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What is strategy?

Updated: Oct 10, 2023

'Would you tell me, please, which way I ought to go from here?'

If there was one lecture at university that impacted my professional path more than any other, it was Mark de Rond’s very first ‘Introduction to Strategy’ at the Judge Business School. He posed the question ‘What is Strategy?’ to the assembled students, and received a few volunteered answers, which were all in the right postcode but didn’t quite seem to nail it.

He then put a cartoon on the screen, an excerpt from Lewis Carroll’s Alice in Wonderland. In the picture, Alice is attempting to find her way home when she is met by the magical Cheshire Cat, and asks him ‘Would you tell me, please, which way I ought to go from here?’, to which the Cheshire Cat answers, ‘That depends a good deal on where you want to get to’.

What is strategy?

Professor de Rond argued that at its essence, business strategy is the answer to these two questions: where are you trying to get to, and how are you going to get there. This definition has stayed with me, and has shaped every strategy consulting project, strategic review, and investment case I’ve worked on since. I am drawn to its simplicity and obvious common-sense qualities. In a sea of buzzwords and stilted AI-generated content, this short passage from Lewis Carroll could well be one of the best (unintentional) pieces of business writing.

The question ‘what is strategy?’ is one that is worth revisiting if your business is about to start a business planning process, or if you are developing a value creation plan. A strategy is not the set of detailed initiatives you will no doubt come up with, nor is it a financial model with its underlying assumptions. It is a set of choices, revisited periodically, that should shape every aspect of how a business operates and how it is structured.

Where to play and how to win?

I think Alice’s question maps directly onto my favourite language for framing strategy development - ‘where to play and how to win’. This originates from the work of Michael Porter on the theory of Competitive Strategy – that to succeed a business must deliberately chose a different set of activities (to competitors) to deliver a unique mix of value to customers.

Using this approach to setting business strategy entails making two types of choices:

  1. The proposition of a business – such as the markets and customers a business will serve, the products & services it will provide, how it will charge for these services, and how it will grow (for example undertaking M&A and/or focusing on organic growth); and

  2. The advantages a business has or can build vs its competitors that will allow it to ‘win’ – such as unique intellectual property, access to the best talent, sourcing advantages, a superior brand or reputation, and operational excellence.

Of course - these choices are not made in isolation; you should logically choose to play where you have at least some chance of ‘winning’. To quote Michael Porter, ‘the essence of strategy is choosing what not to do’. This is a helpful way to ensure a ‘tight’ definition of the market you are trying to serve, which in turn can lead to real clarity on your sources of competitive advantage. Most of world’s largest companies today started out just trying to serve one market where they built a clear competitive advantage (Amazon > books, Google > search, Microsoft > PC operating system).

There are some common traps to avoid with this approach to strategy as well. There are many examples where businesses have assumed that the advantages that allowed to win in their existing markets would be the same in a new market, most commonly when expanding into a new geography for example Tesco in US, BestBuy in the UK, or Starbucks in Australia.

What does it mean to ‘win’ in strategy?

The definition of ‘winning’ will be different for each business and is dependent on the timeframe we are considering. Some common factors that I think define ‘winning':

  1. Gaining market share / growing faster than market – the clearest sign that a business has some form of competitive advantage.

  2. Top quartile profitability among a set of relevant competitors – to prove that a business is not ‘buying’ market share growth and that growth is sustainable.

  3. Clear path for future growth – current success is not just a ‘flash in the pan’.

  4. Meeting the needs of different groups of stakeholders: shareholders, customers, employees, community.

If you can demonstrate success in these areas, then it is safe to say you are probably ‘winning’ and that any investors will be happy!

So if you are about to start a strategic planning process, develop a value creation plan or start a strategy consulting project – take a lead from Alice in Wonderland and ask 'would you tell me, please, which way I ought to go from here'.

If you’d like to discuss how you can create a strategic plan for your business, please Contact Me.

All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.



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