Strategy

WTF is Strategy? — A Guide with an Example Case Study

Search about the word strategy online and you are bound to come across a gazillion articles. Some of them are good, some of them are bad. You wish if there was an article that teaches you strategy with the help of an example case study. Your search ends here!

Photo by Maarten van den Heuvel on Unsplash

My thinking about strategy has been formed after reading the book Good Strategy, Bad Strategy by Richard Rumelt. It is an excellent and thought provoking source that I will recommend you buying. You can also read the summaries which are available online. In my article, however, I will explain with the help of examples how you can have a good strategy, and how you can avoid having a bad strategy as well. But first, we need to know what the word strategy means.

What does the word “Strategy” mean?

Whenever I am learning something, the first step I do is looking at the meaning of the word in the dictionary. This is exactly what I did in this case too. Going to the Oxford Dictionaries and searching for the meaning of the word.

a plan that is intended to achieve a particular purpose, i.e. vision

Does it mean that strategy is a plan? Not entirely. I researched more and found the following differences between the two.

Strategy is concerned more with the intent, whereas planning is more concerned with the actions. Strategy is aligned with the vision, goals, and objectives. Planning is aligned with the strategy. Strategy requires focusing on the future, whereas planning/tactics is more focused on day-to-day execution. The primary focus while developing strategy is being effective, whereas the primary focus while execution is efficiency, that is to say deliver maximum value at minimum cost. Last, but not the least, strategy is intangible, whereas tactics are tangible and can be measured using metrics.

We need to have a strategy and a relevant plan to accomplish some goals/objectives we have. Going back to my previous article, your goals comes from your vision, which is how you want the world to look like in the future.

Because an organisation doesn’t operate alone in the world, the strategy of an organisation can never be, therefore, in isolation. The dynamic world we are living in makes me believe that we cannot have a fixed long-term strategy, but an agile strategy. Choosing one strategy also means that we will let go of another strategy we could have chosen.

According to Rumelt, a good strategy clearly acknowledges the obstacles in the path of realising the vision, and provides an approach to overcoming those obstacles. It is around those challenges we need to form our strategy for making our goals a reality.

The first step is understanding the challenges around me in realising that vision, as well as knowing about my own capabilities and strengths. Equally important is ensuring that I am familiar with my weaknesses too. Last, knowing what social/political opportunities lie around me are also important. Good strategy is the effective application of your organisation’s strengths against your rivals’ weaknesses. Like a lever, it magnifies your efforts.

Kernel of a Good Strategy

There are three components of a good strategy.

• Diagnosis — a theory describing the nature of the challenge or the current situation.
• Guiding policy — a series of general policies which will be applied to grapple with the challenge. Guiding policies are typically going to be implicit or explicit tradeoffs. The policy is “guiding” because it routes actions in certain directions without defining exactly what shall be done (this will be finalized by the coherent actions)
• Coherent actions — a set of specific actions directed by guiding policy to address challenge. This is the most important part and most exciting too. A strategy must always be backed with an action plan.

Thus the hard work of developing a strategy is composed of three parts: diagnosis of what’s happening or holding you back, policy for overcoming that, and breaking that down into coherent actions. This may mean that you need to hire for the strengths you need or fire the liabilities you don’t need to fulfil that strategy. Additionally, one must strive to expose the flaws of ineffective and superficial approaches, which are often mistaken for true strategy.

It is worth mentioning that there are certainly advantages of being a first mover like scale, network effects, reputation, patents, brands etc. Yet, the strength for an effective comes from two natural sources.

1. Having a coherent strategy — one that coordinates policies and actions. This is achieved by the coherence of its design. Many organisations don’t do this. Instead, they have multiple parallel objectives that unconnected with one another, or sometimes even in conflict with each other.
2. Creation of new strengths through subtle shifts in point of view. Reframing of the competitive situation can create new patterns of advantages and weaknesses. This can give birth to most powerful strategies.

One gain strengths not by strengthening the already established strong links, but by making a weak link stronger in a chain. Some of those can be made stronger directly by the organisation, and some of them are beyond one’s control.

Too many words? Let us understand and unpack with the help of an example.

Example

First Step: Diagnosis

Let us say that my vision is having a greener city. There are various ways I can have a greener city. For example, I can have a city where public buses run on electricity. I can have more and more parks that have high-foliage trees. I can also have EV charging stations across the city for those who have electrical vehicles. Additionally, I can have mechanisms to ensure minimum waste generation. There are many options that one can have. We cannot do everything and must not do everything.

