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In response to accelerating globalisation, competition and technology disruptions, many companies are revising their strategies or developing new ones. Increasingly, many managers across the organisation are involved in both strategy formulation and execution. Robert Thong, co-founder of Unleash, clarifies a few common misconceptions and essential truths about strategy
“Anchors” are essential but are not strategy
How often have you heard “our strategy is double digit growth” or “our strategic intent is to be the No.1 player”? Are these sound strategies? In fact neither are strategies, they are goals. Of course any strategy needs to be anchored in an overarching objective. Similarly, strategy can (and should be) anchored in values (eg Coca Cola’s “leadership, collaboration, integrity, accountability, passion, diversity, quality”) or mission (eg Amazon’s “be earth’s most customer centric company”). But these are not “strategy”, merely its business anchors, albeit important.
Strategy needs to guide focused action
Strategy should guide action – what you are doing, how you are going to do it, and what you are not doing. A key requirement when formulating strategy is selecting market space ie which customers, who to compete against, and where. Another key requirement is being clear how you will do it eg by deploying specific skills, technologies and assets in specific business processes.
Good Strategy needs differentiation and often goes beyond best practice
Strategy is based on the notion of competitive advantage and differentiation ie how you will be better. Good strategy derives from realistic and relevant differentiation – can you really be different? Will it impact your goals sufficiently? Does the return justify the cost?
A common trap is thinking “our strategy is to implement industry best practices”. This made sense historically when you had a protected advantage (patents, trade barriers, customer relationships, etc.) and the implementation of best practices served to maximise profits. But there are few sustainable protected situations anymore in today’s highly competitive information-rich world. And today’s best practices are tomorrow’s old practices – by the time you catch up, the other players currently defining “best” will have moved to the next level. Nevertheless, best practice initiatives make convincing financial cases as the gaps are easy to quantify. Although they may not make strategic sense at all!
More likely, if you are behind the curve, you will need to either leapfrog the competition or compete in an altogether new space which is currently uncontested.
Another common trap is “data based decision making”. We should all make decisions logically rather than politically or emotionally. But that does not mean we should bias decisions against situations where there is limited or no market data.
Many dominant incumbents have been blindsided by the above traps and lost to competitors who created new market space that had no historical precedent eg Sony Ericsson and Nokia lost the smartphone war to a company (Apple) that did not even make phones until 2007.
Strategy process is useful but is not strategy
Many people equate strategy with the annual strategic planning process and its tools such as SWOT assessments, market/competitor analyses, balanced scorecards, strategy offsites, 5-year financial projections, etc. You can have a streamlined strategy process which runs like a well-oiled machin and yet produce poor strategy. The key is to focus on the quality of the inputs and creative “stretch thinking”, rather than on how many numbers are generated to great degrees of spurious accuracy.
Strategy is an adaptive journey
Fuelled by technological advances and internet-enabled social changes, the future actions of customers, competitors, suppliers and regulators are impossible to predict accurately. The concept of “sustainable” competitive advantage is under siege. In many industries, change happens so quickly and unexpectedly now that 5-year strategic plans rarely pan out. Some aspects will be better, some worse, and some just different! Investing in ever more market research or the foresight of “experts” does not help as some things are just not knowable in advance. The true sustainable competitive advantage comes from the ability to adapt your strategy in real time as things emerge, staying focused on the goals rather than any preconceived notions of exactly how they will be achieved. More than ever, strategy formulation and execution are increasingly merged into one dynamic continuous process. This does not imply a purely opportunistic approach – you still have to set a direction and pursue various differentiators. But it does mean that you have to navigate in an adaptive way, recovering from unexpected setbacks and seizing unexpected opportunities as they arise.
Robert Thong is the chairman and co-founder of Unleash, a disruptive innovator in the management education and consulting industry.
Robert will be running a workshop on “Strategy DOs and DON’Ts” as part of the ILM Masterclass Programme on Wednesday 29th January 2014. Read his blog (www.scitechstrategyblog.com) or follow him on Twitter (@SciTechStrategy).
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