It is Time to Assess Your Strategy
How often does your company really think about strategy? Does your company really have a strategy? Many companies claim they do have one, but it fails to answer some of the basic questions. Take a short test to see how your strategy measures up.
What is strategy?
There is no one single, all-encompassing definition of strategy. As The Economist noted in its March 1993 issue, “Nobody really knows what strategy is.” Professor Henry Mintzberg, renowned scholar, cites five ways to define a strategy. Some managers think of strategy as a plan to be executed; some see it as a ploy to outmaneuver a competitor. You can also think of a strategy as a pattern that becomes visible once you analyze a company’s actions. Many see a strategy as a position with respect to competitors or markets. Strategic thinking is a mindset of how to perceive the world.
The word strategy comes from the ancient Greek for “general,” specifically for a general on campaign on the field. Cynthia A. Montgomery refers to this definition in her book The Strategist. She stated, “In business, strategy is a company’s campaign in the marketplace: the domain in which it competes, and what it wants to accomplish.”
Whatever your definition of strategy is, it has little value if it does not offer you the backbone and guidance you need every day when you need to make decisions. When you have a solid strategy, you know whether you should submit a certain bid, start a new client relationship, or expand to new business areas.
Do you really have a strategy?
If you have defined your company’s strategy in writing, take a close look at the document. If your strategy is more like a mindset, this might be the time to write it down. See if you can find answers to the following questions from your strategy. These questions are based on D. C. Hambrick’s and J. W. Fredrickson’s excellent article “Are you sure you have a strategy?” published in the journal Academy of Management Executive, 2005, Vol. 19, No. 4.
1) What are your arenas—where are you active? These can be market segments, geographic areas, project types, core technologies, and so on. For example your arena could be health care facilities in the east coast or renovation of demanding water-crossing bridges and railway bridges. If you try to be everything to everybody, you’ll likely fail.
2) What are your differentiators that allow you to win in our target arenas? Some alternative differentiators include special expertise, speed of execution, superior cost-efficiency, or customer intimacy. In today’s hectic business environment, creating a sustainable differentiator is difficult.
3) What are your vehicles to achieve success? They could be—among others—internal development programs, joint ventures, licensing or franchising programs, alliances, or acquisitions.
4) What is your staging and pricing? What is the sequence and speed of strategic moves? Do you serve small clients and gradually try to move into larger projects? Are you local, but plan to be national, or international? Some companies want to move one step at a time; others want to leapfrog to a new level.
5) What is your economic logic? How do you tie all the pieces together in a way that satisfies your key stakeholders? For example, you could be able to offer the lowest price through scale advantages or through scope and replication advantages. Alternatively, you might have premium prices due to unmatchable service or proprietary service features
If your strategy answers these basic questions in an unambiguous manner, you should be proud. I’ve seen too many strategies fail to pass this simple test. If you were uncertain about any of these questions, now is an excellent time to closely review your strategy.
Photo: iStockphoto