what is strategy

HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED

Introduction to StrategyWhat Is It & How Does It Work?


In November of 2006, Yahoo! Manager Brad Garlinghouse issued a memo – known as “The Peanut Butter Manifesto” – that directly challenged the senior management with not having a strategic vision.


At Yahoo!, growth had slowed. Google had overtaken them in online advertising revenues and the share price had fallen by over 30% since the start of the year.


According to Garlinghouse, Yahoo! was spread too thin – like peanut butter – and it was time for strategic change.


Now, all organizations are faced with challenges when it comes to strategic change – some from a desire to grab new opportunities other to overcome significant problems, as Yahoo! had


Before we can talk about what strategy is, we have to understand what strategic decisions are and what types of problems they can potentially cause…


Strategic decisions are about:

The long term direction of an organization and the scope of its activities



Gaining advantage over competitors and address changes in the business environment



Building resources and competences (capabilities) and achieving the values and expectations of stakeholders


Strategic decisions are extremely important to an organization’s growth and future!


As a result, they are likely to:

Be complex and made in situations of uncertainty with its overall effect being operational decision making


As a result, they are likely to:

Require an integrated approach – internally and externally – and involve considerable change


But then if you don’t have a strategy, everything is hodgepodge.


Strategy & Strategic ManagementThe Difference


The words strategy and strategic decisions are typically associated with issues like:


The long-term direction of an organization.

In the Yahoo! example, Garlinghouse explicitly recognized that strategic change would require a “marathon not sprint” mentality


The scope of the organization’s activities

Should the organization concentrate on one area of activity or should it have many? Garlinghouse believed that Yahoo! Was spread too thinly over too many different activities


Advantage for the organization over competition

The problem at Yahoo! was that it was losing its advantage to faster-growing companies such as Google.


Advantage can be achieved in different ways and mean different things to different people – so make sure that you understand what it means to your industry


A strategic fit with the business environment

Organizations need appropriate positioning in their environment to meet clearly defined market needs


This might mean a small business looking for its niche in the market or a MNC seeking to buy up businesses that have already found their position.

Garlinghouse felt that Yahoo! was trying to succeed in too many environments.


Maximize the organization’s resources and competences

Strategy is about exploiting the strategic capability of an organization to provide competitive advantage and/or yield new opportunities


The values and expectations of powerful actors in and around the organization

Individuals, groups an even other organizations can drive fundamental issues such as expansion or consolidation, or where the boundaries are drawn for the organization’s activities.


At Yahoo!, managers may have pursued growth in too many directions and been too reluctant to hold themselves accountable. But lower-level managers, ordinary employees, suppliers, customers and Internet users all have a stake in the future of Yahoo! too.


The beliefs and values of these stakeholders will have a greater or lesser influence on the strategy development of an organization depending on the power they hold


So the most basic definition of strategy:

The long-term direction of an organization


But, with all of these characteristics, we can develop a clearer, fuller definition…


Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its resources and competencies with the aim of fulfilling stakeholder expectations.


Complexity is a defining feature of strategy and strategic decisions no matter whether you are a MNC or a small business


What are some of the complexities?


Uncertainty is inherent in strategy because nobody can be sure about what the future holds


Operational decisions are linked to strategy.

Any attempt to coordinate Yahoo!’s business units more closely will have a knock-on effects on web designers, links, career, development and advertiser relationships


This link is important for 2 reasons:

If the operational aspects are not in line with the strategy, then no matter how well consider the strategy, it will not succeed


This link is important for 2 reasons:

It is at the operational level that real strategic advantage can be achieved


Integration is required for effective strategy

Manager must follow cross functional and operational boundaries to deal with strategic problems and come to agreements with other managers who have different interests and priorities


Relationships and networks outside the organization are important in strategy


Change is a typically crucial component of strategy, which is often difficult because of the resources and organizational change


According to Garlinghouse, Yahoo!’s barriers to change seemed to include a top management that is afraid to take hard decisions and a lack of clear accountability amongst lower-level management.


