Let’s unbuzz the buzzword “Strategy”
What Strategy is, and what it is not
If you asked five of your colleagues what ‘strategy’ is, the odds are that you will receive six different answers. They might range from “a plan of how we create value” or “our priorities for the next few years” to “our approach to winning against our competitors” and “a framework against which we make decisions”.
There is nothing wrong with these answers; and as a matter of fact, if you research business literature for a definition of the term strategy, I am pretty sure that you will find suggestions that match those ideas to a large degree. So, which definition is the most accurate? Who’s right?
I believe that it doesn’t matter. There’s nothing wrong with any of the ideas above. I would accept any definition of strategy if it captured some of the above ideas and if it was used consistently in any given organization. Now, this is where it gets difficult: the term strategy is used so wildly differently and in all aspects of life, from the world of sports to business and beyond, that it is no wonder many find it difficult to make sense out of it.
One of the first questions we should answer is about the term itself: What is a strategy anyway? There are tons of examples out there of how the term is being used, and sometimes misused.
Let me share two particularly notable examples, which are publicly accessible on the respective company websites of Porsche and Boeing. Let’s start with German premium car manufacturer Porsche.
Example 1: Porsche – Strategy 2025:
“The company’s main objective is to achieve value-generating growth. Only by achieving such growth can we make sustainable investments in innovative technologies, new products, and most importantly, in our team here at Porsche. With this approach we are already on our way towards rethinking sporty mobility. We want to excite customers with our products and services. We are also aiming to consolidate our reputation as an excellent employer and business partner that fulfils its social and environmental responsibilities. And the return needs to be sufficient too.
We have everything we need to achieve our objectives: vehicles that will take your breath away and a team that is passionate about its work.”
- Operate as One Boeing
- Build Strength on Strength
- Sharpen and Accelerate to Win
- Market Leadership
- Top-quartile Performance and Returns
- Growth Fuelled by Productivity
- Design, Manufacturing, Services Excellence
- Accelerated Innovation
- Global Scale and Depth
- Best Team, Talent and Leaders
- Top Corporate Citizen”
Porsche’s strategy consists of four key pillars: Excellent employer and business partner, Inspiring customers with a unique product and brand experience, Excellent profitability with RoS >15%, Innovation and sustainable business practices. The pillars are specific; the reader immediately understands their theme and direction. The pillars are interlinked: Porsche sets the pillars into a relation to each other; they require each other, no pillar is self-sustaining, and each pillar contributes to a central objective of value-generating growth. Also, the pillars actually make sense: anyone reading them can comprehend what Porsche is talking about and quickly develops an idea of what the pillars potentially contain.
Sure, one could argue that there might be some elements missing to call it a strategy. Others might even argue about the content as such. But let’s focus on the positive: This is a pretty solid explanation of Porsche’s strategy; probably more explicit than many other examples you can find out there.
Let’s briefly examine the Boeing strategy. Unlike Porsche, the strategy explanation does not consist of proper sentences and instead lists three very short bullet points: Operate as One Boeing, Build Strength on Strength, Sharpen and Accelerate to Win. Following these three points, Boeing lists eight goals for 2025, again in a short bullet-pointed list. Needless to say that this can barely qualify as a strategy. The three main bullet points couldn’t be more generic. They resemble internal corporate marketing lingo. The content and direction of the three strategic themes stay largely in the dark and leave maximum room for interpretation. In addition, it is unclear how themes and goals are connected and how the three themes support reaching the goals listed underneath.
I chose these two examples to illustrate how differently strategies can look and how differently companies communicate their strategies. I’m sure internally both Porsche and Boeing espouse a better defined and a more substantial version of their strategy. My point is that publicly this is what Boeing and Porsche are declaring as their strategy. While I’m not suggesting that it was only because of their strategy – culture and leadership surely played a substantial role – tragically, it was Boeing that was crisis-stricken over the past years. Especially in the aftermath of the 737 MAX disaster that killed 346 people in two plane crashes, Boeing suffered severely. The company lost trust of regulators and the public. The total direct costs of the 737 MAX groundings are an estimated US$20 billion and indirect costs over US$60 billion, not including the US$2.5 billion Boeing settled to pay after being charged with fraud. Over the same period, Porsche has been extremely successful, increasing vehicle sales year on year, strengthening its brand on a global scale, last but not least due to a solid strategy.
Other companies publish strategies which are more like vision statements, aspirations, mission or other statements, which rarely qualify as a strategy. Almost every organization I have ever worked with started their quest for a new strategy based on a fuzzy understanding of the term strategy. But all of them – despite the fuzziness – still used the term, in one way or another, or in multiple ways even. For example: ‘We need a new pricing strategy to compete with the other players in the market’, ‘Our hiring strategy is not delivering the talent pipeline we expected’, ‘We need a clear strategy for the purchasing discussion next week’, ‘Our digital product strategy should fit into the broader marketing strategy’. This omni-present use and blurry understanding of the term strategy turns out to cause issues even at the very top of organizations, within senior leadership teams.
Senior leadership teams typically consist of accomplished professionals with years of experience. In these years, they would have seen different strategies, some more successfully implemented than others. They would have had exciting and sometimes long and tiring discussions about strategy. They would have read classic books such as Competitive Strategy by business academic Michael E. Porter who defines strategy as “a competitive position, deliberately choosing a different set of activities to deliver a unique mix of value”. And now these very individuals embark on an adventure to define a new strategy based on the variety of experiences and preconceived notions about what a strategy actually is, and what it should contain, in their views. You see where this is going. As a result of this misalignment, discussions about strategy are difficult and every individual bases their thoughts on their individual understanding. Over time, my colleagues and I understood that before we could start strategizing with a client, we needed to help those involved form a common understanding of what the term strategy meant, and how they would use the term going forward. What we often achieved was a common understanding of the term ‘strategy’ that looks a bit like this:
So what is strategy – and what is it not?
What strategy is
A set of key priorities to achieve a desired vision, i.e., a desired state in the future
A way to achieve results that will make your customers go “wow!” and leave your competition baffled asking “how did they do that?”
A framework against which business decision are being taken
An initial guide to the next three to five years
The big picture
A map helping you maneuver the business through partly unchartered territory
What strategy is not
A rigid and detailed plan that doesn’t change
A magical formula that guarantees future business success
A formulated answer to questions of all disciplines in your company
A plan coping with every aspect of your business over the coming ten years
A bold statement about the future