Unpacking Business Strategy
Damian Davies
Results-Driven Sales Strategist | B2B Expert | Founder of B2B EVO Newsletter. I thrive on driving revenue growth and exceeding targets through innovative strategies and impactful content creation.
Strategic confusion
Tim: Morning everyone. So let’s stick to the agenda and start this off by discussing our approach at tomorrow’s sales meeting with B2B EVO. So John, could you start please.
John: Thanks Tim. I’ve got a great strategy for this!
Tim: Alright, sounds interesting. What type of strategy are we talking?
John: Well, what we do is, we present them with our product USPs…
Tim: Wait, wait, just a second, I thought I heard you say strategy?
John: Yes, I did. It’s a strategy.., So…
Tim: Excuse me, and sorry for stopping you there John, but it’s just that I would describe your suggestion as an action plan on how to approach the sales meeting tomorrow, and I thought that we all agree on the selling strategy for this account. So tell me about this strategy first, because maybe your strategy is more effective.
John: mmm, maybe I used the wrong word, and it doesn’t matter what you call it , strategy, idea, I don’t mind, but it’s a good one…..
Tim: Okay, go ahead John, tell us what your action plan is for tomorrow.
Alright, the example above is somewhat extreme, and has been used to add a bit of humour to the article, but it was used to illustrate that much to the disappointment of many, the word strategy is a word that is used too loosely in the business world.
Struggling with the strategy – A great buzzword but it’s also a bit of a “fuzzword”
Strategy is a great buzzword to throw into a conversation with somebody because it sounds so corporate, and using the word adds a certain degree of sophistication to your ideas. To the ears of the less experienced it can make an idea sound more credible, especially to those who not well-versed in business strategy, and you will almost certainly be more inclined to accept a proposal if it is wrapped up in a word, which for some, is surrounded by mystery and only used by so-called experts in the business world!
However, do all employees who use the word strategy really work for an organization that has a full-blown strategy in place that they are executing? Do they really understand what strategy is?
You see, the word can get really fuzzy for many people and many experts on corporate strategy believe that part of the reason why many managers and leaders struggle with strategy is because of this lack of understanding about what the word actually means.? This of course is to be expected, because strategy formulation, implementation and execution is by no means an easy thing to do, and after all, that’s why the consultants out there are called in and are able to make a living. Furthermore, a large number of managers, across a broad range of industries, have climbed the ranks in their organization to an executive position without having received the level of training required to evaluate whether or not their current business as usual approach is as effective as it could be if the same business decided to implement a new strategy.
To do this successfully, you need to be familiar with strategic frameworks and methodologies that are available, understand what external partners you are going to need to rely on (e.g. consultants, facilitators), how to present it to your colleagues to get their buy-in, not to mention taking care of the change management required to make such ambitious changes within a business. You basically need some knowledge that there are other options out there in terms of business strategy. Look up the Peter Principle if you are unfamiliar with the term and you'll see what I mean.
By the way, if you Google, The silent Killers of Strategy Implementation, you'll get some more insights into the barriers to successful strategy implementation and execution.
Surprising strategy stats
If you scout around on the net you will find some pretty surprising strategy stats. Here are just a few:
Yes, I’ve chosen the negative ones for this section and of course there are many positives also, but I think we’d all agree that the stats mentioned above are not very encouraging, and it helps emphasize that strategy is a pretty fuzzy word for many employees from all levels within an organization. On the other hand, it must be said that so many businesses out there perform well beyond the objectives they set themselves thanks to the successful formulation, implementation and execution of strategy.
One thing is for sure, and that is that there is enough evidence of success stories out there in the business world linked to solid strategies to affirm that strategy is what helps create highly competitive businesses with high-performance cultures. It’s not surprising that the consultants out there make a killing helping businesses to formulate, implement and execute strategies ??.
Right, so that lays the groundwork for the rest of the article. Now it’s time to start the deep dive into strategy.
Grab your scuba gear, and let’s go!
Military origins
The word "strategy" is deeply rooted in ancient Greek. It is derived from the Greek word "strategia," which is a combination of two words: "stratos," meaning army, and "agos," meaning to lead or guide. Therefore, "strategia" can be roughly translated to "the art of directing military operations."
So the concept of strategy was originally linked to military tactics and the planning and execution of war. Over time, the term evolved beyond the military context to encompass broader areas, such as business, politics, and various other fields where planning and decision-making play a crucial role.
Defining strategy, take your pick!
It’s no wonder that many managers and leaders struggle with understanding strategy, when there is no universally accepted definition of the word!
You will find a huge number of definitions from a diverse number of perspectives in books and on the internet.
Some of my personal favourites are listed below.
Sun Tzu
“To conquer the enemy without resorting to war is the most desirable. The highest form of generalship is to conquer the enemy by strategy”
Alfred Chandler
"Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals."
