Given the relevance and timeliness of Michael Porter’s advice on strategy during tumultuous times, I began my first blog post (which was originally entitled “Strategy in Action”) with that material because it really hit home for those of us working day-to-day in one of the most distressed industries – insurance.
At this juncture, I think it is important to take a brief “step back” and lay a bit of a foundation before delving further into a down-in-the-trenches, best practices approach to strategy and execution.
During most, if not all of my 25 years as a practitioner of the art and science of strategic planning, there has been confusion about what strategy is and how it differs from other elements of a strategic plan such as: objectives, goals and tactics. So, before moving forward into the realm of strategy development (which I will surely do in this blog), it is important to understand a few definitions.
So, what exactly is Strategy?
As a student (and now a reporter on the subject) I can tell you that there are many different perspectives on the subject of strategy. Some of my favorites are presented here – from the broadest to the simplest definitions:
Merriam-Webster begins with a classic definition of strategy from a military perspective and then gets a little closer (but not by much) to a definition that can be applied to corporate or business strategy:
1. a. the science and art of employing the political, economic, psychological, and military forces of a nation or group of nations to afford the support to adopted policies or war. b. the science and art of military command exercised to meet the enemy in combat under advantageous conditions.
2. a careful plan or method; a clever strategem; the art of devising or employing plans or strategems towards a goal.
According to this Merriam-Webster Dictionary definition – strategy requires the following ingredients: science and art, careful planning, support, cleverness, advantageous conditions and employing plans toward a goal.
In terms of corporate and business strategy, there are a quite a few definitions that I have come across:
In Blue Ocean Strategy, the authors challenge companies to strategize to “break out of the red ocean of bloody competition by identifying and developing uncontested market space that makes competition irrelevant”.[2] A little dramatic but their point is well made and I recommend their book as it has plenty of good case studies.
Michael Porter, in his classic 1996 Harvard Business Review article called “What is Strategy?” defined strategy in terms of positioning which can be summarized by 3 key principles:
- Creation of a unique and valuable position, involving a different set of activities than your rivals.
- Making tradeoffs in competing – choosing (and defining) what you will not do.
- Creating a “fit” between company activities so to develop synergies (as a result, the whole being greater than the sum of the parts) between interlocking parts of the company. (Porter, 1996)[3]
If you are involved in strategic planning in anyway, this article is a “must read”. In the book entitled: Understanding Michael Porter the definition of strategy is further refined to the following:
“Strategy explains how an organization, faced with competition, will achieve superior performance.”
Magretta, Joan (2011-11-22). Understanding Michael Porter: The Essential Guide to Competition and Strategy (Kindle Locations 268-269). Perseus Books Group. Kindle Edition.
Meanwhile, the Balanced Scored Card folks (Robert S. Kaplan and David P. Norton) define strategy as: “how an organization intends to create sustained value for its shareholders, leveraging intangible assets for sustainable value creation.” (Norton, 2004)[4]
And, in his seminal direct marketing handbook Ed Nash defines strategy as it relates to direct marketing in this way as simply: “Harnessing combined resources to achieve a selected goal”[5]
No matter what definition applies to your organization, in any business there are two levels of strategy:
1) the corporate or enterprise-wide strategy and
2) the business level strategy (that covers a division, SBU or functional area).
So, how does a Strategy differ from Objectives, Goals or Tactics?
Objectives:
“a. something toward which effort is directed; an aim, goal, or end of action.
b. a strategic position to be attained or a purpose to be achieved by a military operation[6].”
and in my view, they are simply goals set to develop and improve the growth and profitability of your business.
Goals: same as an objective or can serve as a subset of an objective. Merriam-Webster defines it as: “The end toward which effort is directed”[7]. So a goal can be thought of as a destination or a finishing line of sorts.
Tactics: the art or skill of employing available means to accomplish an end; a device for completing a task relating to a strategy. [8]
In my next posts, I will cover the best practices of the strategy development and the very important execution process from which successful businesses are built.
Essentially, there are four pre-requisites to successful strategy development and execution:
1) The need for sound planning and clear, focused strategies at both the corporate and business levels.
2) The vital importance of integrating corporate and business strategies and conducting strategic reviews.
3) The need to define and communicate clearly the key operational components of the strategy and the measurement of execution results.
4) The importance of understanding the demands of strategy, their effects on the development of organizational resources and capabilities, and the impact of the resources and capabilities on execution. [9]
The 4th prerequisite is what Michael Porter called “Trade offs” that must be made with any strategy since good strategies necessarily consume limited resources.
In a nutshell, a strategy sets direction for the organization, focuses effort and concentrates resources, deals with a changing environment either internally or externally, helps define the organization through a mission, values and intent and provides a level of consistency for stakeholders – employees, clients, customers, the board of directors, partners and vendors.
