Strategy, Innovation & Leadership LAB

7 things that every leader should know about strategy

August 4, 2015

“Strategy” is a cool word. In business, this word is used readily and often to leave a good impression with the public. It is even expected of senior management within an organization! But strategy is probably the most used and misused word in the language of business. Most people who use the word strategy do not really know the true meaning of the word strategy.

Image: © Nationale Beeldbank

I often even have the impression that the more people use the word strategy in their conversation, the less these people know about the word strategy. That is why I like to list 7 things that every leader should know about strategy. 

  1. Strive to be unique rather than the best

    Strategy is not about being the best, but about being unique. Competing as the best in business is one of the major misconceptions about strategy. If you only want to remember one tip from this list, it should be this tip!

    Many leaders compare competition in business with that in sports. There can be only one winner. But business competition is much more complex. There can also be multiple winners. In a certain industry, various companies, each with their distinctive, different strategy, can win. They focus on the business in which they are distinctive and unique and are, therefore, not a threat to each other. Seen from strategy development, it is therefore not wise to seek out the biggest player in the industry and to copy everything that this company does. Try to be unique and distinguish yourself! 

  2. Strategy = compete for profit 

    Doing business is not about gaining the largest market share or growing quickly. It is about making money. “I want to grow my business” is not a strategy. “I want to grow my business” is the same as saying: “I would like to be rich.” Unfortunately, these things do not happen by themselves. Growth is therefore not a strategy. It is a consequence after choosing and implementing a strategy. 

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  3. Know your industry

    A company is not an island. It is part of a large ecosystem, an industry. Every industry has its own characteristics and its own structure. This structure and the relative position of your organization in this industry characterizes profitability. Certain industries have a higher return than others. Your vision of the industry and the industry competition affects your vision of your strategy. How are you going to compete in this industry? The better you know the industry, the better you are able to pick out the elements with which you can distinguish yourself and compete. Make sure that you are unique so that you can benefit from a higher average return than the average in your industry. 

  4. Strategy = choice!

    In my view this is the simplest definition of strategy. You must make a clear choice WHO your target group is and HOW you want to control this target group (customers). How do you make the connection between the customer (demand side) and your company (supply side)? Here you need a value proposition for a specific customer segment where developed activities in the value chain serve this customer segment. The key word here is “choice”. Your company cannot produce and offer everything for all target groups. It is therefore important that you select a target group with potential customers who have similar needs. Then you develop your business activities so that they can meet the needs of the chosen target group. Strategic innovation is the process to make these choices based on the definition of “who” and “how” for the company. 

  5. Learn to say NO 

    When you have defined clearly what you want to do (a clear value proposition for a specific customer segment (whom) and a set of distinctive, unique activities in the supply chain to meet the needs of this customer segment), you discover that there are many things you are not going to do. There will be customers that you are not going to serve. There will be business activities that you will not do and services/products that you are not going to offer. When determining your strategy, it is also very important to determine what you are not going to do. 
    Michael Porter quote: “The essence of strategy is choosing what not to do.” 

  6. Never stand still

    A good strategy means that you have reached the finish line. It means that you have reached the predetermined target of the strategy. But competitors move and come and go. Customer needs and behavior change and technology evolves. A crucial element in determining the future path for your business, is predicting how these developments and trends evolve and how you can integrate them into the strategy-building process. Otherwise, you may miss new developments or values ​​and get into trouble. Think about the example of the smartphone and Nokia and you understand what I am saying. 

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  7. Scenario thinking is an important strategy tool
    The standard way to work with assumptions in a structured way is through scenario thinking. You can make use of the facts and figures from within your own company for this. Fix some parameters and vary the others. By applying this technique you get a view of possible future routes (i.e., strategic options) for your business. I believe that scenario thinking is a critical skill for anyone who has to deal with strategy definition and implementation. Every leader should at least master the basic aspects of scenario thinking, so a strategy consultant is not required for every reflection process or to be able to better understand the scenario models that the strategy consultants present. 

This blog is a contribution by Jeroen de Flander, international strategy implementation expert and senior lecturer of the Strategy Implementation master class of TIAS School for Business and Society.

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