Must a Business Have a Strategy?

First a disclaimer:

Some businesses are simple. Your local, family-owned dry cleaner is simple. It cleans clothing, optimizes pricing, and minimizes costs. Not much to think about. Resources are limited, which constrains options. Hence no strategy.

Other businesses are more complex. Perhaps there is money available for investment. Perhaps there are decisions that could have large effect. Perhaps a competitor must be reckoned with. Businesses with these issues – whether they like it or not – have a strategy. The strategy might be as simple as “Maintain the Status Quo And Hope For The Best” – but it is a strategy nonetheless.

Strategy is about seeing the bigger picture. Within the context of an explainable system, it becomes possible to evaluate options on the basis of expected results. In other words, strategy is about finding rational solutions when confronted by ambiguous or confusing situations.

In many of the strategy consulting projects that I’ve worked on, there are often three distinct components. The first component consists of understanding the situation:

  1. the business basics: what’s happening, the history, evolution, strengths and weaknesses, management dynamics
  2. the competition: who’s out there and what are they doing
  3. the market: who are the existing customers, who are the target customers and what do they want. customer segmentation if time permits

The second component focuses on developing a framework:

  1. What theoretical models relate to the issues at hand?
  2. How can our particular problems be compared and contrasted to other businesses’ problems?
  3. What will allows us to capture the salient information in ways that can inform decisions
  4. What are our hypotheses for recommendations

And finally the third component is about running the heart of the consulting project:

  1. Developing hypotheses
  2. Gathering and analyzing data to support/disprove hypotheses
  3. Shaping storyline that takes a client from where they are now, through a process of understanding, to a logical recommended course of action

This third piece of the third component is Strategy. But there’s much that came before, and much that must come after…

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One response to “Must a Business Have a Strategy?

  1. Great overview, thanks for putting it out there.

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