09 February 2011

What Strategy Is

"...If you are not genuinely pained by the risk involved in your strategic choices, it's not much of a strategy."  --Reed Hastings, CEO, Netflix 

Strategy is about making choices. 

The above quote from Reed Hastings puts an important qualifier on what it requires when it comes time to make strategic decisions inside your organization--you have to feel some "pain" in the process.

If it is little or no pain then maybe the choices being made are not all that strategic. 

Two individuals who helped me think about this subject over the years are Ram Charan and Michel Robert.  Both narrowed strategy down to choices or building blocks--what to be, whom to serve, what to offer, etc. Often led by something that becomes a driving force (customer service), but is complemented by other things (quality products and distribution).

The decision by Apple to focus on design and technology.   Southwest Airlines chose to fly one type of aircraft--the B 737 (although this is likely to change with the acquisition of Air Tran Airways).  McDonalds saying "no" to pizza.  The company bought Donatos Pizza in 1999 and sold it back to the founders in 2003.   

So what else is strategy?

It is about choices plus a mixture of other things. It’s a term that, as someone noted, “weaves a complex web of ideas, insights, experiences, goals, expertise, memories, perceptions and expectations all of which provide general guidance to specific actions in pursuit of particular ends.”

An easy way to remember this concept is to think of strategy as what the organization wants to be—a picture of how the organization could look at some point in the future.  Therefore communication plays a central role in this process.

The strategy includes the framework (criteria) for making choices that determine the nature and direction of the organization.

The pre-condition of formulating a strategy is a clear understanding of the goal. No amount of strategizing or planning compensates for an idea of the end sought. 

No amount of strategizing or planning compensates for the absence of a clear and widespread understanding of the ends sought. 

When in doubt, think “results.”

The risk of not being clear includes missed opportunities, fragmented and wasted effort, and working at cross purposes.

How an organization gets to where it wants to go is integral to the process.  More time should be spent on implementation than on strategy formulation.  Strategy is successful execution.

There also needs to be congruence between corporate strategy and the strategies of others within the organization. Congruence does not mean that business units are pre-empted from having their own strategy.   A large organization is too complex, and too diversified to be a monolith.

While others within the organization require their own strategies these must complement one another and be supportive of the corporate strategy.

I read once that staffs tend to be the "wild card." Without direction and accountability, they can go off in their own direction—and will without clear expectations.   Without this congruence among staff, resources are often misaligned and results postponed or lessened.

The highest arc of strategy belongs to the CEO. Everything flows from this position.

The most overlooked aspects of the strategy are people and the allocation of financial resources. Get the right people first and they will identify the right strategy and hopefully make it a reality. The wrong people aren’t likely to do either very well.

Do you feel any pain in the choices being made?


(C) Bredholt & Co.