Determining Your Strategic Orientation: Frameworks That Can Help

The bad news is that if your strategy formulation process isn’t complex and frustrating, you probably aren’t doing it justice. Just thinking about the context for your strategy, you might well initially feel overwhelmed by the thought of the data that you need to gather. And that’s before you can even start thinking about the strategic options you have. Recognising that strategy formulation is complex, it’s no surprise that strategy researchers and practitioners have come up with numerous frameworks and lenses to view strategy through. It’s an effort to help bring structure to the process of developing strategy.

One review of strategy frameworks says tongue in cheek that ‘there are more strategy frameworks than there are strategists’ which highlights a problem in finding ‘the best strategy development framework’. My advice is don’t try. There isn’t a ‘best framework’. But there are definitely some great ideas for how you can think about and structure strategy development. A job for the strategist is to select and employ the ones that will be most helpful to them in their organisational circumstances. A critical question to answer is this: What frameworks and ways of thinking about strategy are going to help us best juggle the interplay between the dynamic (internal and external) environment you operate in and the bureaucratic momentum (stemming from pressures from stakeholders) of our organisation?

In my piece about context, I discussed the much written about difference between planned and an emergent approaches to strategy. Some think that the world is now so fast changing that producing a planned strategy is pointless — they suggest that by the time you’ve begun to implement a planned strategy you need to change it. I’ve come to the view that this type of thinking is dangerous for two reasons. Firstly because it’s a generalisation. The context for any organisation will be unique and the speed of market change will differ at any given time for any given market. So it might be true that a more planned approach to strategy may be appropriate for a given organisation. Secondly, and more universally, people in organisations need objectives and goals to achieve and processes and activities to work with. A highly dynamic marketplace might require equally dynamic changes to objectives and goals and to the processes and activities that will deliver them. But they are still needed. So the need for ‘emergent thinking’ is more true as a beacon for continuous review and evaluation of strategies that are themselves inherently flexible. Potentially, this has an important implication for organisational culture as it highlights a need for organisations to be comfortable with and effective implementers of continual change.

So having argued that plans are needed, in this series of articles I’ll outline some of the more established ways of thinking about strategy and strategy planning. I’ll also describe frameworks that are commonly used in the strategy planning process and say how they can be helpful to you. My intention is that you’ll feel more empowered to experiment with these resources and, as a result, be more effective in creating effective strategies for your organisation.

Before we get into this though, let’s just remind ourselves what we mean by strategy (for a more in-depth exploration of this, read my previous article). The definition of strategy I’m most attracted to states that strategy is a plan designed to achieve particular long-term aims. It’s simple, is connected to an outcome and implies the need for action (a plan). It also implicitly reminds us that an important outcome of good strategic thinking is an identification of “what will we choose not to do in our strategy”. If an activity or process isn’t going to make a significant contribution to achieving our aims, it’s highly likely that we shouldn’t be diverting our limited resources to develop it, implement it and manage it. That’s often one of the hardest bullets for an organisation to bite.

We can bring more character to our definition of strategy by adding that strategy is:

• A roadmap to the future and to goals (so has direction of travel and objectives in mind)
• Concerned with how the goals are achieved (so includes operational processes and activities)
• Demanding of resources (so requires commitment and focus)
• Required due to competition (so responsive to what competitors do and how they do it)
• A focus of ‘top management’ (so recognised as critical to business success)

So with this definition and characterisation in mind, what frameworks and processes might support strategy development? In this piece, I’ll focus on three concepts that help organisations determine a very high level strategy. Being familiar with them will be a great help to your strategy development efforts.

High-Level Strategy Development Frameworks

1. The Generic Strategies

The concept of organisations making a fundamental choice from three ‘generic strategies’, first proposed by Michael Porter, is probably the best-known strategy focussing concept.

Porter proposes that strategy is about achieving competitive advantage and that organisations must choose from one of three generic strategies to orientate their competitive positioning. The generic strategies are:

• Differentiation (offering products and services that are competitively differentiated from (better than) those of competitors
• Cost leadership (using operational efficiency and scale to be less expensive than competitors for comparable products and services)
• Focus (orientating the organisation to serve an identified and specific market segment better than competitors; and equally not seeking to serve diverse audiences)

Critically, Porter argues that you can only follow one of these strategies successfully. He suggests that attempts to be ‘world class’ at more than one creates conflict in required resource allocation that results in the organisation failing to be world class in any. Porter calls this being ‘middled’ and leads to the organisation being beaten on all fronts.

Others has argued that Porter is wrong on this point and that it is possible to be competitive across two generic strategies. Strategists have to decide whether their organisation can build maximum competitive advantage by pursuing one or more of them. The power of the generic strategies construct is that it identifies distinctive high level options for determining how competitive advantage can be achieved. So it enables strategists to orientate their research and examination of the competitive environment and identify a high level strategy under which they can build out a roadmap to objectives and goals. It can provide a powerful start point for the strategy development process.

2. Value Disciplines

A concept that overlaps significantly with Generic Strategies in terms of strategic options but which comes from a very different focus is Value Disciplines. Developed by Michael Treacy and Fred Wiersema, this approach to strategic options was derived from their research to identify common success factors in high performing companies. They determined that ‘market leaders’ are focused on and highly skilled in executing one of three ‘value disciplines’. These disciplines are Operational Excellence, Client intimacy and Product leadership.

