Can You Say What Your Strategy Is?
a strategy statement are, which makes it impossible for them to develop one. With a clear definition, though, two things happen: First, formulation becomes infinitely easier because executives know what they are trying to create. Second, implementation becomes much simpler because the strategy’s essence can be readily communicated and easily inter- nalized by everyone in the organization. Elements of a Strategy Statement The late Mike Rukstad, who contributed enor- mously to this article, identified three critical components of a good strategy statement— objective, scope, and advantage—and rightly believed that executives should be forced to be crystal clear about them. These elements are a simple yet sufficient list for any strategy (whether business or military) that addresses competitive interaction over unbounded terrain. Any strategy statement must begin with a definition of the ends that the strategy is de- signed to achieve. “If you don’t know where you are going, any road will get you there” is the appropriate maxim here. If a nation has an unclear sense of what it seeks to achieve from a military campaign, how can it have a hope of attaining its goal? The definition of the objective should include not only an end point but also a time frame for reaching it. A strategy to get U.S. troops out of Iraq at some distant point in the future would be very dif- ferent from a strategy to bring them home within two years. Since most firms compete in a more or less unbounded landscape, it is also crucial to define the scope, or domain, of the business: the part of the landscape in which the firm will operate. What are the boundaries beyond which it will not venture? If you are planning to enter the restaurant business, will you provide sit-down or quick service? A casual or an upscale atmosphere? What type of food will you offer—French or Mexican? What geo- graphic area will you serve—the Midwest or the East Coast? Alone, these two aspects of strategy are insufficient. You could go into business tomor- row with the goal of becoming the world’s largest hamburger chain within 10 years. But will anyone invest in your company if you have not explained how you are going to reach your objective? Your competitive ad- vantage is the essence of your strategy: What
• “Should I cut the price for this customer? I don’t know if we would be better off win- ning the deal at a lower price or just losing the business.” Leaders of firms are mystified when what they thought was a beautifully crafted strategy is never implemented. They assume that the initiatives described in the voluminous documentation that emerges from an annual budget or a strategic-planning process will ensure competitive success. They fail to ap- preciate the necessity of having a simple, clear, succinct strategy statement that every- one can internalize and use as a guiding light for making difficult choices. Think of a major business as a mound of 10,000 iron filings, each one representing an employee. If you scoop up that many filings and drop them onto a piece of paper, they’ll be pointing in every direction. It will be a big mess: 10,000 smart people working hard and making what they think are the right deci- sions for the company—but with the net result of confusion. Engineers in the R&D department are creating a product with “must have” features for which (as the marketing group could have told them) customers will not pay; the sales force is selling customers on quick turnaround times and customized offer- ings even though the manufacturing group has just invested in equipment designed for long production runs; and so on. If you pass a magnet over those filings, what happens? They line up. Similarly, a well-understood statement of strategy aligns behavior within the business. It allows ev- eryone in the organization to make individual choices that reinforce one another, render- ing those 10,000 employees exponentially more effective. What goes into a good statement of strat- egy? Michael Porter’s seminal article “What Is Strategy?” (HBR November–December 1996) lays out the characteristics of strategy in a conceptual fashion, conveying the essence of strategic choices and distinguishing them from the relentless but competitively fruitless search for operational efficiency. However, we have found in our work both with executives and with students that Porter’s article does not answer the more basic question of how to describe a particular firm’s strategy. It is a dirty little secret that most executives don’t actually know what all the elements of
David J. Collis (dcollis@hbs.edu) is an adjunct professor in the strategy unit of Harvard Business School in Boston and the author of several books on corporate strategy. He has studied and consulted to Edward Jones, the broker- age that is the main example in this article, and has taught in the firm’s management-development program. Michael G. Rukstad was a senior research fellow at Harvard Business School, where he taught for many years until his untimely death in 2006.
harvard business review • april 2008
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