Tzu defined 13 principles (each one a chapter) in his enduring book, The Art of War, which has often been acclaimed as the authoritative work on military strategies and tactics for its time.
Key concepts in the book include the following:
- Developing plans
- Developing strategies
- Developing tactics and maneuvers
- Attacking weak points and leveraging strengths
- Using reconnaissance and spies
Sun-Tzu postulated some general principles of strategy that have stood the test of time and have been utilized by numerous business executives and managers in crafting strategy. Similar to Generally Accepted Accounting Principles or GAAP, the widely accepted accounting standards used to standardize financial accounting of public companies, there is quite a bit of discretion in how the principles are applied. Sun-Tzu's principles are still applicable today as they are a general guide for strategists to follow, not strategy du jour.
Another well-known military strategist was Carl von Clausewitz, the famous Prussian general and the person often termed the father of modern strategic study. Clausewitz defined strategy as "the employment of battles to gain the end of war." A key principle, which I'll discuss further, is that there is an end or goal in mind and the strategy is a way to reach a desired state. In fact, a well-known military model for strategy revolves around the "ends," "ways," and "means" triumvirate, which I'll discuss in more depth later in the article.
A Brief History of Strategy in the Business World1
Strategic planning and a focus on strategy began to take some shape in the 1940s and '50s with Alfred Chandler and Peter Drucker. In Drucker's 1946 book, Concepts of the Corporation, he analyzed and wrote about not only General Motors but also General Electric, IBM, and Sears Roebuck. A key theme identified by Drucker was that the best companies had a centralized planning function and were good at goal-setting. He also highlighted (one of the first to do so) that the purpose of a business is to satisfy customer needs.
There were a number of influential events and thinkers during the 1960s, many of them in the marketing arena. Theodore Levitt's famous Harvard Business Review article, "Marketing Myopia," put a new perspective or lens on corporate strategy and re-visioning the business function. H. Igor Ansoff's 1965 book, Corporate Strategy, outlined a highly detailed road map for planning a firm's objectives, growth plan, and product-market positions, among other areas.
In the 1970s some influential work was carried out by Henry Mintzberg and Ansoff, but it was the 1980s that two writers emerged who have had a deep impact on the concept of strategy: Kenichi Ohmae and Michael Porter (both strategists are discussed in subsequent sections of this article).
The late 1980s and 1990s, Gary Hamel and C.K. Prahalad, two academic/consultants out of the University of Michigan, wrote about core competencies and companies' collective learning abilities. During the same period, other authors revisited corporate strategy in terms of looking at how a parent company could feed, mentor, and care for its operating companies.
During the late 1990s and early 2000s, the dot-com frenzy offered creative, strategic variants around building beachheads, monetizing "eyeballs," and the replacement of bricks with clicks. It was all about new, innovative business models and the creation of low asset-intensity cost structures via the Internet.
After the dot-bomb, however, many thinkers began to revisit and revive the tried-and-tested approaches to strategy. It was evident that the fundamental "laws" of business had not changed.
Strategy According to Keniche Ohmae
Keniche Ohmae's 1982 book, The Mind of the Strategist: The Art of Japanese Business, is a far-reaching tome that illustrates the power and persuasion of combining rigorous strategic analysis, healthy intuition, and unabashed willpower in striving for global dominance.
The ex-McKinsey partner and Ph.D.-trained nuclear engineer puts forward a highly structured approach to "doing" strategy. Key concepts in his 1982 book include the following:
- Key factors for success
- Initial and rival hypotheses
- Constraint analysis
- The profit equation
- Building company, customer, and competitive-based strategies
Keniche is fond of tree charts and decomposition and illustrates that strategy is all about creating and vetting options to reach various end states or goals. He asks a fundamental question for any strategist: "What does success look like?"
Ohmae's operating principles for a strategist are timeless:
- Dichotomous thinker—strategists need to be flexible in their thinking, not binary, and be open to creating "strategic degrees of freedom."
- Perils of perfectionism—there is no perfect strategy or information; the strategist is always bounded in some way.
- Keeping details in perspective—the 80-20 principle has stood the test of time as it forces the strategist to look for the key drivers or levers to any problem.
- Focus on key factors—many issues and industries can be distilled down to a fundamental equation of some sort. For example, banking is all about the interest spread between the cost of funds (e.g., demand deposits) for the bank and the cost of funds for their customers (e.g., interest rate for a loan).
Strategy According to Treacy and Wiersma
Treacy and Wiersma wrote the 1995 best-seller The Discipline of Market Leaders. The main premise of the book is that companies can achieve a leadership position by narrowing their business focus, which has been promulgated by various strategists in terms of "sticking to one's knitting" or focusing on the core business. The authors identified three "value-disciplines" that can form the basis for one's strategy:
- Operational excellence: Think of Wal-Mart and its supply chain capabilities and focus on everyday low prices.
- Customer intimacy: Think of insurance giant USAA, with its intense focus on the customer and its roots in successfully serving the military community.
- Product leadership: Think of the Medtronic and its drive to develop innovative and life-saving medical technologies and devices.
Although each company is likely to have some competencies in each of the value-disciplines, one is usually primary, because each has a different set of requirements. In today's world of shorter product lifecycles and better operational analytics, more and more companies are primarily focused on customer intimacy.
Witness the inexorable rise of customer relationship management (CRM) software and strategies across a multitude of industries. There also seems to be a greater focus on customer loyalty and lifetime value metrics, which are key measures for the customer-intimacy approach.
Strategy According to Michael Porter
Michael Porter, the noted strategist out of Harvard Business School, is world renowned for his work on competitive strategy, which is focused on competitive differentiation and positioning.
In Porter's well-known 1996 Harvard Business Review article "What is Strategy," he wrote that competitive strategy "means deliberately choosing a different set of activities to deliver a unique mix of value." Porter added that "the essence of strategy is in the activities—choosing to perform activities differently or to perform different activities than rivals." According to Porter, competitive strategy is about differentiating your company in the eyes of the customer and about adding value through a unique configuration of activities that is different from your competitors'.