Defining Business Strategy in Simple Terms (So You Understand What 95% of Your Co-workers Don't)

According to an article from Robert Kaplan from the Harvard Business Review, 95% of employees are unaware of, or don’t understand their company’s strategy (source).

Does this statistic surprise you? I once asked a colleague who had had the word “strategist” in their title how they defined strategy. The response was “can I get back to you on that?” This person is not an example of a low performing employee, it's an example of the norm.

We’ll cover why business strategy is difficult to grasp by reviewing prominent definitions from BCG and Peter Drucker. We'll examine why standard definitions don’t get us very far on our journey to become better at strategy. Next we’ll cover McKinsey’s view on strategy, which points us in the right direction. We'll share our own simple definition of strategy, and end with an example featuring Southwest that demonstrates the strategic mindset in action.

The Meaning and Importance of Defining Business Strategy

The reason you should care about defining your business strategy is because you have finite resources. If we had unlimited capital, we could invest everywhere, and beat the competition everywhere. But given limited resources, especially in the early stages of a start-up or for bootstrapped brands and products, the only way to arrive at competitive advantage is by leveraging your resources exceptionally well.

The caveat to this article is there is no true catch all definition of strategy. You must juggle opposing ways of thinking, being philosophical, open, and specific all at the same time. Fundamentally, there is strategy creation and strategy execution, and these are two very different things.

For strategy creation, You need to think and breathe strategically in all that you do, and we'll cover more about that soon. Franklin Covey's Book, The Seven Habits of Highly Effective People, has chapter 2 dedicated to "thinking with the end in mind." Strategy is about long term viability, and having a strategy vision is critical. By thinking with the end in mind, you'll be goal oriented, focused on a vision for the future that will shape what winning looks like. Once you have a vision for what winning looks like, you can work backwards and develop your competitive advantage. You'll understand what you don't understand, and ask questions about your customers, market, and competition to begin allocating your scarce resources towards honing a unique competitive advantage that delivers strategic value no one else can.

The way you execute your strategy is called strategic planning. Once you have a strategy, you need to put it into a plan of action so you can achieve your vision and goals.

Key components of strategic planning include:

• Interlocking with corporate strategy and organizational objectives: You need to make sure your new strategic makes sense holistically for your company, and that key stakeholders "get it" and have by in.

• Setting a budget, goals, objectives, and KPIs: What gets measured gets done, and you'll need to ensure the new strategy can achieve the financial results you demand while staying within budget.

• Coordinating and reinforcing your investments and resources towards your objectives: One of the best buzzwords is "multiplier effect" or "network effect" - if you can find synergies in your business that come together to multiply the effect of what you do and what you invest, you need to find them.

• Communication: Don't let your strategy become an ancient text no one remembers except vaguely as an oral tradition; get it down on paper and ask people from the board room all the way to the break room where the ship is head, and make sure they know.

For a better sense of how to develop a strategic plan and framework, check out our post on the GOST model of Goals, Objectives, Strategies, and Tactics>>

Why is business strategy so troublesome to grasp?

From personal experience, I would say the main culprits are the following: 1) Embarrassment: You and I would both be ashamed to admit we don’t know what strategy is all about.

2) Most business positions don’t care about strategy: Sure, every role purports to desire a “strategic thinker,” but the inevitable demands of day-to-day needs put strategy by the wayside. Many people think strategy belongs at the CEO level, not in their entry level or middle manager world.

In addition to the above, getting a sound apprehension of strategy is no easy feat. It requires a lot of that deep, energy sapping System 2 thinking that Daniel Kahneman described in his book, Thinking Fast and Slow. Abstruse definitions abound, but they don’t help us much either.

The above definitions get us part of the way by mentioning goals, competitive advantage, choosing activities differently than rivals, but their abstract nature leaves us wanting. The Drucker definition below brings us a bit further, but does strategy HAVE to be long term? I enjoyed reading Drucker's "Managing for Results" and "Innovation and Entrepreneurship," and he certainly “gets” strategy more than I ever will, but even his definition falls short of providing a solid mental image of what strategy truly is.

