A fresh view on business strategy

For budding businessmen, there are several terms and concepts that seem overwhelmingly complex, and one of them is strategy. For most people, strategizing entails intensive analyses, brainstorming and measurement; and as time has gone by, countless theories and approaches have made business strategy a confusing web of technicalities and formalities when, in fact, strategizing should only take common sense, a clear vision of the company’s goals, and an ample understanding of the business environment. So once and for all, what is strategy, and what makes a good one? Below, I enumerate and describe a carefully selected assortment of articles and principles brought forward by management experts in recent years.

In a short video clip for Harvard Business Review (HBR), Roger Martin, the dean of Rotman School of Management, enumerates two decisions that business leaders should make for a successful strategy; and those are: choose where you will play, and find a distinctive way to win there. These two elements are based on an earlier article by Martin (also for the HBR) in 2010, in which the renowned book author and management expert provided a series of questions that must be answered, as the approach and very method of strategy making. The questions are:

1. What are our broad aspirations for our organization and the concrete goals against which we can measure our progress?

2. Across the potential field available to us, where will we choose to play and not play?

3. In our chosen place to play, how will we choose to win against the competitors there?

4. What capabilities are necessary to build and maintain in order to win in our chosen manner?

5. What management systems are necessary to operate in order to build and maintain the key capabilities?

Another widely recognized principle in business strategizing is Michael Porter’s Five Competitive Forces That Shape Strategy. These are: threat of new entrants, bargaining power of suppliers, threat of substitute products or services, bargaining power of buyers, and rivalry among existing competitors. The HBR describes Porter’s Five Forces to be saying that “in essence, the job of the strategist is to understand and cope with competition”, and a careful and balanced consideration of these competitive forces would, therefore, help identify the key areas to be targeted by the business strategy.

Lastly, a recent Forbes article entitled Four Reasons Why Your 2013 Strategy Will Fail (and What to Do About It) caught my attention. It talks about common mistakes and flaws of modern business strategies, namely: too many important goals, prioritizing outcomes instead of behaviours, engaging the leaders but not the players, and lack of accountability. What struck me the most about these four points is that they resonate with what I said at the onset of this entry: that with the increasing complexity of today’s notion of “business strategy”, the focus is misdirected towards unnecessary goals and measurements, instead of the essential considerations Martin and Porter have emphasized.

As a closing note, I would like to sum up my sentiments and appeal to fellow business leaders to rethink their business strategies with this insight from Cynthia Montgomery: “strategy has been narrowed to a competitive game plan, divorcing it from a firm’s larger sense of purpose; the CEO’s unique role as arbiter and steward of strategy has been eclipsed; and the exaggerated emphasis on sustainable competitive advantage has drawn attention away from the fact that strategy must be a dynamic tool for guiding the development of a company over time.“.

Knut Nylænde is a Norwegian investor and businessman who founded and currently heads Moxie AS, an investments group in Norway. He has education from the Norwegian School of Economics (NHH) and the BI Norwegian Business School. Knut also has long years of experience in management and financial consulting and investment banking.