A real strategy … or flawed thinking

Strategy development is hard. It's an open problem with broad objectives, soft constraints, a near-infinite set of potential moves, and multiple competitors and stakeholders all making their own moves in a shifting environment. It's also a task most business leaders only ever perform a handful of times in their careers, so there's little opportunity to learn and improve.

Real strategy begins with a realistic assessment of the organisation and its environment. It can be an uncomfortable conversation. Before deciding what to do, someone has to investigate what's happening in the business, what's changing around it, what's holding it back, where meaningful progress is possible, and then identify the challenge worth concentrating on.

Flawed strategy, on the other hand, feels easier. It's often a positive, inspiring, forward-looking conversation about aspirational goals. It doesn't usually involve a critical assessment of the business, acknowledge problems in the business, or address the obstacles standing in its way. It tends to be heavy on inspirational fluff and light on useful specifics.

The following comparison distinguishes practices that produce useful strategy from those that produce faulty conclusions or meaningless verbiage.

Strategy development is best assigned to an individual strategist or a very small team rather than a large committee. Individuals can draw an uncomfortable conclusion or recommend an unpopular course of action without needing widespread consensus. In a committee, everyone contributes but nobody feels responsible for whether the resulting strategy makes sense. Committee members also have day jobs and can't dive as deep as a dedicated strategist. The strategist should draw on executives, employees, directors, customers, suppliers, and others, while retaining responsibility for the diagnosis and recommendations.

Discovery should pay particular attention to what has changed. A shift in customer behaviour, a new competitor, or a change in costs can undermine an established advantage or create a new opportunity. Gathering that information is only the beginning. Diagnosis explains its significance: why customers are leaving, why margins are falling, or why an opportunity remains out of reach.

A diagnosis is a hypothesis, not a verdict, and should be validated. That means looking for evidence that could disprove it, considering alternative explanations, and testing the conditions on which a proposed response depends. A business that attributes lost sales to price should check whether customers actually leave for cheaper competitors before committing to discounts. The same discipline applies as the strategy unfolds: new evidence may require a different diagnosis or response.

Richard Rumelt uses the term crux to refer to the pivotal challenge that the organisation can realistically address and whose resolution would unlock meaningful progress. For example, a software business might have a competitive product and clear demand from larger customers, but be excluded from consideration because it cannot meet their security requirements. Meeting those requirements could be the crux. Spending more on marketing, hiring more salespeople, or adding more features would achieve little while that barrier remains.

Identifying a crux is one way of structuring the strategy development process. It gives strategists a basis for deciding which actions deserve priority, which can wait, and where to concentrate resources. The strategy becomes a coordinated effort to overcome a specific barrier, with a clear explanation of why doing so will move the business forward.

A strategy needs to answer a connected set of questions. Where will the organisation compete? Why should it succeed there? What will it need to deliver on that promise? The strategy should address everything in the following checklist.

Where to play and how to win belong together. Choosing a customer segment does not explain why those customers will choose you. Promising better service does not identify the customers who value it enough to pay for it. A useful strategy connects a specific market with an advantage the organisation has reason to believe it can deliver.

Capabilities describe what the organisation must be able to do. Resources make that possible. For example, competing on reliable delivery might require accurate demand forecasting and dependable fulfilment. That has implications for the people employed, the responsibilities assigned, the systems used, the assets held, and the funding committed. A promise of reliability means little if the business cannot support it.

Objectives should emerge from those choices. A business concentrating on reliable delivery might set a small number of objectives around delivery performance and retention in its chosen segment. Those objectives express what the strategy commits it to achieving. An ambition to grow can motivate the work, but an arbitrary growth target cannot supply the reasoning about where growth will come from or what must change to produce it.

A strategy can address every item in the checklist and still be deeply flawed. Its answers may avoid consequential choices, contradict one another, or depend on assumptions nobody is willing to discuss. Assessing strategy means examining the quality of the reasoning and the commitments it produces. Four factors help distinguish a strategy that merely looks complete from one that's genuinely meaningful and coherent.

Strategy is making choices — the rest is fluff. Real strategy means more than just passing on bad ideas. It means choosing which good ideas to pursue at the expense of all the other good ideas. Michael Porter put it succinctly: “the essence of strategy is choosing what not to do.” A strategy should make choices explicit: which customers to avoid, which opportunities to pass up, and which activities to stop. If every option remains open, choices have not been made.

Coherence asks whether the decisions support one another. A business promising dependable delivery while rewarding salespeople for accepting every urgent custom order may be working against its own strategy. Brand, marketing, sales incentives, operational capacity, recruitment, and investment decisions need to support the same approach. Each initiative can look sensible on its own while the combination fails.

The language of a strategy should be specific. Fluff, vague goals, and sweeping statements should be viewed with suspicion. Replace vague claims with concrete commitments, and remove language that adds no meaning. If a claim cannot be made specific, the thinking behind it needs more work.

Candour means acknowledging the difficulties as well as the opportunity. What capability is missing? Which assumptions remain uncertain? What revenue might be sacrificed, and what will happen if competitors respond? A strategy can be ambitious and motivating while answering those questions honestly. Discomfort is not evidence of quality, but concealing the costs and constraints prevents an honest assessment.

The point of strategy is to give the organisation a reasoned basis for action. Understanding the situation, choosing an approach, and committing resources belong together. A diagnosis without a response leaves the problem untouched; a set of actions without a diagnosis leaves their purpose unexplained.

When you next review a strategy, follow the argument from the challenge it identifies to the choices it makes and the actions it commits to. Ask why those actions should work, what the organisation is giving up, and what evidence would cause it to reconsider. If those connections are missing, the strategic thinking is still unfinished.