What is Strategy?1

Strategy is…2

• Systematically making the right choices• Based on current conditions• Shaped by Values• Informed by Vision• A detailed articulation of Mission

• DIFFERENT FROM TACTICS!

• Intended to bring about a desired outcome• USUALLY this is competitive, i.e. builds

or maintains competitive advantage• CAN also take other forms, e.g. “Exit

Strategy"

Systematic Choices 3

Competitive Advantage

• It’s what you do better than anyone else - • Where does it come from?

– Transaction-cost based view of the firm– Resource-based view of the firm– Knowledge-based view of the firm

• From economics – “free” markets have zero profit: Perfect information, no transportation costs, no interventions, no monopolies, no externalities

4

Position Your Best Resources:• Perfect Information - Information

Asymmetry• Transportation Costs - Resource Deployment• Interventions - Lobby For Policy • Monopolies - Virtual Monopoly Power

And then look outside your business to: • Externalities - Avoid Negative and

Capture Positive

Competitive Advantage Sources 5

• “No battle plan has been written which survives first contact with the enemy”– Gen. Dwight D. Eisenhower

• What is your market and “the” market look like for buyers and sellers?

• Who is your competition?• What are your capabilities?• Is there money moving in your

market?

CURRENT CONDITIONS 6

• Values are shaped by your aspirations for yourself and the business.

• Values provide the basic frame work of what you are and are not willing to do.

• Strategy without values is like an architectdesigning a house without talking to owners.

REMEMBER: Strategy is about choices not tactics!

SHAPED BY VALUES 7

It’s important to be able to be able to communicate your vision and subsequent mission in a way that allows people to KNOW, LIKE, and TRUST you.

Also answers these: • What do we do?• How do we do it?• Whom do we do it for?• What value are we bringing?

8

Informed by Vision and Articulated by Mission

PORTER’S GENERIC STRATEGIESGet familiar with the basic positions: 9

PremiumNiche

Feature Differentiated

Cost Leader

Nar

row

Mas

s

Mar

ket

Cost Function

Primary Attribute

Price- Value

Leader

• Terms are often used interchangeably• Strategy changes more slowly• Strategy directs, or at least suggests, tactics• Strategy comes from the home office (and

may be painful – “go take that hill…”), tactics are embedded in the strategic context (“given that we’re going to take that hill, how will we go about it?”)

DIFFERENT FROM TACTICS 10

What are you shooting for?

• Economies of scale• Diversification• Vertical Integration• Expand product lines for existing

customers• Expand markets to include new customersThere’s always contra-strategy for fun!

EXAMPLE STRATEGIC TOOLS 11

1. Decide what success looks like for your business.

2. Decide the outcomes that will get you there.

3. Get systematic about your decisions.4. Pick a place in your market to call home. 5. Deliver value via innovation, cost, or

anywhere else in Porter’s Matrix. 6. Don’t skimp on the differentiation. 7. Record, Evaluate, and Adapt. 8. Rinse and Repeat.

12Conclusion: 8 Steps to Strategy