Here’s Why Strategy Is So Misunderstood

Strategy has to be one of the most misused words in business. The word is tossed around boardrooms and customer meetings with reckless abandon. You’ve likely heard this: “Our strategy is to become the biggest and the best.” Deciding to become a global corporation, to diversify or to increase sales by a certain number of dollars per annum is not strategy. Such aspirations are goals or objectives.

Articulating how to become the biggest and the best is the strategy. That strategy can be good or bad. The “steel” in strategy is its capacity to set the stage for an organization to achieve ironclad competitive advantage. Strategy is also a “steal” because good strategies cost no more to develop than bad ones.

Walmart is an interesting example in strategy. For many years, they envied the online business of Amazon.com. While Amazon was expanding product lines and customer count, Walmart was content at opening new outlets and increasing same store sales. Now Walmart is making a concerted effort into digital commerce.

This is an objective. The means to that end is a growing web presence, an array of mobile apps and an infrastructure designed and operated by the best managers, coders and engineers the digital world has to offer. These folks can be found in the Bay Area, where Walmart has set up a large and growing outpost.

The added steel in Walmart’s strategy against Amazon is this: Through mobile, Walmart is going beyond bringing the store to the web; it is bringing the web to the store. Who better to leverage their massive customer base and transform retailing?

Tactics, often mistaken for strategy, are the last piece of the puzzle that includes goals/objectives and strategies. Tactics are the ever-important short term decisions and activities that win battles and contribute to winning the war. In traditional manufacturing companies, sales departments know tactics better than most other functions because sales people work with tactics every day.

Big retail chains are dead without a firm understanding of daily, weekly and monthly tactics. They have to decide when they will promote, what brands they will feature and how they will achieve one-upmanship on aggressive competitors.

Promoting Coca-Cola as a loss leader or trying to make a small or large profit margin on the brand is a business tactic. If the retailer’s unique position in the market is lowest prices for brand name items, then all pricing tactics must support that image. In this case, because of Coca-Cola’s massive consumer appeal, a healthy retail margin that inflates the price of Coke would not be a wise decision. Selling Coke at a price above competition destroys the retailer’s strategic positioning.

Imagine the ramifications if Walmart, known for lowest prices every day, made that move. On the other hand, a “low cost” retailer doesn’t have to lose money on Coca-Cola. Their options are to either squeeze the Coca-Cola Company into lowering its cost for a period of time, or choosing another brand such as Pepsi with similar consumer appeal. That’s tactical decision-making.

People worry that strategy slows a company down and limits growth opportunities. The opposite is true. Just look at the success of Apple. Big. Fast. Focused. Innovative. This company managed to harness the resources of 72,000 employees to introduce and successfully market a slew of breakthroughs. Tim Cook and Steve Jobs before him were adamant in saying “no” to thousands of projects so that they could focus on the few that were truly meaningful to Apple.

Howard Schultz grew Starbucks at an outrageous pace. All it took was three decades for Starbucks to catapult from 50 stores in the Pacific Northwest to 21,000 stores in 62 countries, $13 billion in sales and $1.38 billion in profit.

Schultz’s vision for Starbucks was a social community with a defined culture that people would aspire to connect with (over a cup of distinctive, dark-roasted coffee). Seemingly, the personality of the brand impacted every decision about the experience and the ambiance — the furniture, the artwork, the exotic names of the bean origins, even the music.

With so much written about the success of great companies led by outstanding strategic visionaries, one has to wonder why strategy is so misunderstood by so many of today’s leaders.

  • DonJuego Lee

    Clear as mud. No wonder strategy is misunderstood. Even this author could not enunciate what it is to my reading and re-reading.

  • Haaseline

    Great statement !!! I am more confused by this article than before I started. The bottom line is execute or be executed.. Executives and strategists have great vision and coloring book talents , but at the end of the day can their organization “do the task” and “do they buy into execution in all “silo’s” ….. Working the plan is still paramount!!! and last time I looked work ethic isn’t a booming metropolis …but a great area to start a “new” business!!

