Strategy is one of the most mis-used words. There are many who think that a plan is a strategy. Because it’s such an over-used word, it has also become lost in familiarity. Yet strategy is beyond just having a plan, strategy is a wholistic integration of a set of choices that enables an organization to enjoy superior returns in the long run.
Strategy often sits at three levels in the organization. Failure for a strategy to sit at these three levels could also imply failure of strategy. Most strategy fails! And it can fail at the analysis. One can wrongly analyze the industry, or their internal capabilities. But the biggest failure of strategy is the failure to sit at these three levels.
The first level is the business level. At the business level, the firm is answering the question of ‘how shall we compete? How shall we achieve a competitive advantage?’ There are only two ways to answer this question. First, this question can be answered by choosing to be different (increasing customer’s willingness to pay). This can be realized through better branding, better value creation, better convenience, better customer service. The second answer to this question is one of cost leadership (reading supplier opportunity cost). A business can always be a differentiator or a cost leader. Or it can play with a blend of the two. Those who’ve implemented strategy will confess that the blend is hard. At the end of the day, strategy is about trade-offs.
The second level of strategy is the corporate level strategy. Here the firm must make a choice between staying in the spot market (buying) or going into long-term transactions with its suppliers. A firm attempt to answer the question of the scope of involvement. Shall we diversify? Shall we integrate forwards or backwards? Horizontally or vertically?
The third level of strategy is the functional one, and that is the attempt to have coherence in the different functions of the business. What is the HR strategy? What is the technology strategy? What is the international strategy? What is the supply strategy?
The question then holds; where is your strategy currently seated in your organization? Is it occupying the three seats? Or do you even have a strategy in the first place?
The Three Seats of Strategy
Strategy is one of the most mis-used words. There are many who think that a plan is a strategy. Because it’s such an over-used word, it has also become lost in familiarity. Yet strategy is beyond just having a plan, strategy is a wholistic integration of a set of choices that enables an organization to enjoy superior returns in the long run.
Strategy often sits at three levels in the organization. Failure for a strategy to sit at these three levels could also imply failure of strategy. Most strategy fails! And it can fail at the analysis. One can wrongly analyze the industry, or their internal capabilities. But the biggest failure of strategy is the failure to sit at these three levels.
The first level is the business level. At the business level, the firm is answering the question of ‘how shall we compete? How shall we achieve a competitive advantage?’ There are only two ways to answer this question. First, this question can be answered by choosing to be different (increasing customer’s willingness to pay). This can be realized through better branding, better value creation, better convenience, better customer service. The second answer to this question is one of cost leadership (reading supplier opportunity cost). A business can always be a differentiator or a cost leader. Or it can play with a blend of the two. Those who’ve implemented strategy will confess that the blend is hard. At the end of the day, strategy is about trade-offs.
The second level of strategy is the corporate level strategy. Here the firm must make a choice between staying in the spot market (buying) or going into long-term transactions with its suppliers. A firm attempt to answer the question of the scope of involvement. Shall we diversify? Shall we integrate forwards or backwards? Horizontally or vertically?
The third level of strategy is the functional one, and that is the attempt to have coherence in the different functions of the business. What is the HR strategy? What is the technology strategy? What is the international strategy? What is the supply strategy?
The question then holds; where is your strategy currently seated in your organization? Is it occupying the three seats? Or do you even have a strategy in the first place?
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