What is Strategy? And what is a Business Strategy?

It's an obvious question to adress when dealing with or having the responsibility of developing strategies. Yet, this simple question is really confusing a lot of people in daily work and I think it would make sense to start out this blog with defining this.


What is Strategy?
Well to be honest, - strategy is really hard to do succesfully. Why? Because strategy concerns the future and trying to predict the future is getting harder and harder every second. This doesn't mean that we should give up, - but it might give us a clue on how market oriented and foresighted we really have to be when doing our strategic business development. Never before have markets been changing at this speed and it calls for more than well-thought-out plans. Well, - but let's get to the point...What is strategy really?


Strategy is simply answering the question: "Where should we go?"
The easiest and most pragmatic way to explain this, is to introduce another term that goes hand in hand with strategy, - tactics. It's always strategy and tactics that people get confused over and are having trouble defining their differences. Well, - I think that if you remember these very simple definitions in your head, you'll be able to act very sharp on what is strategy and what is NOT relevant in strategy development.

Strategy: "Where should we go?"

Tactics: "How do we get there?"

There are thousands of people that are struggling all over the world with "how do we get there?" issues and they will never be satisfied no matter how many prescious plans they build...and why? Because they didn't take the time to think about "where to go". Not having a target, a "vision" of where to go makes it impossible to point out the right initiatives.

Allright then, - what is a Business Strategy?
Ok, then but why at all bother with doing business strategies? Why should businesses need them? I've tried to formulate a "role" or "purpose" of the business strategy:

"...it is the role of the business strategy to link the organization successfully with it's environment"

If you link it succesfully, transactions take place and you earn money.

There are numerous of companies that are today finding themselves in more dynamic environments than they used to be. Hence they see the need for doing something new. New products that are better than the competitors. Entering new businesses. Taking market shares. A lot of them are seing this as strategy.....but for what? Making new products don't mean that it is going to sell? Entering a new business doesn't mean that you will be succesful. Taking market shares is not always a viable target if you cannot make money on the market....

What I'm trying to say here is, - that strategy in business is NOT just about setting targets. It's about creating a vision that can guide the right tactics to become succesful, - in a business context this means "earning a lot of money".

Business Strategy: "Where should we go with our business"?

Taking a theoretical approach
A business strategy is a way to set up your business system in relation to your environment.



A business system consists of three elements. Your Ressource Base, which is all of your assets, money, competencies, etc. your Activity System which Michael Porter would call "value chain". It's the linked set of activities that creates value for your customers. Value for your customers is the last element. Some people call it Product Offering, but I like Value Proposition better. This is the value that you are offering your clients in return for their money.



At this point, you can also see that the role of the product strategy is to link the organization to it's environment (market).



Two generic ways of developing business strategy
Strategy professors always seem to argue in two directions. Some people say:

"hey, - we've got all these ressoruces, this huge value chain and a lot of nice products and services, - let's push it to the market"

That's called an inside-out approach


others say...

"hey, - wait a minute. The market is really the ones that are paying our salaries. Let's centre our decisions around it and let the market shape our products and services, our value chain and what ressources and competencies to go for"

That's called an outside-in approach


When arguing it seems that none of the approaches have a 100 % fit with success. It seems that a synthesis between the two views should be found and should be related to the specific firms environment. All in all it comes down to: "how market oriented should we be?".

So...how should we develop business strategies??


Well you could try to look at the past and then calculate your future, - and hereby you can formulate the best strategy...in very stable environments this can surely be done (and has been done for a long time), but their are very few of those environments left and it all adds up to become more and more innovative and foresighted in your business strategy approach. If you continue to follow this blog, you'll also find out that I will introduce and talk about how you can develop innovative business strategies...."me-too strategies" that are rooted in "what we're able to do" instead of "what we must be able to do" ....are past.

Hope you've enjoyed reading my first post!