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What is business strategy?

Strategy is an intended, pre-planned, course of action over the long-term.

Strategy is an intended, pre-planned, course of action over the long-term.

In my consultancy work this must be the hardest question to answer. In fact, hundreds of very valid business books have been written about the subject but there exists a whole band of strongly differing opinions and a common definition of the term remains till today elusive. In a sense, it is hugely ironic that such a basic and frequently used business term should be so mysterious.

For a quick background check about the history or etymology of the word there is Wikipedia but suffice it to say that the term originally belonged to the military and only entered business lexicon in recent decades. Academics like to quote Sun Tzu, Machiavelli or Carl von Clausewitz but mainly these thinkers applied the term to a military or political context.

The very idea of strategy being directly relevant to business perhaps came about in the mid-1960s when Igor Ansoff published his book Corporate Strategy. It was still raw and looked very different from the strategy we know of today. In fact, when Peter Drucker (yes him again!) considered an appropriate title for his own best-selling book Managing For Results (first published in 1964) his publisher advised him against the original title- namely Business Strategies – and the reason given, and accepted, was that strategy belonged to the military or politics but not to business!

To my mind, the business world wholeheartedly adopted the concept of strategy in the 1980s when Reganomics and Thatcherism liberalised, privatised and popularised free market economics. This was the time when the ‘deliberate’ school of strategy (lead by Porter et al) and the ‘emergent’ school of strategy (lead by Mintzburg et al) arguably came to the fore.

Just as a side point, it was 1979 when, for instance, a young economist and associate professor at Harvard Business School, Michael Porter, penned his first article How Competitive Forces Shape Strategy and this arguably led the way for a revolution in business thinking which I am alluding to.

Basically, Porter et al stated that strategy is an intended course of action which a business deliberately planned for by using appropriate strategic tools, frameworks and models whereas Mintzberg et al counter-argued that strategy was the duality of a business wanting to intentionally design the future while at the same time needing to gradually explore, learn and adapt to an unfolding reality (still using appropriate tools, frameworks and models obviously); strategy was emergent rather than deliberate.

Each side, until today, soils the other and this directly contributes to the absence of a single and authoritative definition, which in turn fuels the confusion or mystery.

To my mind, and in an effort to answer the question for the benefit of readers of The Times Business, when a business acts deliberately, it ‘thinks’ before it ‘does’. Strategy is therefore seen as an intended, pre-planned, course of action over the long-term. The often quoted words of wisdom being: “If you don’t know where you are going any road [strategy] will do”. Porter et al would be very happy with that understanding of strategy. I personally lean towards the explanation that strategy is gradually shaped during an iterative process of ‘thinking’ and ‘doing’; therefore strategy is emergent.

In truth, strategy is a mixture or a blend of the two schools of thought. To quote Prof. Henry Mintzburg: “All strategy making walks on two feet, one deliberate, the other emergent”. So there is no such thing as a purely deliberate strategy or a purely emergent strategy. A business needs to deliberately plan its strategy – to flesh out its competitive game plan – but it must also be flexible and open to learn as it goes along using appropriate tools and frameworks which help it structure its thoughts and learning.

What further complicates the subject is that there is also disagreement among strategists about “who should be fitted to whom”. Should a business look at the market in which it operates, identify an advantageous market position and then craft an appropriate strategy or should it take the internal strengths of the business and define a market environment to fit and match its own strengths? My point is that there isn’t a simple working definition of strategy because it is a complicated affair which even strategists sometimes disagree on.

Why is all this relevant to business? The market landscape is fiercely competitive. The days of monopolies are gone. The days of being a ‘sole and exclusive’ agent of an international brand are also gone with parallel trading and e-commerce. I would even say that the barriers to competition per se have almost been broken down (particularly in the internet age) to such an extent that almost anyone can set-up a business and compete head-on with established players.

The market is much more democratic and less elitist. In the words of U2 (the rock band “[Nowadays] you have to run [just] to stand still”.

A business, therefore, needs to understand its industry structure, to position the business according to its strengths and weaknesses (or not), to know how to target the ‘right’ customer segments, to understand its competitors and their respective strategies (and how competitor strategies can affect its own strategy) and a whole host of other factors.

Irrespective on whose side you are on – deliberate strategy versus emergent strategy or outside-in strategic approach versus inside-out strategic approach – every business needs to have a strategy and to use appropriate strategic tools and frameworks.

What is strategy? I will teasingly say that it is “far more, and less, than you ever imagine…”!

www.fenci.eu

Mr Fenech is managing director of Fenci Consulting Ltd.

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