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What is Strategy?

Strategy: the engine of growth

Five Common Strategy Mistakes

I just finished a two-year project looking at Michael Porter’s most important insights for managers. Connecting the dots between his classic frameworks (the five forces, for example) and his latest thinking (the five tests of strategy) gave me a new understanding of the most common mistakes that can derail a company’s strategy. In a previous post, I focused on the fallacy of competing to be the best. Here are five more traps I’ve seen managers fall into over and over again. Understanding Porter’s strategy fundamentals will help you to avoid them.

Mistake #1. Confusing marketing with strategy.

Correction: A value proposition isn’t the same thing as a strategy. If you’re trying to describe a strategy, the value proposition is a natural place to begin — it’s intuitive to think of strategy in terms of the mix of benefits aimed at meeting customers’ needs. But as important as it is to have insight into customers’ needs, don’t confuse marketing with strategy. What the marketing-only approach misses is that a robust strategy also requires a tailored value chain, a unique configuration of activities that best delivers that kind of value. This element of strategy is not at all intuitive, but it’s absolutely essential. If you perform the same activities as everyone else, in the same ways, how can you expect to achieve better performance? To establish a competitive advantage, a company must deliver its distinctive value through a distinctive value chain. It must perform different activities than rivals or perform similar activities in different ways.

Mistake #2. Confusing competitive advantage with “what you’re good at.”

Correction: Building on strength is a good thing, but when it comes to strategy, companies are too often inward looking and therefore likely to overestimate their strengths. You might perceive customer service as a strong area. So that becomes the “strength” on which you attempt to build a strategy. But a real strength for strategy purposes has to be something the company can do better than any of its rivals. And “better” because you are choosing to meet different needs and performing different activities than they perform, because you’ve chosen a different configuration for your value chain than they have.

Mistake #3: Pursuing size above all else, because if you’re the biggest, you’ll be more profitable.

Correction: There is at least a grain of truth in this thinking, which is precisely what makes it so dangerous. But before you assume that bigger is always better, it is critical to run the numbers for your business. Too often the goal is chosen because it sounds good, whether or not the economics of the business support the logic. In industry after industry, Porter notes that economies of scale are exhausted at a relatively small share of industry sales. There is no systematic evidence that indicates that industry leaders are the most profitable or successful firms. To cite one notorious example, General Motors was the world’s largest car company for a period of decades, a fact that didn’t prevent its descent into bankruptcy. To the extent that size mattered at all, it might be more accurate to say that GM was too big to succeed. Meanwhile, BMW, small by industry standards, has a history of superior returns. Over the past decade (2000-2009), its average return on invested capital was 50 percent higher than the industry average. Companies only have to be “big enough,” which rarely means they have to dominate. Often “big enough” is just 10 percent of the market.

Mistake #4. Thinking that “growth” or “reaching $1 billion in revenue” is a strategy.

Correction: Don’t confuse strategy with actions (grow, acquire, divest, etc.) or with goals (reach X billion in sales, Y share of market). Porter’s definition: the set of integrated choices that define how you will achieve superior performance in the face of competition. It’s not the goal (e.g., be number one or reach $1 billion in top-line revenue), nor is it a specific action (e.g., make acquisitions). It’s the positioning you choose that will result in achieving the goal; the actions are the path you take to realize the positioning. Moreover, when Porter defines strategy, he is really talking about what constitutes a good strategy — one that will result in a higher ROIC than the industry average. The real problem here is that you will think you have a strategy when you don’t.

Mistake #5. Focusing on high-growth markets, because that’s where the money is.

Correction: Managers often mistakenly assume that a high-growth industry will be an attractive one. Wrong. Growth is no guarantee that the industry will be profitable. For example, growth might put suppliers in the driver’s seat, driving up the industry’s costs and limiting profitability. Or, combined with low entry barriers, growth might attract new rivals, thereby increasing competition and driving prices down. Growth alone says nothing about the power of customers or the availability of substitutes, both of which would dampen profitability. The untested assumption that a fast-growing industry is a “good” industry, Porter warns, often leads to bad strategy decisions.