    • JohnRichardBell

      If its a choice between strategy and execution. Execution wins every time. When the strategy is clear, focused, purposeful and understood by all, the bar on executional excellence raises.

  • Richard Piper

    I couldn’t disagree more, John. The idea that strategy is only about the ‘how’ is outdated and unhelpful. The questions ‘what’ and ‘why’ are fundamental and are by their very nature strategic, at least at the big picture level. For non-profits (where the best strategy often happens, because non-profit strategy is tougher) the question “what difference are we trying to make, and why” is at the heart of any good strategy, alongside, but not dominated by, the how question.

    A simple definition of strategy: it’s the big picture *decisions* that set our organisation’s direction. For non profits there are basically just ten of these big decisions. If you make these decisions, and make them so they are coherent, you’ve got yourself a strategy.

    • JohnRichardBell

      Using a charity as a non-profit example such as cancer research or endangered species, the “what” is given. The “why” in these two examples is rather obvious. What’s left is the “how.” How are you going to convince your target group to support your cause? Thanks for weighing in, Richard

      • Richard Piper

        I hear what you’re saying John but you are mistaken. The ‘what’ ISN’T ever given. It’s designed, by people, through a process (a process called strategy!)

        You’ve just named ‘fields’ that nonprofits can work within. That’s nowhere near enough to determine their strategy. They need to decide what, specifically, their aims are within this broad field. Otherwise, every cancer charity would be the same, which they’re clearly not – because they all have different ‘what and why’ strategies.

        Which endangered species? Pandas, bees, sharks? Why those ones and not others?

        Which cancers? And why prioritise research over, say, supporting those who currently have cancer?

        These strategic choices are the MOST important choices faced by non-profits and they are very tough to answer. The “how do we do it” question is secondary and, in most cases, a bit easier (though still difficult) to answer.

        with good wishes

        Richard

  • http://www.n2growth.com/blog Mike Myatt

    Hi John:

    I agree the topic of strategy is woefully misunderstood, and grossly misapplied by many. Thanks for breaking it down. If I may piggyback on your thoughts, following is a column I authored for Forbes on this topic: http://www.forbes.com/sites/mikemyatt/2012/10/04/successful-leadership-requires-the-right-order-of-operation/

    Thanks John.

  • Luís Miguel Costa

    Thank You John,

    My understanding is very simple – lack of endurance is what it is. In a economie based on the Apple case study you mentioned, people, and managers in particularly lost the long term vision to a daily amount of information and decision that they receive and have to deal with i otder to answer to the pressure of fast and easy results. Economy isn’t (yet) software but “steel” hardware.

    Best Wishes,

    Luís Miguel Costa

    • JohnRichardBell

      Thanks for this insight, Luis. You’ve nailed it.

  • sheri herman

    John, one of my pet peeves is when “tactics” are used to describe “strategy”. And “Strategy” is used to describe “Mission”. You nailed it. Strategies that stand the test of time do not drop from the sky. Although they may start as a light bulb going off in one’s mind, they require a rigorous training before being let out of the starting get. A strategy that is born before the market for it appears requires great timing and the knowledge of how to know when that timing has arrived. Not being self promotional here. Having developed a social commerce company that is part expert advice, part commerce, our key tactic is the use of “How To” video content. That decision was made well in advance of HOWCAST becoming one of You Tubes highest trending channels with 8.5 million views week. But we knew it was inevitable this would happen as we had been watching How To Apply Mascara videos on You Tube closely garnering hundreds of thousand of views. Using How To videos is our number one tactic. Educating in 4 lifestyle verticals through experts is our Strategy. Throw in commerce and stir.

    • JohnRichardBell

      Thanks for sharing your story, Sheri. I didn’t mention it in the blog, but your comments bring to light the importance of the strategic mindset. Leaders with a “do more of the same but better’ attitude are destined for mediocrity. They are minding the store, but lacking the foresight to open new stores. Glad to see strategic foresight working for you. A mindset that is analytical, intuitive and creative can go a long, long way.

  • http://www.ncs.tv/ Dan Auito

    For anyone who is still confused, strategy is the plan and the tactics are what is used to carry it out. Great examples John!

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