Wednesday, July 20, 2011

What is Strategy?

It is therefore essential, when one has fourteen armies, that each wages a kind of war relative to the overall plan for the war (strategy), and to the strength and circumstances – whether topographical or political – of the opposing state.
Napoleon Bonaparte

The word strategy has become one of the most commonly (and badly) used words in business writing. Everywhere we look we see terms such as business strategy, corporate strategy, marketing strategy etc. We are not helped by the original, flexible use of the Greek word ‘strategos’ from which our word strategy derives. In its original form, it meant the art of the General or Commander of the armies. The first time the word ‘strategy’ was used in a business context was by William Newman, in a book published as recently as 1951. Now the word ‘strategy’ is almost synonymous with ‘important’.

Overworking the word in this way helps nobody. It simply serves to confuse. Strategy in its strictest sense refers to means and not ends. Strategy is all about how an organization will achieve its objectives. Best described as ‘business strategy’, the original meaning concentrated on how the key-decision making unit of the organization or the board was going to marshall its resources in order to achieve its stated ‘business objective’. The use of the word strategy in the business literature arose when it became apparent to management researchers that, in sharp contrast to economic models of perfect competition, companies engaged in the same activity and using the same technology often performed differently. Closer inspection suggested that firms in the same industry adopted different approaches to products, distribution and organizational structures. These differences, within similar market environments, came to be known as ‘strategies’. The concept was readily absorbed into Harvard Business School’s Business Policy curriculum in the 1950s and 1960s.

Some simple ‘rules’ about strategy:

1. Strategy is longer term : As strategy is about marshalling the gross resources of the organization to match the needs of the marketplace and achieve the business objective, this cannot be a short-term activity. Every organization is complex and any change takes time to accomplish. Strategic decisions, like the General choosing his battleground, will have long-term implications. Strategic decisions, such as which business areas to enter, cannot be revesed at a moment’s notice – momentum has to built over a planned period.

2. Strategy is not changed every Friday : Constant change produces uncertainty, confusion, misdirection and wastage – not results. Tactics are designed to change on a weekly or even a daily basis in response to changes in the marketplace caused by customer needs or competitive response. Tactical change causes no problems of uncertainty because the strategy, the broad overall direction of the organization, remains constant.

3. Strategy is not another word for important tactics : Tactics can be likened to maneuvers on the field of battle and can be changed as often as required in response to the changing situation faced by the organization in its markets. But, no matter how important or critical the tactic under review, this does not make it a strategy. For want of a nail the horseshoe, the horse, the knight, the battle and the war were lost – I Agree, but once 1000 soldiers have found a nail each they should all know that the reason why they are there is to win the war, not to search for nails.

4. Strategy is not top management’s secret: Strategy is undoubtedly top management’s responsibility to define and agree but not to keep as one of the organization’s most closely guarded secrets. Strategy is most effective when those that have to implement it not only understand it but also believe it and can see their own role in carrying it out. As Mintzberg (The Rise and Fall of Strategic Planning, Prentice Hall, Englewood Cliff, 1996) states, Every failure of implementation is, by definition, also a failure of formulation. If people are to implement, they must know why, how and what. Despite management’s traditional reluctance, communication and active involvement will often be the key to success.

5. Strategy is not just a public relations exercise : One of the first rules of strategy formulation, is that it must be capable of implementation. Strategy is about action, not words. It is about implementation, not just planning.

6. Strategy is based on analysis and understanding, not straws in the wind : Strategy is about the long term. Rapid ‘summings up’ and reaction are unlikely, of themselves, to be sufficient to build a robust strategy. To build a sound strategy for the future, we will need a deeper degree of analysis – at least beginning to understand why things are happening as well as just knowing what is happening. An analysis of the macro and market environments is essential even for the more ‘emergent’ strategic routes that the organization may favour.

7. Strategy is essential to an organization’s survival : A well thought-out strategy will allow managers to test actions and propose tactics against that strategy and the overall business objective to ensure the consistency which is essential to continued success. Without a clear guiding strategy, managers will continue to spend time and money agonizing over decisions that could be made in minutes if only they knew what their organization was trying to do. A well communicated and understood strategy brings the organization together and provides a common purpose. It involves everyone in the organization and challenges them to relate what they do to what the whole organization is trying to achieve.

(From : Marketing Strategy: the difference between marketing and markets. By Paul Fifield. Elsevier, Oxford UK. 2007)

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