What makes a good strategy?

Competing in a red ocean and the resultant lack of profitability is a self-inflicted wound and a resultant of poor strategy. Firms today find it difficult to translate their strategy into sustainable profitability or market share gains simply because they try to do too many things without making hard choices on maintaining viable competitive positions.

So, what are some of the key questions that can guide managers to make the right strategic choices and coherently definite their company’s strategy?

1. Are we consciously choosing to do different activities from rivals or performing similar activities but in different ways? If so, what are these activities, and will they be rewarded by customers with better price points?

2. Despite being a cost leader, are we continuously investing in improving customer experience and product quality? Are the tradeoffs that we make between cost and quality an indication of poor operational effectiveness?

3. Is our gain in productively improvements majorly captured by our customers and suppliers or is it leading us to superior profitability and improved market share? Are we just copying competition or are these gains resultant of superior innovations? 

4. Are we constantly looking at ways to dominate our business or are competing in races down identical paths that no one can win? Does our products and services look alike with what our competitors provide?

5. Are we clear about the customer segment or sub-segment that we operate in and does our activities, price points, processes & people align to meet this customer segment need? How do we deal with segment overlaps?

6. Do we follow a variety-based or a need-based or an access- based positioning strategy? Is the source of our competitive advantage cost, focus or differentiation? Are we trying to be everything to all customer segments or are we clear about our strategic choices?

7. Can our competition easily copy or straddle our strategic position without undermining their own competitive strength in the market? Are we making hard tradeoffs to make it unattractive or difficult for competition to imitate us?

8. Is there a 'Fit' between the activities that we perform and the strategic positioning that we have chosen? Better still, does one activity reinforce other activities that we have chosen to do thereby strengthening our competitive advantage?

9. Is our growth imperative eroding our strategic position? Are we going too broad vs deepening our focus to develop 'Fit'? Are our decisions for short term gain taking over our long-term thinking and are we staying consistent with our overall mission?

10. Are we launching too many products, initiatives, entering too many segments and as a resultant losing our uniqueness? Are we doing enough to communicate our strategy and teaching our teams to say ‘No’ while making operating decisions?

In summary, a good strategic position can be communicated boldly and coherently without the risk of imitation by competition as it is based on a close knit of interconnected, consistent and reinforcing set of activities that is unique to a company. Managers must make the right trade-offs and stay consistent to avoid confusion amongst customers, gain market share and ensure sustainable profitability. 

Reference:

1.    What is strategy? by Michael Porter