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 become a global corporation, to diversify, or to increase sales by x dollars per annum is not strategy. Such aspirations are goals or 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? Not so fast. Even those leaders who understand strategy and its virtues are struggling to successfully implement. Booz & Company’s survey of 3,500 global leaders, including 550 CEOs and 325 other C-suite executives report a serious lack of cohesion within their 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!
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. In traditional manufacturing companies, sales departments know tactics better than most other functions because sales people work with tactics every day. Big retailers are dead without a firm understanding of daily, weekly and monthly tactics. They have to decide when they will hold a sale, what brands they will promote, 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 unique 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 strategic positioning. Imagine the ramifications if Wal-Mart, known for lowest prices every day, made that move. On the other hand, 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.
People worry that strategy slows a company down and limits growth opportunities. The opposite is true. Just 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. All it took was three decades 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 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). 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.