Strategy is one of the most used — and most misunderstood — words in business. Before you can execute it, you have to know what it actually means.
Ask ten leaders what their company strategy is, and you'll get ten different answers. Some will describe their goals. Some will describe their values. Some will describe their operating model. Very few will describe what strategy actually is — and that gap has consequences. You can't execute clearly on something you can't define precisely.
So let's get precise.
At the company level, Harvard Business School Professor Michael Porter defines strategy as a unique and valuable position that involves a different set of activities from your competitors, or the same activities performed in different ways. The Management theorist Henry Mintzberg broadened that definition with his 5 Ps framework:
· The plan helps you attain your objectives to achieve your intended position.
· The ploy is a new offering - usually a surprise tactic that competitors would not expect.
· The pattern is understanding what has worked before and carrying forward what is still useful.
· The position is your market location and the role you play relative to your main competitors.
· The perspective is how your organization sees itself and how various target audiences perceive you.
Together, these capture not just what an organization intends to do, but how it actually behaves, where it stands in the market, and how it sees itself. Strategy, in Mintzberg's view, is both deliberate and emergent — something you set and something you discover as you act.
In practice, strategy is your answer to the most important question any organization can ask: given who we are and where we operate, how do we create distinctive value? It's not a vision statement. It's not a set of aspirational goals. It's a set of choices — about where to play and how to win — that are internally coherent and hard to replicate.
Strategy touches every dimension of the business — how you grow revenue, how you serve customers, and how you build an organization where people thrive. Generally speaking, it's about the intention behind your work and how you pursue the mission creatively across all of these facets. The choices you make in each area should connect back to the same strategic logic.
Five Things Strategy Is — and Isn't
1. Strategy is about choices. To do well, a company must choose to do some things great and not others. So, how do you choose? Many people like to begin broadly in these four categories to be industry leaders:
· A. Product leader - Relentless innovation to be the best and most differentiated. Nike and Apple are product leaders. They constantly change their designs or shoe technology to be the coolest and most innovative in the market. It is hard to outdo them in this category.
· B. Customer intimacy – This is about creating an incredible experience for the customers where they are entirely taken care of. You are prepared to jump through hoops for them. Most large companies find this challenging, but Nordstrom is an example of excellence in this area. It is easier for smaller companies to do this like coffee shops, where workers know your name and have your order ready for you upon arrival. Zappos is known for exceptional customer service. Tony Hsieh shared a story about taking clients out one evening, and when they all returned to their rooms, one of them craved a pizza, but room service was closed. Tony suggested they call Zappos, and they came through on the request! Although they didn’t deliver themselves, they found a nearby pizza parlor that would.
· C. Operational excellence – Delivering consistent quality at scale with unmatched efficiency. Starbucks and Chipotle have standardized their processes and have a model that can be exported seamlessly.
· D. Cost leadership – making something genuinely good and affordable. It is part of IKEA’s competitive advantage. They target young furniture buyers who want style cheaply.
Roger Martin, named #1 by Thinkers 50 says to know if you have picked a good strategy, follow this rule – “If the opposite of your choice is stupid on its face, you have not chosen. For example, if you say, our strategy is to be customer-centric or operationally effective or to value our talent, you can perform this test by stating the opposite - Our strategy is to ignore customers entirely.” If it does not make sense, it cannot work as a strategy because it would be hard to do that and succeed, let alone stay in business. Maybe regulated monopolies like the DMV can get away with this, but they do not engender much love. If the opposite of operational effectiveness is inefficiency, then that’s not a choice because it is not a profitable route.
2. Strategy is about trade-offs. Michael Porter says, “the essence of strategy is choosing what not to do” because you do not have the bandwidth to do it all. Focusing on 1-2 things per quarter and adding the rest to your future list. Leaders need to know how to say no often. As Peter Drucker says, “strategy is saying no to the things that you would like to say yes to.” We can have many good ideas but only so much capacity to execute. The key is to choose a couple of priorities because when you have too many, your team spins their wheels, and there is no organizing framework since they all need your attention. Southwest Airlines is an example of a company that makes these strategic tradeoffs. They offer short-haul, low-cost, point-to-point service between midsize cities and secondary airports in large cities. They avoid large airports and do not fly great distances. Their frequent departures and low fares attract price-sensitive customers who otherwise travel by bus or car and convenience-oriented travelers who would choose a full-service airline. They empower their employees at the front desk to make decisions aligned with their priorities (e.g., planes landing on time, cheap prices, and treating customers well). It’s the reason they do not have milk on their flights because they do not have refrigerators since they have to be repaired when there are breakdowns, and that can lead to late departures.
3. Strategy is about problem-solving. At its core, strategy is the answer to a well-defined problem. What's the gap between where you are and where you need to be? The outcomes you are currently achieving nad your aspirations? What are the fewest, highest-leverage moves that close that gap? The discipline of strategy isn't just in identifying the right destination — it's in diagnosing the real problem clearly enough that the path forward becomes obvious.
Most strategic missteps happen not in the execution, but in the diagnosis. Teams build elegant solutions to the wrong problems. Slowing down to define the problem precisely — before reaching for solutions — is one of the most valuable things a strategist can do.
4. Strategy is about simplicity. There is a myth that strategy needs to be complicated but to be most effective, you want to make it simple - understandable, memorable, and actionable. Research by Roger Martin supports this point. He says, “43 percent of managers cannot state their strategy. When executives are not clear on their strategy, they have to work harder to see their impact on the organization’s direction.” Moreover, execution does not like complexity. Leaders who talk about strategy in concepts and cannot make it simple to move it to a specific goal with the fewest number of executable targets will struggle. As Einstein said, “Everything should be made as simple as possible, but no simpler.” You can start with these simple questions - where are you? Where do you need to go? What resources do you need? What are your options? Which one is best to prioritize? What is the easiest workflow process? What’s your timeframe? What’s your process to reflect and reevaluate?
5. Strategy is about flexibility. You can be clear on your vision and flexible in your strategy. You do not want a strategy that will handcuff you when a pivot is in order so it is important to check in on your strategy. Pay attention to the context and as variables and circumstances require you to update your strategy, be ready. You also may not have gotten it right the first time and that’s ok, you can alter it after your strategy has been tested.
The Question That Cuts Through the Noise
After all the frameworks and definitions, the most useful strategic question is also the simplest: What do we do better than anyone else — and for whom? If you can answer that clearly, you have the foundation of a strategy. If you can't, that's the work.
As Jack Welch said: "In reality, strategy is actually very straightforward. You pick a general direction and implement like hell." The sophistication isn't in the concept. It's in the clarity of the choice — and the discipline to hold it.
Powerful Quote: “A vision without a strategy remains an illusion.” -Author Lee Bolman
Reflection Question: What’s your favorite strategy? What’s your process for formulating your strategy? Comment and share with us, we would love to hear!
The next blog in this series (2/4) will focus on how to develop strategic thinking skills.
As a Leadership Coach, I partner with leaders to engage in strategic thinking for them and their teams, contact me to learn more.
What does strategy mean to you?