These mistakes are both common and costly. Getting smarter about how competition works and what strategy is will save you from making them.

Source:  http://blogs.hbr.org/cs/2011/12/five_common_strategy_mistakes.html

18 December 2011 at 18:14 - Comments

George Pólya: How to Solve it

How to Solve It (1945) is a small volume by mathematician George Pólya describing methods of problem solving.

Four principles

How to Solve It suggests the following steps when solving a mathematical problem:

  1. First, you have to understand the problem.
  2. After understanding, then make a plan.
  3. Carry out the plan.
  4. Look back on your work. How could it be better?

If this technique fails, Pólya advises: “If you can’t solve a problem, then there is an easier problem you can solve: find it.” Or: “If you cannot solve the proposed problem, try to solve first some related problem. Could you imagine a more accessible related problem?”

First principle: Understand the problem

“Understand the problem” is often neglected as being obvious and is not even mentioned in many mathematics classes. Yet students are often stymied in their efforts to solve it, simply because they don’t understand it fully, or even in part. In order to remedy this oversight, Pólya taught teachers how to prompt each student with appropriate questions, depending on the situation, such as:

  • What are you asked to find or show?
  • Can you restate the problem in your own words?
  • Can you think of a picture or a diagram that might help you understand the problem?
  • Is there enough information to enable you to find a solution?Do you understand all the words used in stating the problem?
  • Do you need to ask a question to get the answer?

The teacher is to select the question with the appropriate level of difficulty for each student to ascertain if each student understands at their own level, moving up or down the list to prompt each student, until each one can respond with something constructive.

Second principle: Devise a plan

Pólya mentions that there are many reasonable ways to solve problems. The skill at choosing an appropriate strategy is best learned by solving many problems. You will find choosing a strategy increasingly easy. A partial list of strategies is included:

  • Guess and check
  • Make an orderly list
  • Eliminate possibilities
  • Use symmetry
  • Consider special cases
  • Use direct reasoning
  • Solve an equation

Also suggested:

  • Look for a pattern
  • Draw a picture
  • Solve a simpler problem
  • Use a model
  • Work backward
  • Use a formula
  • Be creative
  • Use your head/noggin

Third principle: Carry out the plan

This step is usually easier than devising the plan. In general, all you need is care and patience, given that you have the necessary skills. Persist with the plan that you have chosen. If it continues not to work discard it and choose another. Don’t be misled; this is how mathematics is done, even by professionals.

Fourth principle: Review/extend

Pólya mentions that much can be gained by taking the time to reflect and look back at what you have done, what worked and what didn’t. Doing this will enable you to predict what strategy to use to solve future problems, if these relate to the original problem.

Heuristics

The book contains a dictionary-style set of heuristics, many of which have to do with generating a more accessible problem. For example:

Heuristic Informal Description Formal analogue
Analogy Can you find a problem analogous to your problem and solve that? Map
Generalization Can you find a problem more general than your problem? Generalization
Induction Can you solve your problem by deriving a generalization from some examples? Induction
Variation of the Problem Can you vary or change your problem to create a new problem (or set of problems) whose solution(s) will help you solve your original problem? Search
Auxiliary Problem Can you find a subproblem or side problem whose solution will help you solve your problem? Subgoal
Here is a problem related to yours and solved before Can you find a problem related to yours that has already been solved and use that to solve your problem? Pattern recognition
Pattern matching
Reduction
Specialization Can you find a problem more specialized? Specialization
Decomposing and Recombining Can you decompose the problem and “recombine its elements in some new manner”? Divide and conquer
Working backward Can you start with the goal and work backwards to something you already know? Backward chaining
Draw a Figure Can you draw a picture of the problem? Diagrammatic Reasoning
Auxiliary Elements Can you add some new element to your problem to get closer to a solution? Extension

The technique “have I used everything” is perhaps most applicable to formal educational examinations (e.g., n men digging m ditches) problems.

