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The Many Definitions of Strategy

May 1st, 2016

What is strategy in a business context? That is an even more elusive question than what culture is. I always thought strategy meant market positioning, but my recent academic foray has exposed me to the many definitions of strategy. I list them below, and while some may contradict another, they are in fact all correct. How can that be, you ask? I reckon it is similar to light and sound, which can behave like a wave or a particle under different circumstances (the wave-particle duality). To paraphrase Einstein, the different definitions of strategy present “contradictory pictures of reality; separately neither of them fully explains the phenomena of” strategy, “but together they do”.

This is the point where I defer to much smarter writers to do the explanation. The following definitions are taken from a textbook Managing Change, 6th Edition by Bernard Burnes wherein he shares five definitions of strategy from Mintzberg’s book The Strategy Process (or see this FT article). I also provide some examples from the real world.

Strategy as a plan

According to this view, strategy is some form of consciously intended course of action which is created ahead of events. This can be either a general strategy or a specific one. If specific, it may also constitute a ploy.

Real-life example

Microsoft’s deliberate plan to repackage .Net from the ground-up as a cross-platform runtime, and especially re-architecting ASP .Net Core to follow de-facto web development standards, is an example where they are purposefully staking a claim in what they see as the future of software – one where Windows is no longer the dominant OS. I previously shared my negative experience with ASP .Net Core before I realised how much of it has changed.

Strategy as a ploy

This is where strategy is a manoeuvre to outwit an opponent. An example of this is when a firm threatens to lower its prices substantially to deter new entrants into its market. It is the threat to lower prices that is the consciously intended course of action, and not any actual plan to do so.

Real-life example

It is hard to find a real-life example, since we as observers have no way of telling if a strategic move is merely a ploy. I will try to offer one in the form of Netflix recently announcing their intention to spend US$5 billion in 2016 to produce original content. Why did they have to announce it? They could have built a marketing campaign around how Netflix has more original content than their competitors, but instead they touted that extravagant figure up-front. While I believe they will eventually spend close to that, it looks more like a ploy to rattle up the competition and lock customers in. I’m a Netflix viewer, and I for one am excited to stick around to see what $5,000,000,000 of original content gets me.

Strategy as a pattern

This is where we observe, after the event, that an organisation has acted in a consistent manner over time, i.e. whether consciously or not, the organisation exhibits a consistent pattern of behaviour. We can say from this that an organisation has pursued a particular strategy. This may not be the strategy it intended to pursue, but it is the one that has emerged from the action of the organisation. Therefore, though the organisation’s realised strategy could be the product of a conscious and deliberate plan, this is often not the case.

Real-life example

This is termed as “emergent” strategy, whereby a pattern of behaviour defines a strategy when we look back at it. I propose that Blackberry (remember them?) fits this definition. When their plans for world domination were halted by Apple iOS and Google Android, a pattern emerged from their efforts to maintain relevance in the marketplace. This started with a major overhaul in Blackberry 10 to prioritise touch screen inputs, and when that didn’t work, acceded to using Android for their latest devices starting with the Priv. Blackberry CEO John Chen responded to the Android adoption by saying, “…We could keep the pride and die hungry or we can eat well and not so proud, maybe. So I chose to eat well. …” Hence, I doubt the decision to go on Android was done deliberately, but one that emerged through its efforts to keep itself sustainable.

Strategy as a position

From this perspective, strategy is about positioning the organisation in order to achieve or maintain a sustainable competitive advantage. Mintzberg et al argue that most organisations try to avoid head-on competition. What they seek to achieve is a position where their competitors cannot or will not challenge them. In this sense, strategy is also seen as a game: groups of players circling each other, each trying to gain the high ground.

Real-life example

Apple’s smartphones, from day one, have positioned itself as a premium product. This has helped it rise above the tide of competitors by setting a healthy profit margin (estimated 65%) on each phone. With the exception of the iPhone 5c to help enter emerging markets, Apple manages to brand itself as worth those extra dollars. Chief rival Samsung have long taken note of this working strategy and is having the same success with its S-series phones.

Strategy as perspective

This definition sees strategy as a somewhat abstract concept that exists primarily in people’s minds. For members of an organisation, the actual details of its strategy, as such, are irrelevant. What is important is that everyone in the organisation shares a common view of its purpose and direction which, whether people are aware of it or not, informs and guides decision-making and actions. Consequently, without the need for detailed plans, the organisation, through a shared understanding, pursues a consistent strategy or purpose.

Hypothetical example

Strategy as perspective basically refers to a culture-driven strategy. Without having an explicit strategy plan/ploy/position, a company’s actions can still be cohesive when it is bound by the internal culture. For example, the hypothetical Acme Inc.’s culture is one of continuous improvement. They also love Agile Scrum. From this emerges a strategy of monthly software releases that Acme uses to keep their customers engaged and happy.

Footnote

It is important to note that this is only one person’s definitions. Indeed, there are probably as many definitions of strategy as there are companies in the world, so take this as a starting point to formulate your own thoughts on what strategy is.

Next week: How is strategy formulated?

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