Personally? I’ve always been very wary of the word “strategy” and, even today, I don’t like to call myself a strategist or baptise any of my team with the term. To me, a title like this—one that comes with a well-honed understanding of the parameters of strategy and its achievements—must be earned.
Operational efficiency is not strategy
What I’ve come to realize, over the last few years, is that agencies and companies have a very hard time differentiating between operational efficiency and actual strategy. The reality is that modern strategy usually provides clients with a way to be more efficient and perform better—which is great, of course. But it’s not what paves the way for a company’s long-term sustainability.
The difference is simple: The foundation of a strategy is located outside the walls of a company, while operational efficiency happens within.
It’s that very difference that led Michael Porter—father of modern business strategy and professor emeritus at Harvard—to name his 400-page book on the subject “On Strategy.” To come up with strategy, a strategist must have a full understanding of the environment in which a business evolves, the industry’s innovations, and especially the competition’s weaknesses. It is crucial for a strategist to understand how the players in an industry generate profit today and, moreover, that the strategist can perceive where profit will be generated 5 years down the road. It’s at that precise point where opportunities are very often found. Without this vision? Strategy just doesn’t exist.
The mistake many strategists make is to focus their attention on what’s happening within the company—evaluating products and services, determining logistic efficiency, hosting workshops on business models, and meeting various participants to suggest “strategies” to solve sales and marketing challenges. The outcome? Maybe some sound recommendations—like implementing ERP or CRM, optimizing sales tools, and setting up an online ecommerce. The problem is that these initiatives are simply not strategies. Because to be considered a strategy—to be a true strategist—an idea must give the company a competitive edge.
Strategy in war time
Strategic ideas are far from new. In fact, they are derived from the fundamental principles of war. Sun Tzu, a great strategist and corporal in the Chinese army, wrote his memoir The Art of War in the 4th century BC—a document that’s still used today when trying to understand the inner workings of strategy.
Allow me to illustrate 4 fundamental business-strategy concepts based on Sun Tzu’s great work:
- In war: Sun Tzu would not have had to develop a strategy and put an army in place if the land he wanted to conquer was uninhabited. In business: The need for strategy is due to the fact that competition exists. Let’s say your company is the only one of its kind in the industry. Then there’s no need for a strategy! But since there’s little chance that this scenario will last for long, your strategy should be based on the potential threat of new players and a way to create more barriers to enter the market.
- In war: Sun Tzu would never have known how many troops to gather if he had not known the size of his enemy’s army.In business: It is essential to know the players in your industry and to look beyond appearances. Base yourself on real market data and understand exactly where your company stands.
- In war: Sun Tzu would have led his troops into traps had he not known his enemy’s imminent threats.In business: If you don’t know what your competition is developing and bringing to market—especially if it’s something trend-setting—you may be investing in your company’s operational efficiency in an area that may soon be obsolete.
- In war: Sun Tzu would never have won a battle had he not known his enemy’s weaknesses. In business: Your competition’s weaknesses—especially those of big players in the industry—are often your biggest opportunities. Think better customer service, personalized products, niche technology, and so on.
It is essential that a strategist prove how their proposed strategy will give the company a step up over the competition, and not just a boost for themselves.
So… just how do you create strategy?
Over the next few weeks, I will explain the fundamentals of strategy outlined in this article in more detail. I’ll be writing more about the frameworks used by our experts at Poudre Noire in the Strategy section above, as well as our blog and POW LAB. These upcoming articles aim to inspire, captivate your imagination, and provide you with the tools you need to define your own strategies.