After breaking the ten most important myths about strategy in my recent series of articles, I owe an answer to the question as to what strategy is and how organizations are supposed to deal with it. After all, if strategy is not what we thought it was, what is strategy then? Let me, therefore, start with giving a definition.
Of course, the question of what strategy “really” means is an extremely pretentious one. There are almost as many definitions of strategy as there are authors writing about it. So, I am certainly not going to give you the unquestionable, final and all-encompassing definition of strategy. There is no such thing. But nevertheless, I think it useful to add another perspective to the discussion and give my definition.
(A caveat: I have written about this before in Part 1 of The Strategy Handbook. Therefore, most of what you read below is directly derived from what I wrote there. Furthermore, my definition is not new or unique in all its aspects. Amongst others, it builds on the work of giants like Michael Porter and Henry Mintzberg. But yet, it does offer a different emphasis that makes a difference.)
Stripped down to its very essence, strategy is an organization’s unique way of sustainable value creation. To understand what this means, let’s look at this definition part by part.
Strategy aims at creating something that has value and that matters to particular people or organizations. This means that your strategy expresses what value your organization creates and for whom. Organizations primarily create value through their products and services. This is what they produce, and as such this can be seen as their main reason of existence. Therefore, value creation is about the value an organization creates through its products and services (their “value proposition,” if you like). Customers buy these products or services because they fulfill a particular need or desire. Since customers may buy them for very different reasons, value is subjective. People may strongly disagree about what is valuable and what not. Because of this subjectivity, a proper strategy indicates for whom value is created.
Strategy aims at value creation that is sustainable over time. This doesn’t mean that it holds forever or that it is necessarily stable over a very long period. However, in the end, you develop a strategy for the future, which means that if it is not at least a little bit sustainable, it doesn’t really qualify as a strategy. Being sustainable means in the first place that a strategy should be hard to copy or circumvent by others. Otherwise, you might be out of business before you even implement it. Sustainable also means that you receive enough in return for the value you create—money, data or anything else that is valuable. This makes sure that you capture enough value so that your organization can survive, prosper and grow. Thirdly, a strategy is sustainable if it doesn’t rely too much on resources that are easily depleted. The reason is simple: if a strategy relies on resources that are soon gone, this strategy cannot be sustained. Finally, to be sustainable, a strategy needs to take into account the interests of important stakeholders such as customers, suppliers and employees. Since you depend on them, their interests need to be taken into account for a strategy to be sustainable.
Good strategy aims at doing something different from others. This doesn’t have to be 100% unique. Preferably not, because no one would even understand what you are doing if you are trying to be so unique. However, strategy should have at least some unique elements. One of the key purposes of strategy is to distinguish yourself from others so that you somehow stand out and give customers a reason to pick you rather than your competitors. This uniqueness can be in anything. It could be the quality of your product, the way you deliver it, the degree of customization you offer, or even the price you ask. As long as there is something. And it doesn’t have to be unique in the world. As long as it is unique in the market that is relevant for you, you should be doing fine.
Strategy is not just a set of goals or plans. Neither is it a statement or a slogan, or limited to what is written down in official documents. Your true strategy appears in what you do; in your organization’s processes, actions, and routines and in the way it is organized. Seen as such, strategy is an ongoing and active process that is lived by the organization on a daily basis. Thus, much more than a piece of text, strategy is a way of doing something–a unique way of sustainable value creation. Excluding the idea of strategy necessarily being planned or formulated from the definition enables us to talk about different types of strategy: your actual strategy, your ideal strategy, your intended strategy, your alternative strategy, your failed strategy, and so forth. All of them are strategy, but of different kinds. And in one way or the other, they do refer to the unique and sustainable way your organization creates value.
So, whenever you ask yourself or someone else what their strategy is, you are asking: what is your unique way of sustainable value creation? Think about this for a moment. Do you have a satisfying answer? Do you have a clear strategy?
This post was published earlier here on my forbes.com page.
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