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What is strategy, anyway?

The Strategy Institute operates in the field of organisation strategy, sometimes called business or corporate strategy. It is the thread that runs through every successful enterprise be it the government, a major manufacturing enterprise, Adderley Street flower-seller or your local hairdressing salon. An organisation is any group of one or more people performing activities that generate a return.

The most valuable use of strategy insights is for managers who are running clearly defined organisations or private sector businesses. If you are one of them, knowledge of strategy can:

  • help you define the different parts of your organisation, where you need to do different things to be successful
  • show in detail where you make the most return, as profits or cash or the general public
  • understand the customers' perspective and why they use your services over those of others, or competitors
  • indicate where you should concentrate most effort and resources
  • identify likely performance improvement by changing product/customer mix, prices and/or cutting costs
  • help you to understand why you have been successful or unsuccessful in particular areas and initiatives
  • show up any missing skills
  • identify areas or product lines which should be discontinued or divested
  • show which customers should be cultivated most and how to build loyalty
  • identify whether it is appropriate to make acquisitions, and, if so, what kind
  • indicate the importance and most appropriate way of expanding

The elusive output of effective strategy is sustainable public value (for the government sector) or sustainable competitive advantage for the businessman.

Where did the concepts come from?

In the late 1950's Chandler maintained that corporations should develop their strategy before deciding on their structure. He defined strategy as the setting of long-term goals and objectives, the determination of courses of action, and the allocation of resources to achieve the objectives. Sloan and Drucker were also early protagonists. Drucker concluded that successful companies were centralised and good at goal-setting and defined the purpose business as creating and satisfying customer needs. In the 1960s Levitt and Anshoff created blueprints for focus, objectives, expansion, product-market positions and resource allocation. The Boston Consulting Group invented the experience curve and the growth/share matrix, two powerful tools.

In 1980 Porter from Harvard published a book on competitive advantage in which he argued that the profitability was determined not only relative competitive position but also by structural industry characteristics, or the "position-based" theory. Ohmae, described how Japanese companies benefited by using strategy combined with analysis, intuition and willpower in the pursuit of global dominance. More recently Hamel and others have posited that successful organisations have strong ambitions and a commitment to change the rules of the game. Their core competence theory proposed that the real key to strategy was a firm's distinctive skills, technologies and assets and its collective learning ability. This is known as the "resource-based" view of strategy.

These foundation concepts, together with a few new insights, continue to guide strategy formulation today.

Whose responsibility is it?

It is no use one set of people drawing up a plan, making recommendations and monitoring their implementation by another set of people. The world does not work like that.

An effective strategy has to be adapted to real-life relationships between people (employees, customers, suppliers and other stakeholders. It is gradually introduced and crafted and re-crafted as circumstances change, and the validity of the underlying assumptions is tested, proved or disproved. The strategic process is only likely to be successful if those pursuing the strategy not only understand and believe in it, but also have the authority and confidence to develop and/or dump parts of it as public or commercial life evolves. Unfortunately strategy development is rarely done by the right people.

Operational or Business Unit Strategy should be developed by operating managers in each Unit. Corporate Strategy is normally developed by the Council, Board or executive management but should be influenced, checked and approved by a cross-section of the best unit managers. Strategy consultants may or may not be involved.

Implementation is critically affected by how effectively the strategic plan is bought into, or "owned" by those called upon to make it a reality.

What are the benefits?

Potential benefits of effective include:

  • Identifying short and long term remedies for firms in financial crisis
  • Showing when a firm is at a turning-point, and which way it should turn
  • Finding appropriate acquisitions that will enhance shareholder wealth
  • Providing a system for successfully integrating acquisitions and improving performance
  • Highlighting which businesses have the greatest value, which should be developed and invested in, and which should be sold or closed.

Incorrectly used, Corporate Strategy can wipe out value, even leading to a firm losing its independence or going insolvent.

The most common disadvantages of Corporate Centre Strategy can involve:

  • Destroying the motivation and sense of personal responsibility for success felt by operational unit managers
  • Adding to a firm's costs of complexity, and creating a bureaucratic morass that restricts and slows down responsiveness

Where do I go from here?

You may have in you what it takes to get your executives together and talk about your business. Write up the findings. You may elect to use an experienced strategy-aware facilitator. This external person adds objectivity, gets all to participate and often provides useful ideas for effective implementation. Strategy Institute executives have been doing this work since the mid-1980s. Ask for a quote from your facilitator service provider. This is free.

2017 - 2020

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