This is what the current situation looks like for my hypothetical startup. I have a team of three people. We have done some projects in the remote area of Himalayas on afforestation. We have the testimonials of the district administration and forest department there, and we had received a funding for doing an afforestation project. We have the technical knowledge required for doing these afforestation projects. We want to now expand to the plains of India, because that is where most of the people live, and that is also where we can have maximum impact on the lives of people.

Out of the possible ways of realising the vision of a greener city, we choose the one that focuses on afforestation on the government land marked for green areas, such as parks, open spaces, and green belt around the streets. This is because we have experience in that and we have people who can vouch for our credibility. Our goal is to have at least thirty afforestation projects in thirty different districts of the first state we are going to work with in three years. This will give us the credibility, a name in the arena, as well as quantifiable metrics that can be used to ascertain the impact we will be making on people’s lives. The next step is to forge a strategy to accomplish this goal.

There are three large organisations that are already existing in this space, and have been doing exactly the same — afforestation. Because they were the first mover, they have reputation and have already gotten some large contracts. These are the direct competitors. One of them doesn’t have speed in the execution of projects, thus if we are swift we will be better. The other two have delivered projects in numerous areas of India, but they have mostly been supported by donations so funding is an issue there. Additionally, they do not have a simple way of doing business with because of numerous combinations of projects that can be done.

In addition to this, there are numerous small non-profit organisations that do afforestation, but not using the scientific method that we use. The government nurseries provide saplings at reduced rates, but they don’t have all the plants we need for our work, thus we need to get some saplings from the private nurseries too, which are more expensive. We are new in this area, thus people are less likely to trust us.

The government offers youth development programs in all the districts and one of the outcomes for those is environmental sustainability and leadership development.

What is our reality? We are new in the market, we don’t have a lot of resources (time, money, and people) and our experience has been in a different region of India.

Second Step: Guiding Policy

Because our competitors are ahead of us, we need to be efficient in doing business with. This can be achieved by simplicity, because we cannot afford complexity as we are new to the business. Thus, our guiding policy should be simplicity and efficiency. If we are to make a choice, we will choose the simpler alternative, the most efficient among all the simple alternatives. Simple communication, simple projects, simple to understand metrics, and simple pricing structure.

Third Step: Coherent Actions

1. Standardised Bundle: Because we do not have the capacity to develop custom projects, we need to develop a list of simple repeatable projects that do not take a lot of time to execute. Additionally, because our geography of operation is similar, we do not tweak the tree species a lot. This means that right after signing, we can get going.
2. Partner Effectively: Because we cannot afford to employ a lot of people, we need to tap into the network of district youth development office to find the volunteers and citizen groups for doing project management and implementation of these projects. Additionally, we need to use our network of forest department that we have from our work in the Himalayas.
3. Limit Size, Deliver Fast: At this stage, we are not looking actively for large projects. Because land is premium, and most of the people want to see a sample first before a major project, we should limit ourselves to projects of size 500-1000 square feet only. These can be delivered quickly.
4. Communication and Impact: Our ability to grow lies with our ability to communicate our impact in a simple manner. Thus, all our actions should ensure we are benefiting people, planet, and local economies. We will be communicating it at various places, via all our online and offline materials.
5. Train Consultants: We are only three people and we cannot be everywhere, so keeping in mind the future, we need to develop capacity of second line of leadership that will take these initiatives forward, as we grow up.

Features of a Bad Strategy

It is easy to identify a bad strategy. They share one of the four features written below.

• Fluff is empty words that sound like a coherent plan, but don’t convey anything. For example, “Using AI solutions to deliver value to our geographically distributed customers.”
• Failure to face challenge is a plan that doesn’t define the challenge. The strategists in this case think that world has rolled down a red carpet for them and their only job is to walk on it.
• Mistaking goals for strategy are most frequently seen in extremely audacious goals that don’t come combined with an approach. Goals are more suited for a vision statement. For example, making our city green is not a strategy.
• Bad strategic objective are goals which offer a diagnosis of the problem, but then fail to address inconvenient realities. For example, we are going to make our sales more, without actually looking at the reality that our product sucks.

According to Rumelt, bad strategy is almost a literary form that uses PowerPoint slides to say, “Here is how we will look as a company in a year or in three years.” That’s interesting, but it’s not a strategy.

What Strategy is NOT?

Strategy is not a big-picture overall direction, divorced from any specific action. A situation in which strategy is defined as broad concepts without implementation creates a wide gap between thought and action.

Goals and objectives are not strategy either.

Now that you know what strategy is, the next step is to make an action plan and roadmap, which I am going to cover in my next article. Stay connected.