WHAT IS STRATEGY?

A successful strategy differentiates a business and provides the impetus for great success; a poor or misunderstood strategy can be equally significant and drive a company out of business. Understanding what constitutes strategy is therefore a critical component of creating a high performance organization. Developing a distinctive, successful business strategy means making tough choices in three areas: who to target as customers, what products to offer and how to undertake related activities efficiently. The most common cause of business failure is the inability to make clear, explicit choices in these three areas. Strategy at the business unit level has three essential elements: development, implementation and selling (meaning, obtaining commitment and buy-in). Underpinning all three is choice, in particular the need to choose a distinctive strategic position on three dimensions:

Who to target as customers (and who to avoid targeting) What products to offer How to undertake related activities efficiently.

Strategy is all about making tough choices in these three dimensions. It means deciding on the customers you will target and, just as important, the customers you will not target. This issue requires a focus on customer segmentation and geography. Delivering a successful strategy also means choosing the products or services you will offer and what product features or benefits to emphasize. Finally, strategy means choosing the activities you will use to sell your selected product to your selected customer. In every industry, there are several viable positions that a company can occupy. The essence of strategy therefore is to choose the one position that your company will claim as its own. A strategic position is simply the sum of a companys answers to these three questions. The goal for every company should be to answer these questions differently

from its competitors. If this is achieved, the firm will then be able to stake out a unique strategic position. Above all, strategy is about understanding where you are now, where you are heading and crucially how you will get there.

WHAT STRATEGY IS NOT?

Data Analysis. Too often, data analysis leads to strategy, when what should happen is that strategic choices are made first, and then these are later refined and explored further using data analysis. A goal, budget or business plan. Strategy is not a goal such as "we aim to be the best or number one". This is, at best, an aspiration or vision. Also, strategy is neither a budget nor a business plan, although elements of these may be part of how the strategy is executed. An absence of choice. Choice matters when making decisions. The three choices of who to target, what to offer and how to undertake related activities need to be difficult and challenging. Avoiding or fudging these issues is a recipe for problems in the future. Vacuous, meaningless or full of platitudes. Statements such as "Our strategy is to be a leading-edge provider/employer explains neither where the firm is going nor how it will make progress. Consequently, it is not a strategy.

DEVELOPING AND IMPLEMENTING STRATEGY

The fundamental principles that ensure strategies succeed are enduring. They are the same today as they were 100 years ago. Foremost among these is the need to focus on customers and deliver the right products. This seems obvious, but the difficulty comes in handling these choices. Understanding that choices are needed is one thing, making sure the decisions are the right ones is altogether more challenging. The solution is to apply a threestage process when developing strategy.

1. Generate as many ideas as possible, focusing on the central strategic issues (who, what and how). This process is often more effective if it is as democratic as possible, gathering support for the process, an understanding of the issues and possibly achieving a consensus as well. If you ensure that this part of the process is strong then the rest will be more likely to succeed. What matters is finding the best answers to the questions: how do we compete, and where in the organization are ideas and insights to be found? This may include data analysis, but this is only one method (and one that is often over-emphasized). The underlying organizational environment of the firm must support the strategic choices made by the firm. 2. Evaluate the ideas by grouping them into specific topic areas and make the tough decisions about who to target, what product to offer and how to ensure success. This part of the process need not be democratic but it does need to be comprehensive. It is the leaders responsibility to ensure that evaluation is rigorous. Analysis has much greater value at this part of the process than it does when generating ideas. To be effective, evaluation relies on the organizational capabilities, for example, its ability to share knowledge and generate ideas. Evaluating ideas and making tough decisions about the direction to take and the ways to achieve progress also rely on an understanding of the market. For example, what impacts will the firms decisions have on customers and competitors? Strategy must not only make difficult choices. It must put all these choices together into a self-reinforcing system of activities that fit. 3. Implement the strategy, once decided. This sounds easy or obvious but in practice can be extremely challenging. When implementing the strategy, it is clearly desirable to stay aware, remaining flexible to changes in the environment. Engaging people at an emotional level with the strategy is essential to ensure that the strategy succeeds: any objective or strategy needs to be purposefully explained to those whose support is needed. In fact, engaging people with the strategy is so important that techniques for ensuring success were highlighted in the second part of the presentation.

A strategy, however brilliant, will fail unless your people are emotionally committed to it. You have to sell it to them.

HOW CAN HR CONTRIBUTE TO STRATEGY?

