In business strategy matters more, because of the many tough decisions one has to make and, to be honest, because we seem to always find ourselves unprepared for a market that is more and more volatile. The winners of today are not the winners of tomorrow, and this should be a starting point for every business strategy. Context matters as much as your actions, and this changes a lot.
Just a reminder, being a new thing, there is no one great theory behind and scientists still argue over what is the best way of making choices in a company. It’s all about what a company will do and not do and how will create and maintain a competitive strategy. At least this is what we look for if we decide that we need a strategy, and it does not matter that much if strategy drives structure or behavior drives strategies. In the end a strategy is a pattern of choices, not an event but a process.
While we can agree with the view that strategy should be a part of the organizational processes or with the fact that strategy is really just an adaptive process, it pays to have a strategy in mind when you start and to be ready to adapt. This, because there are two reasons that explain why some companies perform better than other. One is the attractiveness of industry and the other is the competitive advantage. And, this fact of business makes business unit and corporate strategies two different paradigms.
So, strategy matters! But, what is needed to have a good strategy? That’s an important question, and the answer is in fact a set of great answers to five questions. The first: What’s your winning aspiration? Knowing what you really want will give you a great start. Where will you play? This also needs an answer. It makes a huge difference if you play in a difficult business or a high profit business. How are you going to get where you want to get? This is about strategic decisions, resourcing and plans of actions.
Many great strategies stop here. And, this is why they fail! There is no indication on what capabilities must be in place to get where you want and to reach your objectives and also the management systems that need to be implemented to make the strategy executable are not a subject of the strategic planning process. Not thinking about these two issues will make the difference between you an your competition.
But, this is not the only thing that will decide who wins and who loses on the market. There are actually 4 factors that decide this:
- industries vary widely in their profitability, there fore is easier to be successful in some industries (eg. retail versus pharmaceuticals) than others, the key being that you should make a bigger margin than the average of your industry;
- the industry you are in matters a great deal – some time no matter how smart you are and how good your team is at executing, a difficult industry will break or make your business, simply because there are a lot of forces (eg internet) that you cannot simply control;
- competitive advantage may be fleeting – you might have it today and you could be on the top Forbes Top 500 Companies, and ten years from now of you didn’t fight to keep it you might be out of business or, best case scenario, trying to survive;
- industry structure varies widely in the world – on this depends how your competition and your entry to market barriers look like, and you will be amazed to find out that differences are huge between developed countries.
To conclude, indeed, having a strategy makes a difference, but your capability to adapt and develop will make the difference.