The book has achieved “classic” status because of its considerable influence.

Other books on problem solving are often related to more creative and less concrete techniques. See lateral thinking, mind mapping, brainstorming, and creative problem solving.

Influence

It has been translated into several languages and has sold over a million copies, and has been continuously in print since its first publication.

Marvin Minsky said in his influential paper Steps Toward Artificial Intelligence that “everyone should know the work of George Pólya on how to solve problems.”

Pólya’s book has had a large influence on mathematics textbooks as evidenced by the bibliographies for mathematics education.

Russian physicist Zhores I. Alfyorov, (Nobel laureate in 2000) praised it, saying he was very pleased with Pólya’s famous book.

Russian inventor Genrich Altshuller developed an elaborate set of methods for problem solving known as TRIZ, which in many aspects reproduces or parallels Pólya’s work.

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Source: Wikipedia

19 November 2010 at 12:03 - Comments
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3 March 11 at 11:42

Yes, Master (The Only Brand Strategy for Startups)

Early stage technology companies should only implement a master brand strategy.

Let me explain.

There is such a thing in the world called brand architecture. Brand architecture is just a fancy and quick way of saying “this is how we are going to name our company, products, and services so that customers can find what they are looking for and understand what we offer.” There are generally two ways to go about this.

One is to pursue a master brand strategy. A master brand strategy is one where all the companies products and services are branded with the corporate name. For the most part this is the strategy that Google has pursued with Google Alerts, Google Blog Search, Google Calendar, Google Checkout, Google Chrome, Google Docs, Google Earth, Google Maps, Google Patent Search, and I could go on. Yes, as Google has gotten bigger they have started buying lots of companies such as YouTube and keeping those brands and using sub-brands such as Gmail. But for the most part they have pursued a classic master branding strategy just like Lysol. Lysol’s master brand strategy is “Lysol” followed by “this is what the product does” (though Lysol is actually owned by a company called Reckitt Benckiser, but who has ever heard of them. The dreaded secret corporate brand strategy).

Two is to pursue a sub-branding strategy. A sub-branding strategy is one where the master brand is not reflected in the the sub or product brands. Think Apple and their iWhatever. iMac, iPhone, iPod, iTunes. And Airport, Cinema Display, MacBook, MacBook Air, MacBook Pro, Mac mini, MacPro, and Mighty Mouse. They have pursued a classic sub-branding strategy much like Coca-Cola. Coke has over 2,800 products, most with distinct non Coca-Cola company branding.

And while Steve Jobs is one of the most brilliant business people and marketers of our age, personally I think Apple’s branding strategy is a bit of a mess. And I am not alone. It’s even been called sloppy. Think about that. Steve Jobs, one of the best marketers of our age, has totally dorked a sub-brand strategy (though he did a pretty good job at Pixar). And Apple spends $500 million annually on marketing. Are you Steve Jobs? Do you have $500 million to spend?

Only one person can answer yes to both those questions. And unless you are that person do not try to implement a sub-brand strategy at your technology startup.

Implementing a sub-branding strategy is exponentially more complex. It decreases the chance of effectively communicating your brand promise and brand identity in the marketplace, requires disciplined thought that could be better spent on more important issues, and costs more money. It often creates confusion in the market for potential customers and partners. It make it harder for employees to rally around what you are trying to achieve. Why make it hard?

Early stage technology companies should only implement a master brand strategy.  