• Operational Excellence seeks to provide customers with reliable products or services at competitive prices, and delivers these with minimal ‘friction’ or inconvenience. Fundamentally it’s about maximising efficiency.

• Client intimacy inspires a strategy that focuses on segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of niches. Companies following a Client Intimacy strategy provide solutions that meet the specific needs of their target clients and give them relevant value.

• The Product Leadership disciple drives a strategy built around offering customers leading-edge products and services that consistently enhance the customer’s experience use. Product leaders give customers more features ad benefits than the competition.

For each value discipline, strategists are guided by an an operating model encompassing core processes, cultural requirements, management systems, and organisational and information technology focus. That’s really valuable because it helps strategists make the essential step from high level conception and focus to a tangible road map to the goals.

(Credit: ‘Treacy and Wiersema: The Discipline of Market Leaders’)

It’s worth noting that, differently to the Generic Strategies tradition, the Value Disciplines approach highlights the possibility of having competitive advantage in more than one value discipline and emphasises the need to meet the market threshold competence at the value disciplines that are not your focus. Critically, being ‘sub par’ in any value discipline will counter your focused expertise in another. Some brands have certainly established themselves as masters of two, but be very wary if you’re thinking of aspiring to this. Managing the required organisational system is going to be complex. It will demand that conflicting pressures and focus to be accommodated with extreme skill.

3. The Resource Based View

The Resource Based View (RBV) proposes the development of a winning strategy on ‘controlled, distinctive and valued resources’. The core idea is that sustainable competitive advantage comes from having valued resources in the organisation that are not available to others. So if the market values something that the enterprise can provide but competitors can’t, then a successful strategy can be based on delivering that. There are a few critical words and ideas in this characterisation:

•Distinctive and valued Resources: Only resources that are genuinely both distinctive and valued are strategically important. Rigour and honesty in evaluating resources is essential. Too often, organisations tell themselves they are ‘market leading’ at a ‘critical’ aspect of service or in a key product category when it isn’t true. Or, even if it is, it isn’t important to the market.

• Controlled resources: If the resources you rely on for value are also available to competitors (perhaps they just haven’t realised it yet) then they aren’t going to be deliver any sustainable competitive advantage. A good example of this is ‘super sales people’. Many sales led businesses see disproportionate sales from a few high performing sales executives. These ‘superstars’ contribute huge amounts of revenue and profit and drive business success. Eventually they leave, and, if an equally effective replacement isn’t found, sales take a sustained fall. In effect, the strategy has been to retain the super sales people — but, as resources, they aren’t controlled by the company, they are controlled by their market value and personal motivations — something that competitors can respond to easily. Strategies built on individuals are rarely sustainable because the are not controlled resources.

• Valued by the Market: Distinctive resources that aren’t valued by the market aren’t going to deliver a winning strategy. Influential colleagues might value them; but the critical point is whether markets and customers do. Ultimately, they determine the value.

• Sustainable competitive advantage: Resources can only provide sustainable advantage if they are hard to replicate or if comparable alternatives are not available. If a competitor can identify the resources giving you advantage and can ‘easily’ appropriate the value they give (by replicating them or offering alternatives) then you won’t have the advantage for long and your strategy will need to move on. Examples of difficult to appropriate resources span brands, customer experience, intellectual property, product features and other elements. Companies like Microsoft, Apple, John Lewis Partnership, Amazon and Gore have strategies that are built around hard to appropriate resources. That doesn’t mean though that competitors aren’t thinking hard about how then can erode or eradicate that value. Nothing lasts for ever, but a thought through RBV approach can help create a longer term strategy.

Resources (plural!): When you think about it, the more distinctive resources you have the more able you will be to create unique competitive advantage. With that, the more sustainable your strategy is likely to be. In fact, the RBV determines that because no two organisations have the same set of skills, experiences and culture, their available assets and resources will differ. So sustainable strategy and competitive advantage can be derived from the unique blend of distinctive and valued resources that exists or can be built.

The most valuable resource and capability assets sit in the Venn overlap of ‘in demand’, ‘hard to appropriate’, and ‘scarce’.

The RBV provides a great set of principles with which organisations can take a hard look at their competitive position and capabilities. Judge your resources harshly (and those of competitors) and you’ll get a real steer on where you have or can build competitive advantage and sustainable strategy.

Usefully, the RBV can be used in conjunction with the Generic Strategies and the Value Disciplines to make even more robust strategy decisions. For example, if you identify that you have or can build valued, superior and hard to appropriate customer service and customer segmentation resources then the client intimacy value discipline may be the one for you to build strategy from. Links that can be made is to ‘vision, mission and values’. When you think about it, these can be incredibly powerful resources for an organisation. But they aren’t necessarily (they might not even exist). So again, judge harshly.

Of course there are other concepts that can help in high determine a high-level strategic orientation, I’ve highlighted these three as they are simple to apply and amongst the most frequently used. In the next article, we’ll begin to look at some concepts that can help turn high-level strategic focus into operational processes and activities.