So, What is Strategy?
Are you truly aware of the situation your company is in?
Usually, the honest answer for most companies is a simple no. While reality may or may not exist in a philosophical sense, it's simply very hard to capture all circumstances that make up the complex or chaotic environment that surrounds any undertaking. But in most cases, even a decent understanding of the situation would be sufficient to build a basis on which to act.
Strategy vs. Plans
Colloquially, the term "strategy" is often used as meaning "having a plan" or "doing something with intention". A lot of times it's used to suggest importance of a statement or action, like "this is a strategic customer". And how many meetings are there that ask for "creating a strategy" when all it means is coming up with a simple plan of going from point A to point B?
Reflecting more on it, even more companies mistake their vision and mission statements for strategy. While these are ways to model the general doctrine or identity of the company, and are often used in branding and marketing, they are not sufficient to qualify for a strategy. They are very loose, long-term boundaries in which the company might act - but too loose to inspire real day-to-day action. Every company wants to "win" in some way, every company wants to be profitable.
The Hierarchy of Strategic Thinking
In the hierarchy of strategic thinking, strategy sits between doctrine and capabilities of the company (with a larger time horizon) at the foundation, and planning and tactics (with a shorter time horizon) at the execution level. Each layer serves a different purpose, operates on a different time horizon, and requires different skills. This positioning helps us understand why strategy isn't just planning with a fancy name.
The Problem with Rigid Plans
By now it's common understanding that the rigid usage of strategy as a plan does not hold up when facing real world challenges. As Helmuth von Moltke said: No plan survives contact with the enemy.
No company and no industry exists in a vacuum. While some industries are very slow to change and more suitable to more deliberate plans, all companies need to be constantly changing and adapting at least at the rate of their competitors. There's a reason everyone tries to be agile, even though the success rate for a lot of companies at being agile is not really convincing.
The Essential Elements in Strategy
The simple truth in competition is: If you're constantly slower to adapt to changes in the environment when compared to your competitors, your company's natural trajectory is towards extinction. This element of time and rate of change is essential for the success of any undertaking as it allows a company to react and adapt - the basis of survival.
When looking at it from a purely financial perspective, being able to deliver more customer value or faster both leverage into increased revenue. At the same time, deciding where and how power is focused is another element that allows a company to improve fit in the environment - meaning that survival is not only possible but the company can be thriving.
Beyond Intuition
On the other way of the spectrum of strategy as a plan, there's companies that do not act strategically at all. Instead, they follow their intuition (which does have a chance to guide into the right direction sometimes) and gut feeling.
The big issue with that is, that over time humans have a tendency to build up biases that cloud clear judgement of their own capabilities and the environment they're in. As Daniel Kahneman explains in "Thinking, Fast and Slow," we're particularly susceptible to overconfidence bias (overestimating our knowledge) and confirmation bias (seeing only evidence that supports our existing beliefs). The more uncertain and complex a situation is, the less information is available to make decisions, and the more these cognitive biases affect strategic thinking.
The Warning Signs of Strategic Absence
Some very common signs are:
- Diffuse initiatives without clear priorities
- Unrealistic view of organizational capabilities
- Disconnection between company and customer value
- Declining business results blamed on external factors
- Not being able to name the challenges that the company is facing
If these sound familiar, your company may be planning without strategizing or relying purely on gut feeling.
What Strategy Actually Is
What is strategy, really? The business world offers different perspectives that complement each other. Porter views strategy as creating a unique position and making trade-offs about what not to do. Rumelt sees it as a coherent response to critical challenges through diagnosis, guiding policy, and coherent action. Mintzberg introduces the concept of emergent versus deliberate strategy, recognizing that effective strategies often evolve through experimentation.
Good strategy is placed somewhere between these definitions, taking deliberate action while taking the inherently emergent environment into account. It's not a plan that only works in a theoretical vacuum and not found by purely improvising through day-to-day tactics. This balance helps companies adapt at the right pace to stay competitive without losing direction.
Conclusion
Really taking the time to understand what situation your company is actually in is the basis for creating strategy and employing strategic thinking. It can very much be thought of as creating a map of the realm, where understanding the different factors contributing to the natural trajectory of the company allows to create guidelines on how to adjust that trajectory and closing the gap towards action.
This map isn't static - it requires constant updating as the terrain changes around you. The companies that survive and thrive are those that maintain the clearest view of reality, make coherent choices based on that understanding, and adapt at a pace that matches or exceeds their environment.
Posts from here on out will most likely focus on specific dimensions and more granular aspects or methods of strategy.