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Source: force of good

19 November 2010 at 10:57 - Comments

Brand Strategy

Source

19 November 2010 at 10:47 - Comments

Practical Cognitive Strategies: Brainstorming

The focus of this section of the newsletter is on identifying and using practical cognitive strategies to help with common cognitive issues related to brain injury. The approach I will be taking is to model cognitive strategies that I have seen work with students over the years and then talk about how those strategies can be applied to an individual’s day-to-day life. We will focus on the following areas as they relate to various cognitive topics:

  • Strategy development—identify strategies that may work for a particular issue
  • Strategy evaluation—judge the effectiveness of a strategy as it relates to a particular issue
  • Strategy tweaking—adjust a strategy based on the results of its evaluation

You may notice that I refer to “identifying strategies that may work” above. The word “may” is critical here. My experience in working with individuals living with brain injury is that strategies will be unique to the individual and that, based on many factors (e.g., fatigue or stress), the strategies may work beautifully one day and not at all the next. Think about the implications of this for just a moment. Those of us without brain injuries may have to work to find a strategy that helps us with a particular issue, but once we find the right strategy, we tend to use it over and over again. How frustrating would it be to find a strategy that works and then have to continue changing it because it doesn’t work consistently?

It would be great if one strategy solved the same problem for everyone, but the reality is:

  • One strategy might work for some people.
  • A slight tweak of that strategy might work for others.
  • Others might require an entirely different strategy to deal with the same cognitive issue.

Another challenge in this area of strategy development is that many individuals living with brain injury focus on using the same strategies or approaches they used prior to their brain injuries. Unfortunately, this often doesn’t work. It is understandable that, if something worked for you before, you would try to use it again. The problem arises when an individual with a brain injury can’t let go of that strategy, even when it is obviously not working. There may be many reasons for this, such as:

  • Impulsivity—The individual may act or react on impulse, without taking the time to evaluate how the strategy is working.
  • Memory—The individual may not remember that the strategy no longer works.
  • Insight—The individual may lack the insight that the strategy isn’t working.
  • Holding on to past—The individual may hold on to previous strategies because it ties her back to who she was before her brain injury.

The creativity involved and the challenges associated with strategy development are just some of what makes the field of cognitive rehabilitation so exciting. Let’s take a moment to consider a specific example of a strategy—brainstorming—and the challenges that individuals with brain injuries may encounter in using that strategy.

BRAINSTORMING

Brainstorming is a very powerful cognitive strategy that can be used in a variety of areas, e.g.:

  • Writing
  • Problem-solving
  • Decision making
  • Organization

Brainstorming was developed in the 1940s and was initially used in business as a way to stimulate creativity among individuals within a group or team. Although traditionally used with groups, it can also be used by individuals to identify possibilities or options associated with a particular issue. Doing a simple online search will reveal that there are many different brainstorming techniques. In fact, many of you may already be well-versed in its practial application.

That being said, I would like to present a brainstorming technique that, while not unique, has proven to be effective for individuals living with brain injury. I applied this technique as I created my online Cognitive Strategy Building class offered through Coastline Community College’s Acquired Brain Injury Program. I used a concept mapping program (Inspiration) to visually represent my brainstormed ideas.

Brainstorming Technique—Phase One

  1. Use either a sheet of paper or a computer program like Inspiration.
  2. Identify the issue, question, etc. to be addressed, during this brainstorm session, in the center of the page (e.g., What to cover in the Cognitive Strategy Building class).
  3. Set a timer for 10 minutes.
  4. Write down as many ideas related to the topic as you can before the timer goes off.
    1. Write down all ideas that come to mind, no matter how ridiculous or unrealistic.
    2. Don’t edit while brainstorming. For instance, don’t correct spelling or analyze ideas during this 10-minute brainstorming phase.
  5. When the timer goes off, review the information you came up with during the brainstorm session.

Let’s take a look at what I came up with during my initial brainstorming session regarding what to cover in the Cognitive Strategy Building class:

Practical Cognitive Strategies: Brainstorming

As you can see, I came up with quite a few ideas in my initial 10-minute session. I didn’t stop myself, even though I wasn’t sure I would be able to cover all the general topics listed or even whether they were the right topics. What I did do was ask myself to think about everything I would like to do in the class, regardless of how realistic it might be. Once I completed the ten minutes, I went back and corrected all my spelling (so it would look nice for you), and then considered the various ideas that came to mind.

