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What is Strategy and why is it important?

Ahh the classic ‘what is strategy?’ question. I’ll answer this question in 3 parts if I may – what strategy is, what good strategy looks like and, finally, why it’s important.

The first question…what is it?

Strategy itself can quickly get very complex and bloated; businesses use jargon and buzzwords that obfuscate. And definitions of strategy are no different.

But just as a good strategy finds clarity in amongst the chaos, so should the actual definition of strategy. Let’s take some time to explore a few different perspectives.

Richard Rumelt, in his classic book ‘Good Strategy Bad Strategy’ (which is essential reading to everyone in business not least planners and strategists), says that “the heart of good strategy is insight into the hidden power of a situation.”

Michael Porter, the pioneer of competitive strategy as a corporate discipline, describes it as “a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there.”

Henry Mintzberg’s definition is more conceptual but no less helpful, describing strategy as “a pattern in a stream of decisions."

I think these are 3 useful definitions. But to make strategy useful in practice, you need a process. So what’s the process to get to good strategy? Personally, I love the simplicity of Rumelt’s approach. He says that strategy consists of 3 critical steps.

The first step is diagnosis – understanding and framing the problem to be solved. The second step is developing a guiding policy that sets the path to solving the problem or challenge that’s been diagnosed. The third step is a list of coherent actions i.e. the thing you’re going to do differently tomorrow as a result of the strategy you’ve devised today.

Having gone through the process, what does good strategy look like when it comes out of the other end? How do you know it when you see it? What criteria should we use to judge whether strategy is good or not?

I’ve put together some principles I’ve learned over the years which may help answer these questions, although note this is not exhaustive (and that’s kind of the point, strategy is at its heart a creative and iterative act so there’s never a right answer).

Good strategy is pragmatic. It’s not intellectual pontification in a Powerpoint presentation. It’s not looking smart, it’s being smart. It’s the route to an action plan that will work.

Good strategy is what you don’t do. David Packard, the P of HP, intimated that sacrifice was essential to the health of a business when he said “more businesses die from overeating than starvation.”

Good strategy thinks backwards. Head of Planning at W&K Amsterdam, Martin Wiegel, put it brilliantly when he said: “Strategy thinks backwards. Be clear on what you want people to do, and work back from that.”

Good strategy is specific. Genericness is your enemy; good strategy has a sharpness to it that cuts through the clutter.

Good strategy is simple to explain. I was once told that if you can’t describe your strategy in 30 seconds (without charts) then you’ve not got a strategy.

Good strategy gives a new perspective. That aha moment doesn’t have to come in the form of a beautifully constructed insight but simply a different way of looking at a situation. Instead of trying to define what an insight is (a fool’s errand), we need to spend our time looking for new perspectives and investigating different points of view.

Good strategy asks the right questions. Interrogate the problem and the strategy often becomes clear. Indeed, the CIA define problems and plan solution by using the ‘Phoenix checklist’, a set of questions designed to analyse challenges from many different angles.

Good strategy steers tactics. As Sun Tzu wrote, “tactics without strategy is the noise before defeat.” For this reason, beware the fachidiot – a German word for a specialist who takes a blinkered approach to a multifaceted problem.

Good strategy means action. It’s important not to fall into the trap of thinking that the outcome of strategy is a creative brief or a Keynote. These are processes not outcomes. At the end of the day, the output of strategy is a change in behaviour.

Against the criteria above, good strategy is actually surprisingly rare.

And that’s why it’s so fundamentally important. Because if we know that strategy is the path to growth that businesses crave – and we know that businesses rarely travel along that path – it means that good strategy is in itself the most important competitive advantage.

As a result I think it’s the most interesting, important and challenging activity of any organisation. Indeed, in a time of stagnant corporate growth, there’s never been a more important time for strategists.

After all, as Rumelt said, at the heart of good strategy is insight into the hidden power of a situation. That’s what strategy is ultimately all about. And that’s our job as strategists; to find the hidden power in any situation.

Pretty cool huh?

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