What is Strategy?

Believe it or not, most people, including so-called industry experts and academics, are confused between a "strategy" and a "plan."

In most cases, most people think that they are talking about corporate strategy when they are merely talking about corporate planning.

Let me explain.

When you have a strategy, what you want to do is usually to create some kind of competitive advantage over your competitors, or you pre-empt the market so that you can win as many customers as possible.

While you also plan to beat your competitors and win customers, the key differences here lie in the ability of your competitors to react and respond and how you will respond to your competitors' responses.

Take an anecdote from the great martial artist Bruce Lee. Bruce Lee was observing some Karate exponents training to make their fists harder by hitting and breaking rocks. Curious about the practice session, Lee asked the Karate exponents, "Isn't it straightforward to learn to break rocks? Rocks don't hit back!"

My point is: are you taking the assumption that your competitors are not responding to your strategy? If yes, then you merely have a plan, not a strategy.

Strategy as a Game

Beyond the business world, most people would associate a strategy with warfare. I prefer to illustrate strategy using more peaceful means such as playing chess or taking penalty kicks in a soccer game.

In a soccer tournament, if the 2 competing teams cannot establish a loser, the teams will take turns kicking a ball into a goal from just 12 yards away. The goalkeeper is the only obstacle between the opposing player and the goalpost.

Since it will depend on pure reflex actions, the goalkeeper must guess which direction the player is kicking the ball. The teams would also develop a strategy by guessing what is on the goalkeeper's mind and hope to send the goalkeeper diving in the wrong direction.

This strategy is usually dynamically evolving until all the necessary players have taken their shots at goal. Usually, the first player will choose a direction, either left or right. Then his coach and teammates observe which direction the goalkeeper dives and then formulate another decision to go left or right.

Sometimes, if the goalkeeper figures out that the opposing teams are kicking the balls, the next opposing player may send the ball down the center. The reason is that the goalkeeper will be diving either left or right. However, if the ball is sent to the centre, it catches the goalkeeper completely off guard.

So how does the above apply to the game of business?

The most often quoted example is when companies try to establish what Michael Porter terms cost leadership. The resulting actions from competitors are likely to slash prices as well, resulting in a price war. While in most cases, the companies that are the strongest financially can outlast the rest in a price war. Usually, no one emerges as the winner, not even the customers.

Besides those who went out of business in a price war, the survivors usually suffered great reductions in their profits. Customers lose out when companies cut corners with lower product and service quality as the competing companies slug it out.?

The underlying threat to all businesses is not the price wars nor the fierce competition. Instead, the consistent threat is the propensity of competitors to adopt "copycat" strategies, which makes everybody a loser.

Establishing Win-Win Strategies

Strategy is not just about analysing competitors' responses. It is also about how common interests can be aligned so that all parties can benefit from this arrangement.

The entire IT industry is the epitome of such strategic alliances. Microsoft can only release its latest versions of Windows when Intel produces a better chip. Microsoft can be successful when the primary personal computer manufacturers agree to ship their computers with pre-loaded Windows systems. Even SAP, which is supposed to be the one system that manages everything, also runs on Windows. The result is a win-win situation for all. By leveraging the world's most popular PC operating system, software manufacturers can reach out to many more computer users—even bitter enemies such as Apple partners with Microsoft.

However, such strategic alliances are very fragile, especially for smaller companies. If, for example, there are 2 courier services in town, and each one of them specialises in the eastern and western part of the town respectively. The 2 courier services decide to partner so that they could get more clients. If the Eastern courier gets a business for the Western courier, he will pass over the contact and perhaps get a referral fee, and vice versa.

You may be inclined to find that such win-win arrangements should be long-lasting. However, the opposite may be the case. If the Western courier happens to have 5 times more business than the Eastern courier, the Eastern courier may be tempted to "steal" some of these contacts and expand to the west. This will make the Western courier very upset, and that may be the end of the partnership. Such considerations may include why certain businesses are not inclined to form alliances.

In the case of Microsoft, it will be less inclined to venture into hardware manufacturing (other than Microsoft Surface and Xbox), partly because by doing so, it will be diluting its business focus, which is software.

The more significant reason is that Microsoft probably takes a long-term view of its alliances with its partners and decides that working as a loose strategic alliance will give everybody the chance to specialise in each company's strengths. Microsoft is also dominant enough to ensure none of its partners dare to break the alliance arrangements, keeping everybody in line.?

Survival in the Era of Insurgents

As mentioned earlier, you cannot formulate a strategy without anticipating competitors' responses, suppliers, partners, substitutes, new entrants, and customers.

Traditionally, most strategies revolve around competitor analysis. Nowadays, the more significant threats are substitutes and new entrants, who may be missing on your radar screen.?

If you want to formulate a winning strategy, I suggest you start with your customer first.

