Consequences for Practitioners

Practitioners have to deal with ‘Ambiguity’ considering that the word strategy holds a variety of meanings and strategy-making also comes in a vast variety of tastes.

No single definition of ‘what strategy should be’ is accepted (various people may have different perceptions or expectations). Therefore, dealing with strategy elaboration first and foremost requires building a shared interpretation of the problem to be solved.

When the problem at hand is understood, the strategist must establish as well an adequate problem-solving approach and strategy development process and leadership. Indeed there is as little convergence on strategy-making that there is about ”what strategy is”.

Last but not least strategists must find ways to share and convey their findings and recommendations to the various stakeholders.

Interpretation

Many people, from different Functions, are usually involved in crafting or updating strategies. As there is no unanimously accepted definition, different people will usually have different understandings (and possibly different expectations) of what strategy is or should be.

In most firms, strategy is not a standardised professional domain with its own recognised body of knowledge (there is no chartered strategist as there are chartered engineers or accountants).

Some scholars argue that strategic reasoning is dominantly a logical activity that hinges upon strong analytical skills. The course of action is explicitly derived from an in-depth analysis of the facts and available data.

However, despite their seeking to be comprehensive, rigorous and systematic, strategists will hit some shortcomings and cognitive limitations. As stressed by H. Simon “people act intentionally rational but only limitedly so” ( [Simon57] ) .

Other thinkers are strong proponents of generative reasoning: creating new perspectives, unveiling new insights and find new ways to solve problems. According to De Wit & Meyer “Creative thinking should be the driving force and logical thinking a supporting means” ( [DeWit10] ) .

Unstructured problem

Strategy-making is in itself, a process of interpretation. It requires to deeply understand the problem statement, design an effective problem-solving method, discover candidate options and down select the optimal solution.

Although many tools exist, there is no ready-to-use recipe, no tool or framework is a silver bullet that would solve any strategic problem, and each specific case will require its own specific method.

Defining and solving strategic problems is primarily a creative activity: questions are ill-defined & highly subjective ( [Ritel73] ) . Furthermore, the classes of potential solutions are not known in advance (aka wicked problem). Articulating a strategy becomes then a creative reformulation of the situation.

For instance, Jim Kecinski (a former managing director at Google) stresses that one should “tap into the wisdom of crowds to drive innovation and creativity” - “frame-breaking ideas can’t be found, they have to be generated”.

Sergey Brin (Google’s co-founder) considers that most successful projects at Google have emerged bottom-up rather than being conceived top-down.

Efficient Communication

Communication skills (sometimes, negotiation skills) are paramount both for facilitating the formulation of a strategy and articulating the recommendations to the decision-makers.

This usually includes an evaluation of the proposed strategy: is the option(s) suitable in terms of matching opportunities and threats ? is it feasible and does the organisation control the adequate capabilities to implement the option(s) ? is it acceptable in the eyes of the main stakeholders?

Once approved, a strategy must also get clearly communicated to all stakeholders.

Inner-compass

It is essential that practitioners have their own inner-compass, their own representation of what strategy means to them. A few models (out of many others) are briefly presented hereafter.

The VIP Model

According to Frédéric Fréry ( [Frery06] ) Strategy encompasses three major elements : value, imitation and perimeter.

On a general level, strategy comprises three objectives: creating value, handling imitation and shaping a perimeter.

Value
Strategy aims at creating sustainable value (from the perspective of customers, shareholders or more broadly any stakeholders), from which short-term and long-term over-performance can be derived.

The uniqueness of strategy resides in value creation; increasing customer value beyond cost is the seminal assumption of strategy.

Some organisations take the view that their only responsibility is the short-term interest of shareholders. However, an exclusive focus on financial results does not necessarily align managerial and shareholder interests. Some organisations are mission-driven and exclusively concentrate on demonstrating the best value for their customers or users. However, this stance can threaten the long-term survival of the organisation and when a business reaches effectiveness at the expense of efficiency, it contradicts its basic purpose.

Defining and assessing value is therefore of the utmost importance. In addition, it is key to understand how value is shared between the firm and its ecosystem.

A sound strategy must evolve between these extremes of shareholder value and customer satisfaction, profit maximisation and corporate social responsibility.

Furthermore, a firm must both create value and claim value. In other words, a firm must capture some of the value it creates.

Imitation
A firm is unlikely to continue to over-perform for long if the recipe for its success can be easily understood and copied.

Defining a new business model and implementing an innovative value offer is worthless if competitors can quickly catch up.

