What is Strategy

hello and welcome to today's lesson where we're looking at what is strategy and how to tell if you have a good one now if you're working in a professional environment you may hear the word strategy a lot but what exactly is strategy well before we dig into what strategy is let's take a look at what strategy isn't now you may have come across the following strategies before our strategy is to sell directly to consumers our strategy is to be number one in EMEA our strategy is to grow through acquisition our strategy is to pursue global expansion our strategy is to be the lowest cost provider so what exactly do these strategies have in common well for a start none of them none of them are strategies instead they are components of a strategy or in some cases they're simply goals targets to hit but what they aren't is strategies so if we now know what strategy isn't then what is strategy a simple way to understand strategy is to examine the origin of the word strategy it derives from the Greek word Strategos which means the generals art so if strategy is the generals art what does the general do well the answer to that is that they coordinate the whole with the aim of winning the war and that's the essence of strategy to coordinate the whole to achieve some goal now the general has the goal of defeating the enemy but its strategy they use to achieve this goal now the general might decide to engage in some battles and retreat from others they will sometimes feint areas of strength they will try to play to their strengths they may even sacrifice teams to achieve their objectives in other areas what they probably won't do is launch towards the enemy on all fronts at the same time so before we proceed it's important to understand the difference between strategy and tactics now a simple way to understand the difference between the two is through this quote from Peter Drucker management is doing things right whereas leadership is doing the right things now you can think of management as being about tactics and leadership as being about strategy now turning again to our general they are doing the leader they coordinate the whole or the strategy they're trying to do the right things and contrast that to the commander on the battlefields now they're more like the manager executing what the general has told them to do they choose how best to coordinate their men or the tactics to achieve what the general has asked them to do so let's examine how strategy fits within an organization this will help further deepen our understanding of strategy when people think about strategy curation they often think of the many tools available to help support this activity tools such as a pest analysis SWOT analysis and competitive analysis now these tools support strategy creation but they're not strategy either and the diagram you should see here should make this clear now from the diagram we can see that there are two major inputs to strategy creation so the first is mission and this is our big goal and our values now in the generals case their mission is obviously to defeat the enemy but their values might be to obey the Geneva Convention and to treat every individual with the same respect now the second input to strategy creation is the strategic analysis and this is the information you gather that helps you form a better strategy now this might include performing things like in analyzing your strengths and weaknesses analyzing the environment and analyzing competitors amongst a bunch of other things but once you have those two inputs then it's time to create our strategy now we'll deal with this a little bit later but for now let's look at the outputs from strategy now that's going to include amongst other things the organization structure so that means setting up the organization so it can execute the strategy it's going to include people what people should be employed so for example should we focus on hiring great designers or should we focus on hiring great customer service people for example it's going to focus on the processes or what processes need to be in place to support the strategy and likewise what rewards do we need how should we align rewards with the objectives of strategy so in essence the organizational setup is all about the practical details of the organization and how it should be set up as a direct consequence of the strategy so we just looked at what the inputs to strategy are and what the outputs from strategy creation are but how do we create a strategy well to curate or to have a strategy you must be able to answer the following five questions now if we can answer these questions then we know we have a complete strategy but what's more if each of our answers reinforces the others and we may just have a great strategy so let's examine each of the questions in turn so first what arenas will we compete in well the answer do to answer this question we need to get specific about the market we're chasing so what country or region are we go after what sales channels will we use what product categories will we focus on how we configure our value training these are just some of the questions we need to answer the next question is what vehicles will we use to get there now we know the arena in which we want to compete but now we need to choose a vehicle to get us to the arena now this could be to build it ourselves it could be to license it or it could be via a partnership question three how will we differentiate ourselves to win now many people assume strategy is about competing to be the best it isn't it's about competing to be unique now here we need to define how we differentiate ourselves will we have a better design for example or maybe it will have a higher quality product or perhaps have cheaper product or a more reliable product whatever it is we have to work really hard to make ourselves be unique so we can win in the marketplace question 4 how fast will remove and using what sequence now the speed of movement in business is important move too fast and you could end up getting ahead of yourself growing too quickly and going out of business move too slowly and the competition competition could get there first now related to this is understanding the sequence of the moves that you will take so for example your arena might be opening stores across China but to avoid getting ahead of yourself you launch just one store in Beijing first taking plenty of time to get the operational kinks ironed out and once that's done then you expand as fast as you can and the final question is how will we make a profit now this question determines if you're making a profit based on two factors and that's basically whether you are a low cost or a high cost provider now there's no right or wrong answer here large profits are achievable with either approach so just as an example Apple obviously there are high cost and that's how they make their profit and that's underpinned by a unique selling point of great design and conversely IKEA they make profit based on low cost but that's underpinned by replication efficiencies because they create so much stuff ok so let's take a look at an example and look at the strategy of BMW and in the diagram here you can kind of see in a nutshell the BMW strategy now if pmw were to launch in a new country would it make sense to partner with an existing dealer or an existing dealer network in that country and what you'll see as we go through this example is that BMWs strategy tells them not only what to do but also what not to do now let's take a look at the diagram now BMWs arena is obviously global professionals their value chain is set up to emphasize the active driving design philosophy now the vehicle they use to reach their market is their dealer Network and their differentiators are that there are high quality unique design and high performance the steps or sequence of moves they make are to increase the range of cars in established countries and the new territories they establish dealerships in the capital and take it from there finally their economic logic is based around charging a premium price now the real power of BMW strategy is where the answer to one question reinforces another so for example by controlling the dealership experience they can ensure a high quality sales experience and that obviously aligns with the premium quality of their product now there is also alignment between high performance and professionals and finally one last example there is also alignment between professionals and a premium price now if BMW were to partner with an existing dealer to supply their cars then they wouldn't have the same level of control over the sales experience so as you can see BMW wouldn't do this so the strategy doesn't only tell us what to do it tells us what not to do you know it means that BMW doesn't make trucks BMW doesn't partner with others to work on its styling it doesn't make a single budget car their lower range cars are all at a premium price compared to competitors - so by telling us what not to do a good strategy helps us make trade-offs and make prioritizations so to summarize or conclude by now you should be able to answer the question what is strategy that we posed at the beginning of this video now articulating what is strategy can seem really esoteric at first and it's a term that's thrown around a lot but at its core a strategy is about controlling the whole to achieve some goal strategy tells us what to do as well as what not to do and it is important to set a strategy as otherwise your moves are without aim and as you execute your strategy your strategy will be tested every day so without a clear strategy it's going to be super easy to get distracted and go off course so that's it really hope you enjoyed this video and I look forward to speaking to you again soon