What is strategy?

As I have started to read more and more about strategy, I notice the word itself is often used (and misused). I admit that I’ve been guilty of misusing the word “strategy.” A google search for the word “strategy” turned up 529 million hits.

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Looking at the news turns up head-lines like “Will a new global strategy lift under armor stock?”. Or “Obama repeats strategy in student loan fight.” As you’ll see neither of these headlines accurately use the word “strategy”

Given my need for clarity around what strategy is (and is not), I wanted to devote a post to the subject. As I mentioned previously, I loved Lafley and Martin’s Playing to Win  – it has inspired several posts that I want to share.

What is strategy?

Michael Porter, the father of business strategy, wrote a seminal paper entitled “What is strategy” in 1996. This paper has become the most cited HBR article, ever.

In “What is strategy?” Porter defines strategy as “the creation of a unique and valuable position, involving a different set of activities.” There is a lot going on in this definition and Lafley and Martin provide a valuable framework for unpacking Porter.

Lafley and Martin’s take

Building off of Porter’s work, Lafley and Martin, define strategy as

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Strategy is a “set of choices about winning” and as I mentioned in my previous post, “winning” can be a noble aspiration.

Having only read Lafley and Martin’s book a month ago, I have found the question set to be extremely valuable. They represent an easy way to teach yourself and others strategy. One of my favorite antidotes from the book relates to the idea of teaching strategy. This is from A.G. Lafley

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“I was going to teach strategy until P&G was excellent at it.”

Turning the framework on yourself

You’ve read this far and you think, “I don’t run a business” or “I’m in college” or “I’m not a manager.” How can you apply what is in Playing to Win? By applying the framework on yourself – your career, your marriage, your family, etc. Take your career as an example. I’ll use a hypothetical example:  Jen just started at E&Y and she wants to one day become a partner.

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Now Jen has a strategy. She will evaluate choices she has in light of this strategy. Her strategy will help clarify what choices she will make.

What must be true? (WMBT)  – this is a refrain that Roger Martin uses often and is a great way to brainstorm the requirements to successfully execute. I used WMBT to help work out Jen’s strategy.

For example, what must be true for Jen to learn how to sell and bring in business for E&Y? She must learn from the company’s best salespeople. Notice that this is just one answer….there are other answers to the question. The answer could have been, “Jen needs to read the top ten books written on how to sell.” That said, Jen must make a choice, she can’t do an unlimited number of activities in order to become a good salesperson (in this case she could read books AND learn from others at E&Y).  Strategy is a set of choices about winning.

The better the choices, the better the strategy and the more likely that executing on the strategy will lead to the winning aspiration – for Jen, making partner. Also, not making a choice, is a choice.

What is your winning aspiration? And what are the series of choices you are going to make to help ensure that you win?

Playing to Win

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I am starting a series of posts on A.G Lafley and Roger Martin’s Playing to Win. It’s a delightful book on strategy AND it’s not what you might typically think about when the words “business strategy” are mentioned.

For many of you, the words “business strategy” will produce one of two responses.

One: you will want to fall asleep, close this tab in your browser, block my facebook updates.

Two: you think about businessmen and women in a room figuring out how they can make more money, often at the expense of you, the customer.

So what is different about Lafley and Martin’s approach? The winning is strongly linked to delivering superior value to your customers…i.e. you win when your customer wins.

Peter Drucker said, “the purpose of a business is to create a customer.” Contrast this with what is taught in every Economics 101 class, “the purpose of a business is to maximize profit.”

What Lafley and Martin show us (in this book and Martin’s articles) is that the way to maximize profit (the Econ 101 definition) is to maximize customer satisfaction. The ideas are related, but those that put the profit maximization ahead of making the customers happy will not win in the long run.

I think Johnson and Johnson’s credo is a great example of this idea. I’ve include the entire credo below. (highlight is mine). LINK TO PDF

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Notice the order in the credo:

  1. Customers
  2. Suppliers and Distributors
  3. Employees
  4. Communities
  5. Shareholders

The shareholders are listed LAST! Does J&J care about their shareholders? Absolutely, but they ensure that the shareholders win by taking care of 1-4 on the list above. “When we operate according to these principles, the stockholders should realize a fair return.”

I’l end this with a few questions, what do you think would motivate your employee base (or yourself)? A: Solving an important problem for your customer, somehow making their lives better, etc. or B: Improving returns for shareholders?

For me (and for 99.999% of the world) it’s A. I get excited about discovering and meeting our customers needs. I want to help ensure that they are delighted.

What should we be teaching students in economics? The purpose of the firm is to maximize profits? or should it be that the purpose of the firm is to maximize customer value? Which one would attract the best and the brightest into business? Again, I believe we could dramatically change the experience of most business school students by focusing on improving the lives of customers.

For the next few blog posts, I’ll dive further into some of the ideas discussed in Playing to Win. Now that you see that strategy can have a higher purpose, please come along for the ride.

Roger was kind enough to spend a few minutes with me and sign my copy of his book.

Roger was kind enough to spend a few minutes with me and sign my copy of his book.