Three Levels of Stratgy


Strategies exist at multiple levels in an organization. Each level can have an independent strategy or certain levels can be working from one strategy.


There are three (3) distinct levels of strategy that we need to understand…


Level 1 – Corporate Level Strategy

Corporate level strategy is concerned with the overall scope of an organization and how value will be added to the different parts (business units) of the organization.

HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLEDHTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED

Corporate Level Strategy Influencers Geographical coverage Diversity of products/service or business units How resources are allocated between different

parts of the organization


Corporate Level Strategy is concerned with the expectations of the owners, shareholders and stock market; and usually takes the form of a “Mission Statement”


Corporate Level Strategy is important because it determines the range of business to include in other strategic decisions


Level 2 – Business Level Strategy

Business Level Strategy is about how the various businesses included in the corporate strategy should compete in their particular markets.


Business Level Strategy is sometimes called Competitive Strategy

HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLEDHTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED

Business Level Strategy Influencers Decisions about how units should provide best

value services Pricing Strategy Innovation and differentiation


So Corporate Level Strategy involves decisions about the organization as a whole, while Business Level Strategy relates to strategic business units (SBUs) within the overall organization


What is a Strategic Business Unit?


An SBU is a part of an organization for which there is a distinct external market for goods and services that is different from another SBU.


In Yahoo!’s case, the SBUs would be Yahoo! Photos and Yahoo! Music, for example.


Now, you may be thinking that is a huge organization, what about small businesses?


Small and Medium sized Enterprises (SMEs) also have corporate and business level strategies, but there is a greater similarity within them.


The Corporate Level Strategy provides the framework for whether and under what conditions other business opportunities might be added or rejected.


One thing to keep in mind – the corporate strategy should support the SBUs, but the SBUs have to make sure their Business Level Strategies do not damage the corporate or other SBUs in the group.


Level 3 – Operational Strategy

Operational strategies are concerned with how the component parts of an organization deliver effectively the corporate- and the business-level strategies in terms of resources, processes and people.


In most businesses, successful strategies depend on the decisions that are taken, or activities that occur, at the operational level – making these strategies extremely important.


The Vocabulary of StrategyKnowing the Terminology


There are 8 terms that you will see in association with any strategy-related discussion.


These terms provide a framework for anyone discussing or learning about strategy, thus we will add them to your vocabulary.


Mission

A general expression of the overall purpose of the organization which is in line with the values and expectations of major stakeholders and concerned with the scope and boundaries of the organization.


The easy way to remember the Mission is “What business are we in?”


Vision or Strategic Intent

The desired future state of the organization. It is an aspiration around which a strategist might seek to focus the attention and energies of members of the organization.


Goal

The general aim in line with the Mission. Can be qualitative.


Objective

A more precise aim in line with the goal. Is usually quantified.


Strategic Capability

Concerned with the resources and competences that an organization can use to provide value to customers or clients.


Business Model

Describes the structure of product, service and information flows and the roles of the participating parties


A traditional model for manufacturing is a linear flow of products from component to product to distributor to retailer to consumer. Information may flow directly between the product manufacturer and the final consumer.


Strategic Control

Monitoring the extent to which the strategy is achieving the objectives and suggesting corrective action (or a reconsideration of the objectives)


So What Did We Learn?


Strategy is relevant to a wide range of contexts.


A small entrepreneurial start-up will need a strategy statement to persuade investors and lenders of its viability.


Public sector organizations need strategy statements not only to know what to do, but also to reassure their funders and regulators that what they do is what they should be doing.


Voluntary organizations need to communicate exciting strategies in order to inspire volunteers and donors.


SBU managers need to propose clear strategies that are consistent with the objectives of their corporate owners and with the needs of other SBUs within the corporate whole.


Privately-held organizations need persuasive strategy statements to motivate their employees and to build long-term relationships with their key customers and suppliers.


Strategy is everywhere in business, even when we don’t see or understand it. It serves a number of purposes to drive organizations forward.


The study and understanding of strategy is critical to being successful in business because understanding it makes you look at factors that are internal and external to your own control, planning for the impact they could have on your organization.