What is Strategy?

Despite the fact that the word, “strategy” is so commonly used, there’s still a lot of confusion surrounding its definition, even among so-called experts.

The topic of strategy was first introduced by the Chinese in treatises like Sun Tzu’s ‘The Art of War’, written in 400 B.C. Our Western understanding of strategy originates from the Greek word “strategos,” which roughly translates to “General.” It primarily referred to a military leaders knowledge or wisdom.

Today’s focus on business strategy didn’t emerge as a field of study and practice until the 1950s and 1960s, most likely prompted by former military leaders who joined the corporate world after serving in World War II. Prior to that, the words “strategy” and “competition” rarely appeared in prominent management literature.

Definition

Strategy is defined as “a framework for making decisions” about how you will play the game of business. Strategy doesn’t answer all the questions required for implementation – that’s planning – but it establishes the game you are playing and how you expect to win.

Without a strategic framework to guide decision making, a business may run in too many different directions, accomplishing little and squandering precious resources.

A strategy describes a business’s goals and outlines how it will go about attaining them. For example, a strategy might examine the wants, needs, and expectations of customers, explain how to deal with competitors, and lay out the long term growth plans for the business.

Simply put, a strategy outlines how a business will succeed and the best way to get there from here.

Types of Strategy

There are strategies for literally every level of business. There are team strategies, functional level strategies, business unit strategies, corporate strategies and global strategies.

Academic and author Henry Mintzberg identified five common uses (5 Ps) of the term “strategy”:

• Strategy as a Position: The location of a business in context to its environment or industry.
• Strategy as a Plan: A deliberate and consciously chosen course of action.
• Strategy as a Pattern: If a plan is equivalent to an intended strategy, a pattern is that strategy realized – what can be learned from the past and applied to the future.
• Strategy as a Perspective:  A persistent mindset regarding how a business operates – a worldview or personality that dictates uniform thoughts and behavior.
• Strategy as a Ploy: A particular maneuver designed to mislead someone, like a competitor.

By far, the most common uses of “strategy” are as either a position or a plan.

Michael Porter, another academic and author, is perhaps the most well-know theorist when it comes to strategy. Porter suggests that strategy consists of three key characteristics.

1. The creation of a unique and valuable position (ala Mintzberg), involving a different set of activities.
2. Making trade-offs in competing – choosing what to do, and more importantly, what not to do.
3. Creating “fit” among a company’s activities, where “fit” is defined as the ways a company’s activities interact and reinforce one another.

Porter is critical of today’s business leaders for focusing more on operational efficiency (OE) instead of formulating, implementing, evaluating, and modifying a cohesive and coherent strategy. Operational efficiency is all about being faster, better, or smarter when it comes to the myriad of activities that go into creating, producing, selling, and delivering a product or service – the basic units of a competitive advantage.

Operational efficiency, as the name implies, is all about creating greater efficiencies in business while strategy is all about creating a more effective business.

The problem with operational efficiency from a competitive standpoint is that it’s relatively easy to copy someone else’s best practices. Once competitors in your industry have adopted them, no one can really achieve, much less maintain, a competitive advantage. That’s why Porter believes it is more important to identify and preserve what is unique about a company by performing different activities from your competitors, or performing similar activities in different ways. Accomplishing this true competitive advantage – a more effective business – is no small feat. According to Porter, it requires a strategy.

Summary: Strategy is a framework for making decisions. Businesses have strategies for every level of an organization. Strategy is to organizational effectiveness, as planning is to organizational efficiency. You need both to be successful but most organizations focus more on planning than strategy because it’s easier. If strategy were easier, every business would have one.

Still confused about the meaning of strategy? Email your questions to info@event-strategy.net.