Business Strategy

"Even if you do see the future correctly, its timing is hard to predict and its implications are uncertain."– John Kay Business Strategy Defined A full statement of a selected business strategy is a business plan defining: • the company vision • the strategy and tactics that will enable the company to reach those objectives • the resources required, and how they are going to be obtained; • what the main milestones and steps are along the way; • who is responsible for causing each step to occur; • what are the company's business risks and external factors that need to be kept under review for indications that a change in strategy or plan may be required. Modern Theory of Business Strategy Strategizing is much more than just visioning, forecasting and planning. In the new rapidly changing economy, all substantive issues of strategy have been redefined as issues of implementation. Today, strategizing is concerned with the match between the internal capabilities of the company and its external environment. "The modern subject of business strategy is a set of analytic techniques for understanding better, and so influencing, a company's position in its actual and potential marketplace". As strategy today is a subject of application, rather than a discipline, the obvious underpinning disciplines for strategy are economics and organizational sociology. You should employ them to define a structure in which the process of strategy formulation and its implementation are bound together. Working On Your Business "Most businesspeople are so busy working for their business or in their business that they never find time to work on their business. Thus they fail to anticipate what might happen or what they might be able to make happen." Unless you regularly schedule time (one-day out-of-the-office meeting a month at least) to work on your business and answer critical questions, you'll never achieve your stretch goals. Business Strategy Stretching To Jack Welch, the legendary former CEO of GE, business strategy stretching is doing the best possible – and then reaching beyond. What Welch calls "stretch" simply means figuring our performance targets "that are achievable, reasonable, and within GE's capabilities. And then raising sights higher – much higher – towards goals that seem almost beyond reach, goals requiring superhuman effort to achieve."8 Often business leaders exceed goals even as they fall short of the stretch. Don't punish, reward them. What's critical is setting the performance bar high enough; otherwise, it's impossible to find out what people can do. New Paradigm: Resource-Based Theory The currently dominant view of business strategy – resource-based theory – is based on the concept of economic rent and the view of the company as a collection of capabilities.

This view of strategy has a coherence and integrative role that places it well ahead of other mechanisms of strategic decision making. The resource based view of strategy emphasizes economic rent creation through distinctive capabilities. Economic rent is what companies earn over and above the cost of the capital employed in their business. It is the measure of the competitive advantage, and competitive advantage is the only means by which companies in competitive markets can earn economic rent. The objective of a company is to increase its economic rent, rather than its profit as such. "A company which increases its profits but not its economic rent – as through investments or acquisitions which yield less than the cost of capital – destroys value." The perspective of economic rent forces the question 'why can't competitors do that?' into discussion. The Methods of Business Strategy Require: 1. Looking inward: strategic analysis of the characteristic of your company to identify your distinctive capabilities and surround them with a collection of reproducible capabilities, or complementary assets, which enable your company to sell its distinctive capabilities in the market it operates. 2. Looking outward: strategic analysis of the industries and markets in which your company operates to identify those markets in which your company's capabilities can yield competitive advantage. The questions are twofold: 1. What are the origins and characteristics of the successful fit between capabilities and environment? Why do companies succeed? 2. How can companies and their managers make that fit more effective? How will companies succeed? At the Business unit Level, the Strategy Formulation and Implementation Deals With: • Positioning

and differentiating the business and/or products against rivals • Business-level cross-functional process management • Anticipating changes in technology and customer perceptions and adjusting the strategy to accommodate them. • Influencing the nature of competition through strategic actions such as virtual integration and through political actions • Building strategic partnerships and co-innovating with other business units, partners, and customers.