Obtaining commitment and engaging people with the strategy can be achieved by taking people through four emotional stages.

I know I understand Yes, I think I can I will

Explaining the context, the strategy and what it means is the first, essential step. This provides valuable information without necessarily generating commitment. The next stage builds on this by generating clear understanding of why the strategy is significant for the organization and, in particular, why it is important to the individual and what it means for them. The next part of the process of generating commitment is to make the strategy attainable. This can be accomplished by achieving early victories that generate momentum and involvement. Finally, getting people to believe they can achieve success can develop commitment to the strategy. To do this:

Involve people in the strategy process early Divide the strategy into tangible, practical steps Make people feel involved and genuinely committed, for example, by celebrating successes and fostering teamwork. Changing peoples behavior

CHANGING PEOPLE'S BEHAVIOR

Too often, peoples day to day behavior actually undermines strategy. To avoid this, several factors can help. First, recognize that the underlying environment of your organization creates the behaviors in that organization. Measurement and incentives matter when changing peoples behavior. After all, what gets measured gets done people focus on the tasks and measures being used to assess them. Values are also significant: dont expect people to do things that are contrary to their values. Conversely, phrase requests and challenges in ways that appeal to their values. When implementing a business strategy, a questioning culture is valuable, as well as a propensity to experiment, to learn and to tolerate mistakes. Attitude and mindset are important. So, for example, it is important to avoid the situation of social loafing in which everybody thinks that everyone else is going to do something, so nobody does anything. What HR professionals can provide is an emphasis on individual responsibility. This can help to counter the gap between what people know and what they do, and overcome the not-invented-here syndrome where people have an antipathy to external ideas or tasks.

AVOIDING THE PITFALLS OF STRATEGY DEVELOPMENT AND EXECUTION

1. Ensure that your strategy creates a unique strategic position for your company. This is achieved by focusing on who your customers are, what the value proposition is offered to these customers and how you can do this efficiently. Do not confuse strategy with vision, mission or objectives. 2. Make distinctive, tough choices. To be distinctive and meaningful, strategy must make difficult choices and combine these choices in a self-reinforcing system of activities that fit. Common mistakes include: keeping options open; permitting

incentives in the system that enable people to ignore choices; searching for growth in a way that forces people to ignore the firms strategy, and analysis paralysis. 3. Understand the importance of values and incentives. In particular, the underlying environment of your organization creates the behaviors of that organization. The organizational culture and values, measurement and incentives, people, structure and processes all determine the underlying environment. 4. Gain peoples emotional commitment to the strategy. Any strategy, however brilliant, will fail unless people are emotionally committed to its success. 5. Remember, understanding is not the same as communicating. Explain why the strategy is important to the organization and the individual. 6. Do not overlook the knowledge-doing gap. Individuals tend to do the urgent things and not the important ones. Remember, what gets measured gets done. 7. Do not believe that strategic means important. Closely linked is the mistaken view that only top people can develop strategic ideas. Ideas can come from anybody, anytime, anywhere. 8. Keep your strategy flexible. All ideas are good for a limited time not forever. Continually question the answers to the who what how questions. Strategy does not need to be changed too often, but it will occasionally require adjusting to suit external circumstances. So, give your people freedom and autonomy to respond and to adjust, without waiting for permission or instructions. Next steps Unfortunately, not only will aggressive competitors imitate attractive positions but new strategic positions will be emerging continually. In industry after industry, once formidable companies with seemingly unassailable strategies are humbled by little known companies that base their attacks on creating and exploiting new strategic positions.

The hallmark of successful firms and a successful strategy is strategic innovation proactively establishing distinctive strategic positions that are critical to shifting market share or creating new markets. To prepare for the inevitable strategic innovation that will disrupt its market, an organization should:

Identify turning points before a crisis occurs, by regularly monitoring indicators of strategic rather than financial health in the market. Prevent cultural and structural inertia by creating a culture that welcomes change and is ready to accept new strategic innovation even if it disrupts the status quo. Develop processes that allow experimenting with new ideas to reveal the potential of a new innovation. Develop the required competencies and skills. Manage a transition to the new strategic position, by clearly deciding whether to adopt the new position and by ensuring that old and new coexist harmoniously.

Designing a successful strategy is a continuous, dynamic process. It involves identifying and colonizing a distinctive strategic position. It also means excelling in this position, ensuring that systems and processes reinforce each other, enabling the organization to achieve progress towards its goal.