The hunt for strategy, but what is it really?

Volatile markets, disproved myths of infallible giants and the perpetual hunt for growth spur companies on the relentless, and often confusing, search for strategies to thrive (or for some, to survive) in the business arena. They are often inundated with a wide range of advice that draws from Sun Tzi’s war strategies, searching for unchartered blue ocean waters, analysing Growth-Share matrices, adopting traditional niche-develop-dominate-grow or modern-day adapt-and-evolve, actively shaping techniques, corporate renewal to the all-encompassing and inertially challenging palette of strategies. All of which have their own merits and gaps. But, what is strategy, really? For that we turn to the godfather of strategy himself, Michael E. Porter.

Strategy, from the godfather

Michael E. Porter, renowned strategist and Professor at Harvard University, provided us an overview of what strategy, especially at the business level, really is. He puts together notions that builds on basic elements and form the foundation which other strategies borrow from. Here, we discuss briefly the foundations that help businesses build unique, sustainable and valuable positions for themselves while debunking conventional (mis-)perceptions.

Optimising operations is NOT strategy

Any business owner or manager would know that operational effectiveness is essential to optimising resources to maximise throughput and value delivery. However, optimising operational efficiency is NOT strategy. Inasmuch as it served the Japanese well in the 80s and helped them supersede Western companies, competitors can easily emulate the management techniques, technologies, improvements and methods in serving customer needs. This in itself creates a converging competitive environment in which companies rush down identical paths that result in a scenario where everyone, including the winner, loses.

Strategise through your activities

Strategy involves the deliberate performance of different activities to differentiate yourself from rivals, or similar activities in different ways, with the ultimate goal to deliver a unique concoction that customers value. Take for example the budget airline, Air Asia. Their blend of short-range flights, second-hand aircraft, economy-only seating and pay-premium-for-service allows them to compete and thrive in a realm that the bigger players (SIA, Qatar, Emirates, etc.) are absent from. They intentionally target the special needs of a subset of customers, actively design their set of activities for that purpose, create a consistent image and position themselves in a way that other players would not be able to imitate. Continental Airline’s failed attempt with Continental Lite exemplifies this impenetrability of activity-driven positioning.

Trade-offs are quintessential

The less intuitive notion to strategy, however, is the act of choosing what not to do. It comes with the presumption that trade-offs are counter-growth. However, IKEA exemplifies this by catering to the lower-middle income and forgoing the higher-end, higher-margin customer segment. They grew not by increasing their breadth of services, but rather, depth to strengthen their individuality and image. In actuality, efforts to grow breadthwise may blur uniqueness, foster compromises, diminish fit and ultimately undermine competitive advantage. However, to consciously make these tradeoffs while focusing on delivering unique value by mastering your activity-mix may seemingly introduce inflexibility but more importantly, it defies the “growth trap” and builds uniqueness in machinery, people and systems.

Fit is pro-cyclical

The last aspect of defining your mix of activities is appreciating, and thus optimising, how they relate to and reinforce one another. Singapore Airlines embodies this practice with their blend of customer service, top-notch equipment and unwavering delivery of customer satisfaction. It cements their value proposition with world class air travellers and earned them their position as amongst the very top-ranked airlines globally. By fortifying your web of activities and optimising how they relate to one another, you solidify your position, create incentives to improve operational efficiency and ultimately lock out copycats from messing up your “couch.”

Rediscover strategy - Cover the basics and make room for strategy

The value of strategy is often undermined by misguided notions of competition, organisational efficiency and false ideas of growth. Cover the basics. Manage your customer relationships (CRM), streamline your supply chain (SCM), use technology (IT Systems) to automate, and build lean manufacturing. Employ the right tools (ERP Systems) and free yourself to make true strategic plans to move forward. Make the tradeoffs necessary and optimize your mix of activities to entrench your market position and solidify company identity.

The time to act is now.

References

Robert M. Grant, “Contemporary Strategy Analysis”

Michael E. Porter, “What Is Strategy?” https://hbr.org/1996/11/what-is-strategy

Schumpeter, “A palette of plans,” http://www.economist.com/news/business/21652318-choosing-strategy-lot-more-complex-companies-it-used-be-palette-plans