Page 16 of “Strategy Safari: A Guided Tour Through The Wilds Of Strategic Management by Henry Mintzberg, Bruce Ahlstrand and Joseph Lampel features this excellent summary of what strategy is:
THE STRATEGY BEAST: AREAS OF AGREEMENT
(adapted from Chaffee, 1985:89-90)
- Strategy concerns both organization and environment. “A basic premise of thinking about strategy concerns the inseparability of organization and environment. . . . The organization uses strategy to deal with changing environments.”
- The substance of strategy is complex. “Because change brings novel combinations of circumstances to the organization, the substance of strategy remains unstructured, un-programmed, non-routine, and non-repetitive.”
- Strategy affects overall welfare of the organization. “… Strategic decisions. . . are considered important enough to affect the overall welfare of the organization….”
- Strategy involves issues of both content and process. “. . . The study of strategy includes both the actions taken, or the content of strategy, and the processes by which actions are decided and implemented.”
- Strategies are not purely deliberate. “Theorists . . . agree that intended, emergent, and realized strategies may differ from one another.”
- Strategies exist on different levels. “… Firms have . . . corporate strategy (What businesses shall we be in?) and business strategy (How shall we compete in each business?)”
- Strategy involves various thought processes. ” . . . Strategy involves conceptual as well as analytical exercises. Some authors stress the analytical dimension more than others, but most affirm that the heart of strategy making is the conceptual work done by leaders of the organization.” [10]
If you are interested in the topic and are a practitioner of strategy development you can access a whole series of .pdf formatted and downloadable strategy articles at Harvard Business Review at:
http://hbr.org/product/hbr-s-must-reads-on-strategy/an/12601-PDF-ENG?referral=00304
I sincerely hope that you can apply some of this information in your planning efforts. Comments, suggestions and additional perspectives on Strategy and Execution are welcome!
[1] Merriam-Webster Online Dictionary. See http://www.merriam-webster.com/dictionary/strategy
[2] (Kim, 2005), Blue Ocean Strategy, Harvard Business School Press, Boston, MA, 2005.
[3] What is Strategy?, Michael Porter, Harvard Business Review, 1996.
[4]Strategy Maps, Robert S. Kaplan and David P. Norton, Harvard Business School Press, Boston, 2004.
[5] Direct Marketing: Strategy, Planning and Execution, Ed Nash, 4th Edition published by McGraw Hill
[6] Merriam Webster Online Dictionary
[7] Merriam Webster Online Dictionary
[8] Merriam Webster Online Dictionary
[9] Hrebiniak, Lawrence G. Making Strategy Work: Leading Effective Execution and Change, Wharton School Publishing, Upper Saddle River, NJ. July 2005.
[10] Strategy Safari, by Henry Mintzberg, Ltd., Bruce Ahlstrand, and Joseph Lampel THE FREE PRESS, A Division of Simon & Schuster Inc., 1230 Avenue of the Americas, New York, NY 10020. 1998. Page 16.
Related articles
- There’s no quit in Michael Porter (management.fortune.cnn.com)
- Oct 5, Value Chain Analysis and a Value Chain Example (more-for-small-business.com)
- Managing Assumptions, Risks and Impediments In Strategic Planning (vistage.com)
The Savvy Strategist (tm) 
Bill,
I greatly enjoyed this article and look forward to your subsequent posts. Good luck with the blog!
Leigh
Strategic and operational (or tactical) planning are hopelessly intertwined. One cannot have a strategic plan that is not operationally employable. One cannot have an operational (or tactical) plan that is not based upon a rational strategy. I suppose one can in either case but what would be the point?
Strategic & operational planning are different beasts but must be exercised in tandem. In conducting such exercises, I always find myself bouncing back & forth between the two.
Bill,
We have been involved in “strategic planning sessions” whether in the workplace, or serving on a board, and many times the discussion quickly become tactical in nature. Three hours later after the point has been discussed ad nauseam the group is no further ahead in crafting their strategic plan. The challenge for most organizations is that without a professional facilitator or an internal person who has the ability to keep the discussion a high level, it is very easy to go from the 30,000 foot discussion to the ground floor. Too often goals/objectives which support the strategic plan, and tactics which support the goals and objectives, and ultimately the strategy become the focal point of “strategic planning”. If this scenario is all too familiar, you should consider a professional facilitator to lead your “strategic planning” sessions-if the facilator is good, the meeting becomes far mor productive, and the subsequent meetings (plan building-goals and tactics and milestone), are that more productive as well as the group has a clear vision to build their plan around. Bill Tyson is one to consider for this type of project.
Great blog! This nicely sums up strategy and some of its varied definitions and how it relates to objectives, goals and tactics.
Great blog ,Bill! This is a great post that lays the groundwork for a rich discussion on strategy. I would argue that there is a third level of strategy under the first two you set forth — a campaign or initiative level strategy. Too often organizations go straight from a business unit level strategy to a laundry list of tactics. These tactics then fail to deliver on the BU level strategy, as they have no common focus or prioritization. By planning initiatives or campaigns specifically designed (with strategies!) to meet the goals and objectives of a BU strategy, I think organizations see much higher levels of success.