Achieving and sustaining success depends on the ability to be unique and remain so. That is why imitation is a central theme in strategy, whether it consists of building and defending a sustainable competitive advantage (how to avoid imitation) or, on the contrary, matching an innovator’s positioning (how to imitate a winning business model).

When firms cannot find ways of differentiation (doing different things or doing the same things differently) they run the risk of strategic convergence and industry commoditisation (standardised product and offers, low margins if any).

Because the value of any strategic concept resides in its ability to create competitive advantage, the concept becomes irrelevant as soon as it is extensively adopted. Many best practices (ISO standards, Six Sigma, CRM) although once distinctive, have now been widely adopted.

Because it makes sense for competitors to mimic successful strategies, there is a great deal of similarity between organisations in many industries. Adopting new perspectives on business allow defining fresh strategic spaces by contrast to conventional business models.

Perimeter
Strategy is also deciding what to do and even more importantly what not to do.

Beyond designing a valuable business model and managing imitation, shaping the perimeter of the organisation (i.e. defining or setting the limits of its scope) is the overarching mission of strategists.

Decisions about diversification, outsourcing, vertical integration, internationalisation and positioning, as well as defining new markets untainted by competition, are all linked with the search for a profitable perimeter.

Of course, strategy is not limited to choices related to the organisational scope, but conversely, any alteration of the perimeter can be considered as a strategic move.

Most of the perimeter aspects are part of Corporate Strategy.

The DERE Model

R. Grant ( [Grant06] ) underlines that a sound Strategy must “ encompass consistency of direction, based upon a clear understanding of the game being played, a keen awareness of how to manoeuvre into a position of advantage and an effectively & faultless implementation ”.

Strategy, which must not be confused with a detailed plan, recipe or programme of instructions, is “a unifying theme that gives coherence and direction to the actions and decisions of an individual or organisation”.

“Enterprises need business strategies for much the same reasons that armies need military strategies: to give direction and purpose, to deploy resources in the most effective manner and to coordinate the decisions made by different individuals”.

while tactics are about winning battles, strategy is about winning the war. Strategic decisions are important, involve a significant commitment of resources and are not easily reversible.

Achieving success requires the formulation of a Strategy (that does not necessarily have to exist as a plan or even to be made explicit and its effectively implementation. It requires consistency of direction based on a clear understanding of the ‘game’ being played and a keen awareness of how to manoeuvre into a position of advantage [Grant].

Direction (or goal)
Johnson, Whittington & Scholes ( [Johnson11] ) insist that strategy is the long-term direction of a firm. „Strategy is the long term direction of an organisation. […] The long term direction of Disney is from “Carton ” to diversified entertainment ”. As such it should include deliberate and logical strategy-making elements although it can also encompass more incremental and/or emergent patterns.

Goals must be simple and long term: a single-minded commitment to a clearly recognised goal that is pursued steadfastly over a substantial period of time

To A. Chandler or K. Andrews, two management and corporate strategy gurus, action plans do matter but only as a means of fulfilling long-term objectives, direction or goals. Strategy setting is therefore also about defining the purpose and/or (present or future) business of a company. It flows from the determination of goals to the allocation of resources.

To M. Porter, strategy is about positioning: making the deliberate choice of being and behaving differently.

Environment & Resources
Formulating a successful strategy requires more than direction. Defining a compelling strategy stems from a profound understanding of the competitive environment (“a deep and insightful appreciation of the arena in which the organisation is competing ”) and a non-complacent appraisal of one’s own resource (“exploiting internal strength, while protecting areas of weakness”).

Execution
Without effective implementation (or strategy execution) the best-laid strategies are of little use.

The effectiveness of leaders in reaching decisions is key to success, as well as, their energy in implementing them, their effectiveness in instilling loyalty & commitment among subordinates and allow effective marshalling of resources & capabilities and to build organisations that promptly respond to changes in the competitive environment. ( [Grant06] )

Preparing detailed analyses drawing up plans, making extensive slide presentations and holding long meetings might all be necessary means, but ultimately it is the organisation’s action directed at the market-place that counts. ( [DeWit10] )

Strategy is about being different

The essence of strategy is about being different and there are two ways a company can be different:

• Deliver something Different: offer to customers something they can’t get elsewhere (and different here must not be confused with better - in other words differentiation is not restricted to higher-end differentiation).

• Do things Differently: find a different way to deliver the value propositions to customers. Configure the value architecture differently.

• Stay Focussed: to paraphrase M. Porter “don’t try to be everything to everybody”. Be clear about what you do and equally clear about what you don’t do.