What is Strategy?

Without a plan, every day is a crisis. What else can it be?

The plan for how value will be delivered is more crucial in today's marketplace than ever before. Strategy defines for people how the theory for value will be realized. In order to achieve the speed necessary in today's marketplace, many people within the organization must make hundreds of decisions each day. It is essential that they are empowered with an understanding of what activities they must be engaged in order to contribute to common goals.

A survey of a cross-section of business leaders which asked about their current strategic objectives revealed not surprisingly that cost reduction was at the top of the list, with 90% of respondents indicating its importance, and over two-thirds revealing that it was their top (or equal to top) concern.  Many others are focused on investments in technology to improve operations. *

However, improving competitive position was the lowest ranked of any of the objectives.

A fundamental question that underlies business planning is this: if a business is not offering anything different -- even if it is just better customer service, why should customers select your product or service over those of competitors?

For that matter why should they even seek you out at all?

Harvard professor and author, Michael Porter, who has probably researched business management as much as anyone, has argued that operational effectiveness which includes efficiency but is not limited to it, although necessary to superior performance, is not sufficient because its techniques are easy to imitate. By contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match. 

He has traced the economic basis of differentiating advantage down to the level of specific activities a company performs.  Whereas managers often focus on individual components of success such as core competencies or technology resources, Porter has demonstrated that managing fit across all of the companies activities enhances both competitive advantage and sustainability of financial performance.

He has offered some advice on how companies can refocus strategy processes and raise the probabilty that their efforts will succeed:

  • A strategy rests on unique activities 
  • A sustainable strategic position requires trade-offs
  • Fit drives both competitive advantage and sustainability
  • To preserve and reinforce strategy, leaders should concentrate on deepening a strategic position rather than broadening or compromising it

One approach is to look for extensions of existing strategy that leverage the existing activity system by offering features or services that rivals would find impossible or costly to match on a stand-alone basis.

In essence, leaders need to make company activities more distinctive, strengthen fit among activities and communicate strategy better to those customers who should value it.

The framework that can emerge from lean deployment principles can provide the means to implement that advice.

 * PA Consulting Group

Back To Top