By the way, Chandler’s definition was one of the very first definitions of strategy in the business context.
R. Rumelt, D. Schendel, D. Teece
"Strategy is the establishment of a unique and valuable position, involving a different set of activities."
Richard Rumelt
"Good strategy is coherent action backed up by an argument, an effective mixture of thought and action with an underlying logic."
A.G. Lafley and Roger L. Martin's
"Strategy means making clear-cut choices about how to compete."
One of the best reads out there on strategy is without a doubt offered by Michael E Porter (1996) in an article published by the Harvard Business Review, titled “What is strategy?.
At the very beginning of this article he states that “hypercompetition is a self-inflicted wound” and that the root of many of the problems created for businesses in such competitive environments is the failure to distinguish between operational effectiveness and strategy, and although operational efficiency and strategy are both essential if a business wants to achieve superior performance, they work in very different ways.
One of Porter’s memorable quotes is, “The essence of strategy is choosing what not to do”.
So, lots of great definitions from some of the leading strategic thinkers in business history, but when did the word start being used in a business context?
From the trenches to the boardroom – the origins of corporate strategy
We can trace the implementation of strategy in a military context back as far as the 5th century BC in the world famous book titled, The Art of War, by Chinese Military General, Sun Tzu, but the very earliest talk of strategy in a business is still very recent in comparison.
领英推荐
Expansion of the word strategy into non-military contexts accelerated rapidly during the 19th century, and as our area of interest is the context of business we are going to hone in on some of the major contributions to business strategy which took place in the 20th century.
The giant’s shoulders upon which modern business strategy stands
Thanks to a number of globally recognized thought leaders, business strategy has evolved over the decades. Each one of them has contributed enormously to what we know today as business strategy and this next section will take a look at some of the major contributors to this discipline.?
Sloan & Drucker
In his book titled, Concept of the Corporation which was published in 1946, Peter Drucker offered the first glimpse of what goes on behind the scenes of one of the most successful organizations of that time, GM. This was the first real study, based on a two-year long analysis, of the structure, and internal dynamics of a major business enterprise and how they contribute to the success of the company. GM managers were not impressed at all when the book first hit the shops, and even said that the book was antibusiness, yet the many of the models published in the book were later adopted by businesses in the private and public sector across the globe.
Alfred P. Sloan Jr followed up on the work by Drucker with his world-renowned classic book on business management, titled, My Years with General Motors which was first published in 1963.
Bill Gates has famously said that if you want to read one book on business, read this one.
Ansoff
1965 saw the arrival of what was considered at the time to be the go-to-book on strategic planning. The book is titled, “Corporate Strategy” and the author is H. Igor Ansoff. Yes that’s right!, the same gentleman who gave us the Ansoff Matrix. This was the first “real” business strategy textbook to be launched and one which has had a massive impact on business strategy over the decades and still forms a part of many modern day MBAs.?
Henderson
The late 60s, early 70s saw the arrival of world renowned consultancy companies such as BCG (Boston Consulting Group), and the introduction of a portfolio management framework called the Growth Share Matrix. The Growth Share Matrix became popular thanks to BCG’s founder, Mr Bruce Henderson’s essay titled, The Product Portfolio. It is said that at one point when this framework was at the height of its success, it was being used by approximately half of the Fortune 500 companies!
The fact that it is still included in business strategy curricula proves just how effective this framework can be for businesses.
Porter
In the late 70s and early 80s business minds were transformed thanks to the thought leadership of Mr Michael Porter, a Harvard Business School Professor. In 1980 he published his book, Competitive Strategy, Techniques for Analyzing Industries and Competitors, which went on to become one of the most influential books on strategy ever published. Included in the book is the renowned Five Force Analysis – A must for any business that wishes to assess their competitive environment so that they can make strategic decisions which lead to long-term success.
Kaplan and Norton
Fast forward to the mid-90s and Robert S. Kaplan and David P. Norton brought us what has been acclaimed to be the most influential business idea of the past 75 years, and I am of course talking about BSC (Balanced Scorecard). It was recently reported that the BSC is in the top 5 most widely used management tools at Bain & Co. and just in case you were wondering who Bain & Co is, it is a company that is part of the famous MBB which stands for McKinsey, Boston Consulting Group (BCG) and Bain & Co, known as The Big Three (the three largest management consultancy firms in the world).
The BSC enables businesses to examine itself from four different perspectives which are:
Even though BSC is used by some of the best-in-class business across a vast array of industries, it does not come without it’s challenges such as gaining organization wide commitment (including senior executive commitment sponsorship), the need for expertise from an outside consultant or facilitator, and the difficulties associated with identification of critical areas of business performance and the metrics that allow a company to track performance. Furthermore, the danger with metrics is that they can suddenly become redundant as the market shifts slightly from underneath you and you begin forgetting the truth behind the metric you are attempting to seek. This then means that the metric has to be continually reassessed to find out if it’s still relevant, or missing something. If you haven’t already read it, Mr Jeff Bezos some great advice on metrics which you can find here (https://rb.gy/9hvrr7 ).