Potential Challenges to Brainstorming—Phase One

Individuals living with brain injuries may find several challenges to this technique, including:

Challenges & Specific Strategies to Address Them
Challenges Specific Strategies
The 10-minute limit may cause anxiety. Emphasize that the 10-minute limit is there to give them the opportunity to at least complete an initial attempt at the task.
They may perseverate on one idea and may not be able to let go of that idea in order to brainstorm other possibilities. Set a second timer that goes off every 90 seconds as a prompt to move on.
They may get distracted during the 10-minute period. Break the 10-minute session into two 5-minute sessions.
They may say they don’t have any ideas. Initiate ideas by asking questions related to the topic (e.g., What do other people do to socialize?)
They may get off topic because they forget the issue being addressed. After writing each idea, refocus by reading the initial issue or question.

We will expand on this techique in future articles, but for now, the important thing is going through the steps to get an initial list of ideas.

Okay, now it’s your turn to try some brainstorming!

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Source: ID 4 the Web

19 November 2010 at 10:44 - Comments

New Marketing Strategy

New Marketing Strategy

New Marketing Strategy

  1. Develop strategies based on the dynamics of online search, content marketing (brand journalism) and social media.
  2. Create great content that helps answer your target audience’s questions and solve their problems.
  3. Publish content on the web and across social media channels.
  4. Promote content using search engine optimization, permission based e-marketing and social media.
  5. Manage, maintain, review, update and archive content on an ongoing basis.
  6. Collect, measure and analyze marketing data to assess engagement, conversion rates, leads and sales.

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Source: Intersection Consulting

19 November 2010 at 09:51 - Comments

Metrics-Driven Marketing Strategy

17 November 2010 at 17:55 - Comments

Learning from Napoleon

To understand how business strategists used military strategies, we can look at the innovations of Napoleon and apply them to business situations. Napoleon made four key innovations. They were

  1. increase his army’s marching rate,
  2. organize the army into self contained units,
  3. live off the country, and
  4. attack the opponent’s lines of supply.

All four provide lessons for business strategists.

  1. By increasing the speed that the army marched and fought, they created a military advantage. They could implement their tactics faster than the enemy. Hitler used the same strategy with his Blitzkrieg. The enemy was overrun before they were able to organize a viable resistance. But once these innovations were used, other armies made adjustments and the nature of warfare changed. All armies had to increase their pace of operations to be effective. Businesses, like armies must operate at a faster pace than their competitors in order to have a competitive advantage. They must develop and introduce products faWhat is Strategy: Learning from Napoleonster, implement strategies faster, and respond to environmental factors faster. They must be proactive.
  2. Napoleon returned to the cohort organization of the Greek phalanx. These were self contained fighting units of citizens that knew each other in daily life, and had a wide variety of skills and various skill levels. Under the Roman Empire the phalanx was replaced by specialized legions containing 100 fighters (centurion). Each legion had a specialized skill (such as the archer legions from Thrace). For more than 100 years, businesses have taken Adam Smith’s advice and organized by functional specialization, just like the Roman legions did. Accountants populated the finance department and technicians populated the operations department. According to Adam Smith this is the most efficient way of organizing. But as the speed of business increases we need a more flexible system. We use cross functional teams (like the Greek phalanx) that have enough breadth of knowledge to see the big picture, are objective enough to get accurate and unbiased perceptions of environmental factors, and are flexible enough to act quickly.
  3. Napoleon’s armies lived off the country instead of bringing supplies with them. This allowed them to march faster. The disadvantage is that stealing from the local population created resentment. But this was a longer term problem. It could be dealt with when the time came. The short term advantage outweighed the long term disadvantage. In business we no longer stock inventory based on an EOQ model. We use a Just In Time model and this reduces costs considerably. However it makes us vulnerable to our supply channel partners. Just as Napoleon had to manage the local people that supplied him his provisions, businesses today have found supply chain management to be a critically important part of doing business.
  4. Striking at the opponents lines of supply is known as a flanking strategy. It is effective because it eliminates the need to fight the enemy head-on. An attack on a poorly defended supply line can render the whole enemy army unable to fight. In business today we attempt to do this with exclusivity agreements with suppliers (if you sell Pepsi, you can’t sell Coke). If Pepsi has an exclusivity agreement with Pizza Hut, Coke will effectively be eliminated from that part of the market.

