What is Strategy?

To sum this up, operations asks: “How can we do what we already do better?”, while strategy asks: “How can we do things differently?” Note that in answering this question, we are
simultaneously answering another question: what won’t we do? Since strategic decisions entail the deployment of finite resources – time, money, energy, and attention – strategy
formulation is as much about deciding what we won’t do as about what we will do. Each decision has an opportunity cost – an alternate place to spend our finite resources.

Why differently? It’s critical to note that the goal of exploring these questions is to create a plan for the organisation to survive and thrive over time. As such, the central focus of
strategy creation is identifying and harnessing the attributes that will give the organisation a difference or a “competitive advantage”, i.e., those factors that allow it to outperform its
competitors.

Strategy links an organisation to its environment, offering a formal logic for the organisation’s goals and outlining ways for people to orient around them. In this way, strategy provides clarity and focus for collective action and decision-making.

Curious Questions:

• When connecting your organisation’s present to a desired future state, what could you do differently? To enable your organisation’s finite resources to support the above, what would you be willing to let go?

A good strategy is grounded in purpose, aspires to the future, and reinforces culture

It’s fundamentally human to want to have meaning in our lives – to have a sense that our actions matter, that our work has a purpose. Great organisations are clear on their purpose, their reason for being, and the pursuit that energises and motivates them. A purpose is a higher-order reason for an organisation’s existence that goes beyond making money and adds value to society.  Connecting these are the organisation’s values – distinct and authentic words or statements that capture what its members collectively care about and the moral code that guides their actions and interactions.

Projected into the future, this purpose becomes a vision; the aspirational depiction of a future state in which the organisation’s purpose has been realised. A compelling vision can motivate and inspire people to sacrifice in the pursuit of something bigger than themselves. In strategy work, a vision can be made concrete and attainable for team members through collaboration in imagining ‘preferred futures’ – elaborate depictions of the organisation living its purpose and striving towards its vision across multiple time horizons.

A good strategy has the organisation’s purpose at its core, provides the roadmap towards its vision, and reflects and reinforces its values. Strategy is how the organisation connects its higher calling to market realities, enabling it to manifest its desired impact on the world. Getting clear and authentic about the organisation’s purpose, vision, and values creates a North Star for strategy formulation and a compass that guides ongoing decision-making and delivery.

Critically, this clarity also helps to align strategy with culture – the combination of visible behavioural norms and artefacts, explicit values, and beliefs, and the underlying, implicit, and taken-for-granted assumptions. The famous expression “culture eats strategy for breakfast” refers to what happens when strategy – what we say we’ll do – is misaligned with culture – what we actually do and what we truly believe in. Organisations often seek to encourage strategy implementation via concrete rewards for achieving goals and consequences for failing to do so. However, if strategy is misaligned with our deeply held beliefs about how we operate, where power sits, and how this is enacted, these formal rules and extrinsic motivators will fall flat. When it’s a true expression of culture, strategy is underpinned by and reinforces our implicit and taken-for-granted beliefs and assumptions about appropriate ways of acting and interacting.

Curious Questions:

• Does your organisation have a clear and authentic purpose, vision, and values?
• Does your strategy align with these, thereby becoming a true expression of your culture?
• How might you shape your culture to align with the impact you want to create and what your organisation needs to be to achieve this?

Strategy is relational, iterative, and coevolutionary

Strategy is relational

While motivated by the pursuit of a unique purpose and vision, strategy is ultimately a relational concept. Strategy is about how the organisation manages and shapes its interdependencies with the surrounding environment, including customers, partners, competitors, communities, the environment, and other stakeholders.

Given that strategy is about finding ways to enable the organisation to continually survive and realise its core purpose, a fundamental question in strategy is: how will we create sustainable competitive advantages?

A tour through the history of strategy research will quickly unearth two prominent approaches to addressing this question: the “positioning view” and the “resource-based view”.

The positioning view looks beyond the organisation and focuses on selecting the optimal environment for it to operate in. The strategic objective here is to establish a market or industry position with favourable competitive conditions (e.g., high entry barriers, low threats of substitutes and new entrants, and low customer and supplier bargaining power), and take steps to make these even more favourable.

The resource-based view looks within the organisation to identify resources and core competencies that could enable it to establish sustainable competitive advantages over others. This view asks: what do we have (or could we create) that is valuable, rare, difficult, and costly for others to replicate or substitute for, and that we can organise to create value in ways that others can’t?

