Everyone agrees that strategy is very important to the success of an organization, yet many also struggle to define it. Those who do define it seem to have differing opinions of the definition:
- The Oxford dictionary says: "a plan of action or policy designed to achieve a major or overall aim"
- Michael Porter says: "the best position relative to all forces in your competitive environment"
- McKinsey says: "an integrated set of actions designed to create a sustainable advantage over competitors"
- Harvard Business Review authors tend not to define strategy, though can be quite vocal on what strategy is not
Perhaps this makes sense, because "Strategy", as a distinct corporate discipline, is relatively new. It was not concretely defined until mid 20th century, when Igor Ansoff, in the 1960s, first used the term "strategy" in a business context, in his book Corporate Strategy. This led to the dawn of planning and focus on competitive research and analysis.
A unified definition of strategy
Uniting what is common across all definitions of corporate strategy, however, gives us the following definition:
A strategy is a communicable plan to maximize and sustain the most important outcomes.
The core components of this are:
- "Outcomes": A strategy is rooted in outcomes or objectives. If you don't have an outcome in mind, you can't create a strategy for achieving it. Try taking a taxi without telling the driver the destination.
- "Maximize and sustain": A strategy is an maximization exercise, with the intention of picking the optimal path to the destination, not just any path.
- "Plan": While a strategy is not a detailed, prescriptive plan, it is indeed a plan, in that it is an analytical consideration of resources and investments, which is intended to be executed.
- "Communicable": A strategy that is not communicated is merely an intellectual exercise. In order to be executed, a strategy must be thoughtfully communicated, socialized, and integrated into the fabric of an organization.
To see a checklist of what comprises a best-practice strategy, read through the 14 elements of good strategy.
"Outcomes" drive strategy, but what drives outcomes?
Outcomes are the highest-level measures of success of an organization, and are primarily quantitative (eg "Reach $10M in runrate revenue" or "House 50,000 homeless"). Some tech companies call these audacious goals.
These outcomes are subjective, which can make them tricky to set, but they are defined according to shareholder/stakeholder needs and priorities, as well as the mission.
Outcomes are the anchor of strategy; they should be concrete, unarguable, and rarely change. To avoid conflation with performance, outcomes have a time horizon (eg 2-5 years) instead of strict timelines (eg by December 2023).
"Opportunities" achieve outcomes, but what are opportunities?
Opportunities (aka "initiatives") are the ways to achieve the strategic outcomes. Roger Martin once called them "where to play, how to win".
Opportunities are the multi-year cohesive groupings of tactics and efforts that make meaningful progress on the outcome.
Here are 2 examples of opportunities:
- Grow product portfolio from 10 to 50
- Expand service from EU-only to Americas and China
Each one is a multi-year endeavor, with many sub-initiatives and tactics underneath them. The teams that ideated such opportunities believed each one to make 20-50% of the entire required progress towards their desired outcome.
Opportunity ideas should cover as much ground as possible, to make sure they are holistic as possible, to ensure that the strategy is the best choice across all possible options. Only a couple of multi-year opportunities will be chosen at the end of the day, though.
Here are some possible areas in which to contemplate opportunities:
- Product and user experience
- Channels and go-to-market
- Expansion (eg new geography, eg new audience)
- Contraction (eg cost cutting)
- Operations, support, delivery, customer success
- Governance and regulatory
You can also consider multiple other frameworks and analyses to identify potential opportunities from different vantage points, such as Porter's Five Forces and SWOT.
How is a strategy created?
While the analysis, research, and tradeoffs that must be made as part of a strategy are nuanced and tough, the overarching steps an organization must follow to actually conduct strategy planning are very simple. Try following these steps to run workshops to build a strategy plan.
For more information on accountable, outcomes-driven strategy planning, don't hesitate to get in touch with the Gaussian team or read more about the Gaussian Consulting services around strategy planning that are trusted by industry leaders everywhere.
Photo by Joshua Earle.