Most effective strategies begin with a compelling diagnostic analysis of the organization’s challenges. This diagnosis involves both internal and external analyses that lead to a judgement about the meaning of the facts. This judgment is just that– your best ideas of what you learned about your organization, its challenges, and potential avenues to create value.
To be effective and long-lasting, a strategy has external and internal analyses that help define a focus to overcome a challenge. This focus is then actionable– implemented to realize its outcomes.
The table in this blog lists questions you can use to address the definition of a business strategy. The table is organized around the four effectiveness criteria (external analysis, internal analysis, focus, and quality implementation) and a fifth category related to the strategy making process.
Kaiser Family Fund Strategy
Being distinctive is important to effective strategy. For example, “The Kaiser Family Foundation is trying to play a special role as an independent, trusted source of information and analysis on the national health care scene, and we evaluate our performance against that objective. We believe that role is sorely needed in the health care system today, and, based on the reception our work receives; we are convinced that we are on the right course for us.”
A strategy must have certain additional characteristics. The positioning must be unique and valuable to customers and other stakeholders and the organization has to have the capability to protect this positioning. Strategy helps organizations to be different from others; deliberately choosing a different set of activities to deliver a unique market value. Another way to think about strategy is the organization’s theory of itself about how it can gain and sustain its competitive advantage.
If there were one ideal position for all organizations, organizations would have no need for strategy and strategic thinking. Organizations would face simple destinies that would be defined by formulas about how they do their work. Operational effectiveness would differentiate organizations and most organizations would probably earn the cost of capital or achieve usual outcomes rather than gain a competitive advantage. Yet, the world of organizations does not work this way– there are various ways to play the game with various positioning with various supporting activities.
Here is Tesla’s vision statement: “to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.” This vision includes the company’s focus on renewable energy. The following components are significant in Tesla’s vision statement: (1) Most compelling; (2) Car company; (3) 21st Century; (4) The world’s transition to electric vehicles. A cynical response to this statement is that they are not in the car business but in the renewable energy business to improve the environment. Also, the statement does not provide adequate information about the general direction of Tesla’s organizational development. Tesla can improve the mission statement by including more details about the company’s approaches in fulfilling its vision.
Consider that all organizations refer to strategy at various organizational levels, especially these three levels of analysis: Business, Corporate and Functional. Business strategy refers to the positioning and set of activities for a single line of business in an industry. Table 1 is focused on business strategy. Corporate refers to an organization’s strategy for multiple lines of business or markets. Functional strategy refers to strategies specific to functions within a business such as marketing, operations, and finance. Ideally, the business, corporate, and functional strategies would mesh to form a coherent story (or theory) about how the organization goes about increasing its value.
In summary, effective strategic decisions are significant commitments of resources and are not easily reversed. These decisions are deliberate attempts to respond to internal and external analyses and to focus an organization to increase competitiveness.
Christie’s Keeps Up With the Times
Christie’s auctions art. It controls approximately 50% of the art auction market and had about $6.8 billion in 2017 revenues, a 21% increase from 2016. It is a 252-year-old company that changes with the times. CEO Guilhaume Cerutti explained how critical the balancing act of art expertise, as a competency, with being sensitive to market changes. For example, Christie’s focus on Asia and contemporary art is a change from the past. This strategy change is also sensitive to new buyers, 37% of whom buy online, a dramatic change for this legacy auction house.
Table: Questions to Stimulate Strategic Thinking
Analytical, Process Skills for Content (how you do strategic thinking).
- What is your starting point? What are your change management challenges?
- What data do you consider most important for your strategic thinking?
- What are the key concepts, theories, models, and methods for understanding strategy?
- What are the various lenses you can bring to strategy?
- How can you act to gather relevant information and to make decisions?
- Is your analysis granular enough to gain specific data to make decisions?
- How should you phrase your strategic alternatives and your strategic direction?
- How do you manage inevitable biases and internal political influences on decisions?
- Who should be at the table and how does each member perform a role in the process?
- How does one behave to gain a sense of perspective, urgency to act, to make changes and to convince others that changes are organizationally appropriate?
- What are the internal and external processes for innovation?
External Conditions: What external conditions are we facing?
- What long-term trends might influence your business?
- What can you learn from the macro environments in which you do business?
- What is your competitive position?
- What can you learn from a strategic analysis of your industry or industries, the marketplaces, competitors, and other key players who influence your organization?
- Who are your core customers and what trends do you see for them? What are the customer’s purchasing criteria?
- Where will you be active; with how much emphasis? What are the boundaries?
- What are your key success factors?
Internal Conditions: What internal competencies do we have?
- What are your core products and services?
- What are your resources and capabilities (activities)?
- To what extent are these resources and capabilities rare, relevant, durable, and connected?
- To what extent do the resources and capabilities fit with the organization’s administrative history; structure, systems, culture, and management style?
- How can you enhance returns from your resources and capabilities?
Focus: Where will we focus our attention?
- What do you want to achieve? What are your fundamental purpose; values; mandates; targets and objectives; why are you in business?
- Where are the growth opportunities: core, adjacencies breakthroughs,[xxvi] white spaces, and blue oceans?
- How can you be different compared to those with whom you compete or cooperate for resources? What are your points of parity and difference?
- Will your strategy beat the market?
- What are your strategic imperatives and initiatives?
- Can you find places for shared value?
- What is your guiding principle to increase organizational value.
Implementation: How will we accomplish our focus?
- What can you achieve?
- What moves should you make to achieve your purpose?
- How can you mobilize, build momentum, and sustain change efforts?
- What will be your speed and sequence of the moves?
- What is your plan given the trade-offs in priorities, timing, and politics?
- How do you balance commitment, accountability, motivation, and flexibility?
- How will you obtain returns? What are your best business models?
- What measures will you use to know you are achieving your purpose?