What Is Strategy?

I see and hear the word "strategy" or "strategic" being used a lot in my business, but I think people use it a bit more fast-and-loosely than it should be.

Why is that? I think that the word "strategy" or "strategic" has an air of grandeur about it. It lends weight to what you're saying or doing. People like to give the impression they know what they're talking about, or are important, or their work is inscrutable to the uninitiated, so when in doubt prepend "strategic" on what you're saying and it instantly becomes more significant.

I was having a conversation with some coworkers the other day and they said, among other things "we need to put together a strategic plan." I was curious. I asked "so what's changing in the industry that you'll be responding to with this strategy?" I got blank looks. I continued, saying "if you're not responding to some change you're anticipating or is coming for sure in the industry, then you're just coming up with a plan. It might be a one year or two year plan, but it's still just a plan because it's completely inward-looking." They agreed. They had been using the term "strategic" synonymously with "overarching". All that money I paid for the MBA must be paying off...

My strategy professor put it succinctly: "Strategy is about how you will win in the industry. It says how you plan either to differentiate or to be the cost leader. That's it."

It's a simple definition, and a powerful one. It lays out two important concepts:

1. Strategy must exist within some context; a forward-looking assessment of changes either coming or currently exerting themselves on your business and on the industry it operates in.

2. Strategy focuses on either differentiation, or on cost leadership. You either do it better in some way than the other companies in the industry, or you do it cheaper. Without knowledge of how other companies are doing things, or what their cost structure is, your strategy is speculative.

On that note, I hope you have a healthy, happy, and strategic New Year!