• One way to reconcile these views is to weave them into a grounded strategic exploration in relation to key stakeholders. This approach asks:
• Who are our current stakeholders, and what do we want from them
• Given where we want to be in the future, and where opportunities for us exist, who are our critical stakeholders for the emerging future?
• How will working with them create a favourable market position for us (positioning view)?
• What do our key stakeholders want from us, and what unique value propositions can we offer them?
• What key resources and competencies could we build on, strengthen, or develop to create this unique value (resource-based view)?
• What does this mean for what we’ll do differently?

Curious Questions:

• What is the optimal environment for your organisation to operate in?
• What internal resources and core competencies does your organisation have to enable it to establish sustainable competitive advantages over others?

Strategy is iterative and coevolutionary

We all know the adage “The best-laid plans…”. Anyone who has tried to predict anything from the share market to the weather can appreciate the limitations of concrete plans in rapidly changing environments. Macrosystems change, and change quickly.

Management scholar Henry Mintzberg suggested that real-world strategies fall somewhere along a continuum between distinguished between “deliberate strategy” – a process that distinctly separates strategic planning (first) and execution (second) – and “emergent strategy”, whereby strategy emerges over time as intentions collide with and accommodate a changing reality.

Given that our modern world is increasingly VUCA (volatile, uncertain, complex, and ambiguous), making concrete plans is increasingly fraught and the emergent dimension of strategy is becoming increasingly critical. However, emergent strategy is not an excuse for leaders to abandon planning altogether, but rather to acknowledge its limitations. Ideally, strategic plans will incorporate adaptive elements that continue to scan and analyse the external environment, enabling organisations to sense when changes are required to maintain continuity and growth.

It’s important to note that strategy is not simply about adapting to the external environment; strategies also actively shape the external environment. Organisations are not passive bystanders but active participants in markets, industries, and communities, and organizational strategy exists and unfolds in co-evolutionary interplay with other companies, communities, institutions such as regulation and legislation, industry logics (i.e., ‘the rules of the game’) and societal belief systems (reflected in ‘public opinion’).
To understand this coevolution, leaders can ask: where should we comply, compete, lead, and shape? Whereas the former entails achieving fit by accommodating environmental forces, the latter entails actively shaping these forces.

A regenerative leadership lens can also empower leaders to appreciate the “wholeness” of their wider ecosystem and make decisions that positively benefit its constituent parts.

Curious Questions:

• How will your organisation’s strategy adapt and accommodate a changing external environment?
• How will it work to steward and shape it?
• How are you in the process of becoming?
• Where will you seek to accommodate, compete, lead, and/or shape the environment in which you are embedded?

Strategy requires unique thinking

Strategy requires us to move away from conventional thinking where we might feel most comfortable, and grapple with novelty, ambiguity, and paradox.

Strategy is making tradeoffs and balancing tensions

Devoting time and resources to a course of action precludes devoting these to all other actions, and this means exploring what trade-offs can potentially be made. Sitting beneath these trade-offs are often fundamental tensions and inherent contradictions. Strategic decisions need to be made around how to balance the short-term and long-term, exploiting and capitalising on current strengths while exploring new opportunities, and building internal capacity while fostering partnerships. These are not problems we can solve for, but rather ongoing forces that exist in polarity and that need to be managed over time.

Strategy, too, is not something that can be “solved”, but something that is dynamic and emergent.

Strategy requires the adoption of “both-and” leadership[2] that acknowledges paradox and strives to avoid falling out of balance – e.g., consistently over-indexing towards the short-term over the long-term, or toward exploitation over exploration – across decisions and over time. Anchoring back into purpose, values and vision can help leaders to clarify and align on how their organisation will strike this balance for the different polarities they face.

Curious Questions

• Thinking about what your organisation is willing to let go of to make way for your strategy, what possible trade-offs and tensions might emerge?
• How can these best be managed in your organisation over time?
• How can this balance be supported by anchoring into your purpose, values, and vision?

Strategy formulation benefits from diverse lenses and perspectives

Strategic thinking is distinct from more tactical and operational thinking. While the latter is concerned with “today”, strategic thinking calls on us to fundamentally question the status quo, creatively imagine tomorrow, and map out novel pathways toward this. However, this way of thinking is often atypical and counterintuitive for us, and so we can face inherent limitations to thinking strategically and creatively imagining future scenarios. Although traditional strategic frameworks can enable us to identify important aspects and trends in our current environments and project these forward, simply applying these directly without awareness of where we may be limited can nonetheless result in strategic plans that are incremental and formulaic.