Are you sure You have a Strategy?

Are You Sure You Have a Strategy?

 

Donald Hambrick and James Fredrickson describe shortcomings with traditional strategic analysis frameworks in “Are You Sure You Have a Strategy?” This article, written in 2001, points out the missing guidance for what constitutes a strategy and what should be the outcome, such as many organizations’ belief that they have a strategy when they may only have a piece of a strategy.  This article describes how actual-company strategic statements like “We’re pursuing a global strategy” and “Our strategy is to move from defense to industrial applications” are not strategies.

 

In this article, the writers say that a strategy consists of an integrated set of choices but it isn’t a catchall for every important choice an executive faces. In addition, they define elements of Strategy as Arena's, Vehicles, Economic Logic, Staging & Differentiators.

 

Arena’s : Where we will be active?

è  Be specific about where you will be active, what areas/categories you will emphasize. Strategy may be centered on one product or one category or one customer segment.

 

Vehicles : How will we get there?

è How do you intend to attain a significant business presence in your chosen Arena? (Joint Ventures, strategic alliances, acquisitions, R&D, Product Development, Marketing, Globalization)?

 

Differentiators : How will we win in the market-place?

è Image, customization, price, styling, quality, reliability? What is the value proposition? ? How do we differentiate ourselves from competition? (Brand, Price Points, Customer Services, Quality of product - e.t.c) We must choose / decide how we intend to differentiate and then devise a plan of action to actively differentiate ourselves in our chose arenas.

Staging : What will be our speed and sequence of moves?

è Set priorities – what do we do first? What’s the plan of a record? What is the sequence by which we entire a specific arena? How quickly do we move? What’s our time horizon?
[Key influencing factors include: Funding, Urgency – i.e. first mover advantage? achievement of credibility]. Sometimes the pursuit of early wins is also important because it can help build momentum.

 

Economic Logic : How will we obtain our returns?

è How will profits be generated? What’s our biz model and how does it tie in to the other 4 elements? What’s our pricing strategy? Economic logic analytics, results in a determination of how profit will be generated. That could happen on the front end, through aggressive pricing, or on the back end by effectively monitoring costs. These are the key questions which one needs to address when reviewing this element of a strategic plan.

 

These 5 Strategic Elements are critically important and enough to warrant specific, intended planning. They form the initial framework on which companies can build org structure, foundational polices, operations processes and other important elements of building an organization.

 

Also, the authors say that a good strategy is not static but it should be flexible and evolve, new arena's or new competitive advantages. Strategy is not chiefly about planning- it’s about intentional, informed, and integrated choices. The strategy diamond featuring the 5 strategic elements is a basis for creating a well thought out intentional, informed and plan.

 

The article describes how these statements are mere strategic element threads of a strategy but executives then communicate these threads to their organizations in the mistaken belief that doing this will help managers make choices. But it doesn’t say how to know that their company is to purse a first-mover strategy or acquisition strategy help most managers set priorities and do their job.

 

Strategic planning is important however often the strategic plan is created in an executive retreat where incorporated strategic planning models don’t systematically blend analytics with innovation and the metrics of an organization’s value chain in the overall strategic development process. There is a no-nonsense integration of strategic planning tools with organizational scorecards, process improvement activity development, and an organization control mechanism.