No matter what product or service you sell, your customer's acceptance will be the most important of all. To reach out to customers effectively, you need to define your Unique Selling Proposition (USP), which in simple terms, would make your customers buy from you and not from someone else.

Your USP can be defined when you find out the needs, wants, and concerns of your customers that are not fulfilled by you or your competitors yet. Unlike Porter's suggestion to analyze competitors' strengths and weaknesses, a focus on providing unfulfilled benefits to customers is likely to give you higher chances of Marketing success. By focusing on the unfulfilled benefits to your customers, you can also catch a glimpse of your substitute's products and possibly new entrants to the game.

The next thing is to make sure you launch a blitzkrieg or surprise introduction of your new products and services to as many customers in the shortest possible time.

As in all strategy formulation, stealth is critical to your success. However, when you start to market, you will have to give out crucial information to your competitors and customers. To overcome this, you would have to plan a few steps ahead. You would have to anticipate how long it would take for your competitors to respond and in what way they would respond. Remember, your competitor is not a piece of rock.

In a knowledge-based economy like this, time is of the essence. Sometimes, you cannot make the perfect product given the time allowable. Hence, companies like Microsoft tend to launch defective products and modify them along the way. According to the Pareto principle, 80% of your product's benefits can be fulfilled by 20% of those products' functions. As long as your customers can accept 80% of the product's benefits, in theory you can launch a product that is only 20% developed.

Besides allowing you to launch products rapidly, it also allows you to throw your competitors off their track. When your competitors introduce a copycat product into the market and start undercutting each others' prices, you have further developed your product, thus moving several steps ahead of your competition.

In addition, time, as well as other resources, ought to be well managed creatively. If you have 2 cows, and your business is milking cow's milk to sell the milk in the market, what you can do to multiply production exponentially is to sell 1 cow and buy a bull!

Conclusion

While most management textbooks emphasize that a strategy is dynamically evolving, the tools and processes discussed are usually meant for static plans. The success of any strategy lies not just in having information about your competitors but, more importantly, in anticipating how your competitors will respond to your actions.

In closing, here is a joke that was found on the Internet, which illustrates the process of a dynamically evolving strategy.

A duck hunter was waiting in an open field near a pond when a covey of ducks flew over at a low altitude. Aiming carefully and quickly, he fired, and down fell a duck. As he and his faithful dog approached their kill, a rather imposing-looking farmer appeared and motioned to the hunter to stop.?

The 6' 6", 245 lb. farmer asked the hunter what he thought he was doing.

"Well, I'm hunting ducks," he replied to the farmer's question. "I just killed one, and now I'm going to pick it up and put it in my bag."

The farmer then stated that the duck was not the hunter's because "I own the land and the sky over it; Since the duck fell on my land - I own the duck!"

After a short but spirited argument, the hunter and the farmer could see that neither was willing to give up the duck to the other. The hunter then offered a remedy to the problem. He said, "In the age of the Vikings when problems such as this arose, the two arguing Vikings would agree to take turns kicking each other in the groin until one of them couldn't continue. The victor would then win the argument. I suggest we do this tried and true age-old remedy to settle the question about who owns the duck."

The farmer, much larger than the slightly built hunter, agreed and, in a gentlemanly gesture, encouraged the hunter to "go ahead and kick first."

Kick is exactly what he did! The hunter reeled back, and, with all of his might, he kicked the farmer right square in the groin!

The farmer immediately fell to the ground. He writhed in excruciating pain for several minutes, finally struggling to his knees. Coughing and holding his gut, he staggered to his feet, barely holding his balance. Another ten minutes passed, and still the farmer couldn't speak -- he could scarcely breathe! All the while, the hunter and his dog stood nearby, waiting for the farmer to take his turn...

Finally, when the farmer felt strong enough to stand, he muttered in a furious and determined growl, "Now it's my turn!"

He slowly regained his full massive stature and positioned himself to kick -- when suddenly the hunter said, "Nah, you go ahead and keep the duck!"

The moral of the story: before committing yourself, find out.

1. If it's worth your while;
2. Has your expected payoffs or returns changed; and
3. If you're stuck in a no-win situation, why not give it away?

c.j. is a sales performance coach and co-author of Sales Map – the only scenario-based assessment tool to evaluate the sales person’s strengths and weaknesses at every step of the B2B sales cycle.?He is a PCC with ICF, and a IAC Masteries Practitioner?.?c.j. can be reached at?https://www.dhirubhai.net/in/cydj001/ ??

c.j.是一位销售绩效教练，也是“销售地图”（sales Map）的合著者。“销售地图”是唯一一个基于场景的评估工具，用于评估销售人员在B2B销售周期中每一步的优势和不足。他是ICF的PCC，也是IAC? 的Masteries Practitioner。 你可以通过 https://www.dhirubhai.net/in/cydj001/ ?联系到C.j.。