Having said that, BSC is still widely used by some of the largest, most successful industry leading companies out there today which illustrates its relevance even after almost three decades of its creation.?
Fogg
Other notable contributions from the 90s include the work from C. Davis Fogg, and in particular his book titled, Team-based Strategic Planning which was published in 1994 and offered readers a complete guide on how to structure, facilitate and implement the strategic planning process for specific types of organizations.
Hamel and Prahalad
In their book titled, Competing for the future, which was also published in 1994, Gary Hamel and C.K. Prahalad first introduced us to the term ‘core competencies’ which can be defined as the combination of resources and skills that differentiate a company in a marketplace. In their book they state very clearly that, “this book is anyone who views themselves as an enemy of entropy”. ?Their key focus is on a shift away from solely focussing on incrementalism as the key foundation for growth because there will be rivals out there who are fundamentally reinventing the industrial landscape while your company obsesses over cutting costs, reducing your time to market, increasing quality etc. It’s a combination of incrementalistic operational improvement and creating supreme value for that will “wow” customers and make competitors irrelevant.
This book was way ahead of its time!
Kim and Mauborgne
It wasn’t until 2005 until we saw something fresh introduced into the world of business strategy, and it hit like a tsunami (that’s a bit of a clue).
Blue Ocean strategy was developed by Chan Kim and Renée Mauborgne, Professors of strategy at INSEAD. Their first book ever published in 2005, titled, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, is now widely recognized as one of the most iconic and impactful books on strategy ever written. In 2023, Blue Ocean Strategy was chosen as one of the three most important theories in 100 years of Harvard Business Review’s publication.
Blue Ocean challenges the theory that market and industry boundaries are a given, and that they can be restructured to open up new market space and create new demand. The authors coined the terms ‘red ocean’ and ‘blue ocean’.
Red oceans
These are markets in which the industry boundaries are acknowledged and accepted by all industry participants. In Red Oceans companies simply try to outperform their competitors to gain a larger piece of market share. However, as markets get more and more crowded, growth and profits are reduced and eventually products can become commodities which leads to cutthroat or “bloody” competition, and hence the term ‘red ocean’. In a red ocean businesses are perusing low cost or differentiation competitive advantage strategies. Sound like a familiar place?
Blue oceans
Blue oceans refers to the unknown market space. In Blue Oceans demand is created and this makes your competition irrelevant which in turn offers enormous growth potential. In a blue ocean the businesses are pursuing both differentiation and low cost at the same time – known as the best cost competitive advantage strategy.
The theory sounds great, right? But is not simply a theory. Blue Ocean has been implemented by leading organizations across multiple industries and it uses a number of different tools and frameworks to successfully implement Blue Ocean in a business such as the ERRC (Eliminate Reduce Raise Create) matrix tool as part of the Four Actions Framework to help break the value-cost trade off and form a new strategic profile for the business. Honestly, it’s one of the most enlightening, and thought provoking strategies out there at the moment and should be on your list of things to look into if you haven’t already done so!
Blank and Ries
In 2010 the Lean Startup methodology hit the startup arena. This was a fresh and innovative approach to how startup tech companies would traditionally launch a product, and it was developed by Eric Reis who was influenced by Steve Blank’s thoughts on the lean approach which was encompassed in the book by Eric Reis titled, The Lean Startup which was published in 2011. The major difference between the Lean Startup approach and traditional approach to developing a product or service is that with the Lean Start testing of a MVP (minimum viable product) which focusses on core value is gauged with customer feedback. By building the prototype (MVP) quickly, forming a feedback loop from customers early on in the design process, the business can pivot if required by making any iterations that are required to improve the market success of the product or service.
This strategy naturally reduces the financial risk involved in creating a product or service using the traditional approach which entails creating a business plan based on an idea you have developed with little interaction with your target customers, pitching the idea to investors, build a team, launch and sell as much as you can. This is a infamously known as the hit-or-miss approach because you may think you have what customers need, but many times a product will flop because you have failed to test any hypotheses that you have come up with about customer needs.
Lean startup is all about customer validation before launching and it is a great strategy for entrepreneurs because it offers them the chance to fail fast, fail cheap and start the process all over again. It teaches businesses to be more agile, and the aspect of agility was inspired by Toyota’s agile approach to manufacturing, known as lean manufacturing.
Even though Lean Startup is still the preferred method for startups, it is now being implemented by major companies from diverse industries, especially as a part of their innovation initiatives.
There are others who we could also mention, and there are models and frameworks which we could delve into further, but we’ll keep that for future articles! ??
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