Source: Wikipedia

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{Photography by Roby Ferrari}

17 November 2010 at 17:37 - Comments

Strategy: Definition

Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage strategy is distinct from tactics, which are concerned with the conduct of an engagement, while strategy is concerned with how different engagements are linked. How a battle is fought is a matter of tactics: the terms and conditions that it is fought on and whether it should be fought at all is a matter of strategy, which is part of the four levels of warfare: political goals or grand strategy, strategy, operations, and tactics. Building on the work of many thinkers on the subject, one can define strategy as “a comprehensive way to try to pursue political ends, including the threat or actual use of force, in a dialectic of wills – there have to be at least two sides to a conflict. These sides interact, and thus a Strategy will thus rarely be successful if it shows no adaptability.”

Etymology

The word strategy derives from the Greek “στρατηγία” (strategia), “office of general, co

mmand, generalship”, in turn from “στρατηγός” (strategos), “leader or commander of an army, general”, a compound of “στρατός” (stratos), “army, host” + “ἀγός” (agos), “leader, chief”, in turn from “ἄγω” (ago), “to lead”. We have no evidence of it being used in a modern sense in Ancient Greek, but fin

d it in Byzantine documents from the 6th century onwards, and most notably in the work attributed to Emperor Leo VI the Wise of Byzantium. The word was first used in German as “Strategie” in a translation of Leo’s work in 1777, shortly thereafter in French as “stratégie” by Leo’s French translator, and was first attested in English 1810.

Strategies in game theory

What is Strategy: Greece

In game theory, a strategy refers to one of the options that a player can choose. That is, every player in a non-cooperative game has a set of possible strategies, and must choose one of the choices.

A strategy must specify what action will happen in each contingent state of the game—e.g. if the opponent does A, then take action B, whereas if the opponent does C, take action D.

Strategies in game theory may be random (mixed) or deterministic (pure). That is, in some games, players choose mixed strategies. Pure strategies can be thought of as a special case of mixed strategies, in which only probabilities 0 or 1 are assigned to actions.

Noted texts on strategy

Classic texts such as Chanakya’s Arthashastra written in the 3rd century BC, Sun Tzu’s The Art of War, written in China 2,500 years ago, the political strategy of Niccolò Machiavelli’s The Prince, written in 1513, or Carl von Clausewitz’s On War, published in 1832, as with the Japanese classic The book of five rings by Miyamoto Mushashi written in 1645, are still well known, and highly influential. Even thought the term was not used before the end of the 18th century, and subsequently shifted its meaning (see definitions, above), there were several insightful writers on strategy between Machiavelli and Clausewitz, like Matthew Sutcliffe, Bernardino de Mendoza, Santa Cruz de Marcenado (Álvaro de Navia Osorio y Vigil, marqués de Santa Cruz de Marcenado), Guibert (Jacques Antoine Hippolyte, Comte de Guibert), and August Otto Rühle von Lilienstern. In the 20th century, the subject of strategic management has been particularly applied to organizations, most typically to business firms and corporations.

The nature of historic texts differs greatly from area to area, and given the nature of strategy itself, there are some potential parallels between various forms of strategy—noting, for example, the popularity of The Art of War as a business book. Each domain generally has its own foundational texts, as well as more recent contributions to new applications of strategy. Some of these are:

Source: Wikipedia

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{Photography by Clarity}

17 November 2010 at 17:13 - Comments

Strategy according to Michael Porter



16 November 2010 at 22:37 - Comments