Peter Drucker’s definition of strategy: “A pattern of activities that seek to achieve the objectives of the organization and adapt its scope, resources and operations to environmental changes in the long term.”

McKinsey points us on the right track for understanding strategy…

The big take away – strategy is a mindset, not the memorization of definitions, processes, or fancy frameworks. Which is too bad, because this blog and website are all about fancy frameworks. I digress.

Strategy as a mindset makes sense. You could call Da Vinci one of the greatest strategic thinkers of all time, even though he never even had an internship at McKinsey or BCG, because he was an astounding observer with a clear goal of understanding why things exist and appear as they do. He implemented his observations and conclusions into his work in a very strategic way.

As a quick aside, I want to share an article I just read from an old friend (and my old boss) Jake Dunlap over at SKALED. Jake looks at annual reports to examine company strategies and corporate priorities; it's a great way to see how your competition is building their strategy to ensure you're differentiated from the pack. Read the article here >>

So what is a “strategic way” of thinking and doing things?

Ok we've admitted no definition will get you very far. However, the Strategy Kiln definition below aims to define strategy in simple terms you can take with you and use every day.

Our definition is about honing in on the critical factors of the situation, making a choice to focus on these critical factors, and making connections where possible to drive increased results, e.g. create multiplier effects. An important note: our definition is phrased as a question. The only way to get to the critical factors of a situation is to ask the right questions. You MUST be curious and analytical. Ask 5 whys. Many of the best strategies are developed by asking simple questions like "how might I solve this problem for my customers without increasing prices?" or even more simply asking "what's happening?"

If you want to learn more about the strategic thinker’ s mindset, checkout my video on “OCCAM’s Strategy Razor”. It provides an in depth analysis and framework for strategic thinking.

Here’s a quick example of strategy from a day to day perspective

Let’s say you’re a marketing coordinator for Southwest Airlines and your boss asks you to recommend some tactics to drive awareness around the new Southwest credit card benefits, keeping in mind that a major challenge is that customers find the credit card pitches in flight very boring. You could come up with a stand-alone tactical plan and it might be fine. But if you opened up and asked “what’s happening” in other areas of the organization, you may find some interesting opportunities. Perhaps the CEO or your marketing VP recently mentioned they want Southwest employees to come to life in advertising. This might lead you to search on YouTube, where you find a viral video you saw on YouTube about a really funny Southwest Flight Attendant who the passengers loved, garnering 100MM views.

Perhaps you could propose including that employee in assets where you try to make the credit card benefits fun and enjoyable. You might even reach out to the PR team to find out they are already creating assets you can use for your campaign, driving synergy among departments.

This would be a great story…

The stand out part of this strategic approach would be how you addressed the challenge of boring credit card pitches, brought a Southwest employee to life in creative assets, and how you created connections with other departments to drive cost savings and synergy in the development of a winning campaign. You got to the core of the challenge and implemented reinforcing strategic action to drive results. Someone would probably honor you with a shiny gift card for your stellar strategic efforts.

Conclusion

Hopefully, we've defined strategy in a way that clarifies how to use the elusive “S” word. Although the word strategy has been abused and lost much of its meaning, in a way similar to the infamous phrase “proactive approach,” we can’t stop using the word. You don't have to be Michael Porter, you can get to the heart of strategy by asking questions. You can get to the heart of competitive advantage by asking questions, too. Don't be afraid to create your own simple definition of strategy, and print out ours and tack it on your cubicle or wall of your glorious office. Let’s continue to learn and grow our strategic mindset together.

What’s your favorite definition of strategy?

How would you describe what strategy is?

Remember to check out my video on “OCCAM’s Strategy Razor” for more information on strategic thinking.