Strategy Is One of the Most Misused Words in Business

Strategy

Strategy has to be one of the most misused words in business.

The word is tossed around boardrooms and customer meetings with reckless abandon. You’ve likely heard this: “Our strategy is to become the biggest and the best.”

Deciding to go global, to diversify, or to increase sales by x dollars per year isn’t strategy. These aspirations are objectives. Articulating how to become the biggest and the best is the strategy. That strategy can be good or bad. The “steel” in strategy is its capacity to set the stage for an organization to achieve ironclad competitive advantage. Strategy is also a “steal” because good strategies cost no more to develop than bad ones.

Sounds simple enough, no? Not so fast.

Even those leaders who understand strategy and its virtues are struggling to implement. Booz & Company’s survey of 3,500 global leaders, including 550 CEOs and 325 other C-suite executives, reports a serious lack of cohesion within organizations.

Consider these staggering statistics: 54% of respondents didn’t believe their company’s strategy will lead to success. 53% couldn’t say whether their employees understood the strategy. Only a third believe the company’s core capabilities fully support the corporate strategy. Ouch!

Strategy has to be one of the most misused words in business.

At the other end of the strategy conundrum are leaders and managers who don’t understand strategy. Too often they mistake tactics for strategy. Tactics are the ever-important short term decisions and activities that win battles and contribute to winning the war.

Sales departments know tactics better than most other functions because sales people work with tactics every day. Big retail chains are dead without a firm grasp of daily, weekly and monthly tactics. They have to decide when they will promote, what brands they will feature in the sale, and how they will achieve one-upmanship on aggressive competitors.

Promoting Coca-Cola as a loss leader or trying to make a small or large profit margin on the brand is a tactic. If the retailer’s strategic position in the market is lowest prices for brand name items, then all pricing tactics must support that image.

In this case, because of Coca-Cola’s massive consumer appeal, a healthy retail margin that inflates the price of Coke would not be a wise decision. Selling Coke at a price above competition destroys the retailer’s price positioning.

Tactics are the ever-important short term decisions and activities that win battles and contribute to winning the war.

Imagine the ramifications if Wal-Mart, known for lowest prices every day, made that move. Yet, a “low cost” retailer doesn’t have to lose money on Coca-Cola. Their options are to either squeeze the Coca-Cola Company into lowering their cost for a period of time, or choosing another brand such as Pepsi with similar consumer appeal. That’s tactical decision-making.

Organizations are thick with C-suite executives who worry that strategy slows an organization down and limits growth opportunities. The opposite is true. Look at the success of Apple. Big. Fast. Focused. Innovative. This company managed to harness the resources of 72,000 employees to introduce and successfully market a slew of breakthroughs.

Tim Cook and Steve Jobs before him were adamant in saying “no” to thousands of projects so that they could focus on the few that were truly meaningful to Apple.

Howard Schultz grew Starbucks at an outrageous pace. Three decades was all it took for Starbucks to catapult from 50 stores in the Pacific Northwest to 21,000 stores worldwide, $13 billion in sales and $1.38 billion in profit. Schultz’s strategic vision for Starbucks was a social community with a defined culture that people would aspire to connect with, (over a cup of distinctive, dark-roasted coffee).

Organizations are thick with C-suite executives who worry that strategy slows an organization down and limits growth opportunities. The opposite is true.

Seemingly, the personality of the brand impacted every decision about the experience and the ambiance – the furniture, the artwork, the exotic names of the bean origins, even the music.

With so much written about the success of great companies led by outstanding strategic visionaries, one has to wonder why strategy is so misunderstood by so many of today’s leaders.

John Bell is the author of Do Less Better. The Power of Strategic Sacrifice in a Complex World. A retired consumer packaged goods CEO and global strategy consultant to some of the world's most respected blue-chip organizations, his periodic musings on strategy, leadership, and branding appear in various journals including Fortune and Forbes. John has served as a director of several private, public, and not-for-profit organizations. He can be reached at his blog http://www.ceoafterlife.com/

  • Alessia

    Thanks for writing this. It’s likely to become my most referred to article when talking to people.

  • http://www.frymonkeys.com Alan Kay

    John, some sectors of business face on-going change a great deal
    more than in others. In some of those organizations people feel constrained by
    strategy because they see it as too rigid to help them with the wholesale
    change that can emerge without warning. Hence they still pay lots of attention to
    strategy and view it as a framework with measurable desired outcomes, but
    subject to modification as new conditions arise.

    What’s your experience in this sort situation?

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  • http://www.savvycapitalist.blogspot.com TedCoine

    John, thanks for this terrific insight from a former CEO who clearly has no trouble mistaking strategy for tactics or aspirations. Your post dovetails nicely with one of my own, introducing the Principles-to-Practices framework: http://switchandshift.com/this-trumps-strategy-you-need-more-of-this

    When I think of the Booz & Company survey you cite, and the examples of companies that get strategy right (and how), I can’t help but notice in your examples one oft-overlooked trait of a successful strategy: it’s really, really simple. Indeed, with Apple in particular, that’s pretty much their mantra: keep it simple.

    Simple is easy to explain. It is easy to remember. It is easy to diffuse throughout an organization. It is easy for the company to convey to the customer. And it works. What is that Colin Powell said? “Great leaders are almost always great simplifiers”? Maybe there’s so much trouble with complex strategies because there are so few great leaders.

  • Patrick Plemmons

    Agree completely with your premise. As a former VP Strategy, it was always a struggle to get all the players to understand the differences. Do you have some simple definitions for strategy, tactics and mission that you could share?

  • Nick Malik

    Good article to frame a common problem. However, understanding the difference between strategy and tactics is only one step.
    Do you have an approach for actually making sure that an organization (a) forms a good strategy, (b) executing the steps that are necessary to achieve it, and (c) measuring whether they are successful.

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  • JohnRichardBell

    Great comment and question, Alan. I think the wholesale change you refer to often occurs because too many leaders are not creating the change themselves. They are reactive, rather than proactive. As such, they insist on flexibility to deal with the “curve balls” that come their way. I’d be surprised if the Apple folks think this way. Apple operates within a “lead change” strategic culture. As you know, I’ve had some experience with this — can’t think of a better way but to define an organization’s destiny and then flawlessly execute.
    PS: Yes, there will be curve balls. The strategic leader must determine if they are “game-changers” or aggravations and then go from there.

  • JohnRichardBell

    Couldn’t agree more, Ted. So many leaders try to “do more and more with less and less.” Others prefer to “do more with more.” My mantra is “do less, better.”

  • Mark Vitlin

    Simply as possible, could I suggest that you need strategies to win wars, tactics to win battles, and the mission is why you went to war in the first place.

  • JohnRichardBell

    Nice one, Mark.

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