Believe it or not, most people, including so-called industry experts and academics, are confused between a "strategy" and a "plan".
In most cases, most people think that they are talking about corporate strategy, when in actual fact they are merely talking about corporate planning.
Let me explain.
When you have a strategy, what you want to do is usually to create some kind of competitive advantage over your competitors, or you pre-empt the market, so that you can win as many customers over as possible.
While you also plan to beat your competitors and win customers, the key differences here lie in the ability of your competitors to react and respond, and how you are then going to respond to your competitors' responses.
Simply take an anecdote from the great martial artist, Bruce Lee. Bruce Lee was observing some Karate exponents training to make their fists harder by hitting and breaking rocks. Curious about the practice session, Lee asked the Karate exponents, "Isn't it very easy to learn to break rocks? Rocks don't hit back!"
My point is: are you taking the assumption that your competitors are not responding back to your strategy? If yes, then you merely have a plan, not a strategy.
Strategy as a Game
Beyond the world of business, most people would associate a strategy with that of warfare. I prefer to illustrate strategy using more peaceful means such as playing chess, or better still, taking penalty kicks in a soccer game.
In a soccer tournament, if the 2 competing teams are not able to establish and a loser, the teams will take turns to kick a ball into a goal from just 12 yards away. The only obstacle between the opposing player and the goal posts is the goalkeeper.
Since it will depend on pure reflex actions, the goalkeeper would have to guess which direction the player is kicking the ball. The teams would also develop a strategy by guessing what is on the goalkeeper's mind, and hope to send the goalkeeper diving in the wrong direction.
This strategy is usually dynamically evolving until all the necessary players have taken their shots at goal. Usually, the first player will choose a direction, either left or right. Then his coach and teammates observe which direction the goalkeeper dives, and then formulate another decision to go left or right.
Some times, if the goalkeeper seems to figure out the pattern that the opposing teams are kicking the balls, the next opposing player may just send the ball down the centre. The reason being that the goalkeeper will be diving either left or right for sure. However, if the ball is sent to the centre, it catches the goalkeeper completely off guard.
So how does the above apply to the game of business?
The most often quoted example is when companies try to establish what Michael Porter terms as cost leadership. The resulting actions from competitors are likely to slash prices as well, thereby resulting in a price war. While in most cases, the companies that are the strongest financially can outlast the rest in a price war, usually no one emerges as the winner, not even the customers.
Besides those who went out of business in a price war, the survivors usually suffered great reductions in their profits as a result. Customers lose out when companies cut corners with lower product and service quality as the competing companies slug it out.
The underlying threat to all businesses is not the price wars, nor the fierce competition that exists. Rather the consistent threat is the propensity of competitors to adopt "copy cat" strategies, which makes everybody a loser.
Take the example of the dog gone dot.coms.
Most dot.coms operate under the premise of getting as many eyeballs as possible. Whether the eyeballs are there just to browse or to purchase something is a separate issue. The key thing is to get the eyeballs, since Amazon, Yahoo, eBay, eToys and other dot.com pioneers are getting millions of eyeballs each day.
However, when there are many dot.coms using different means to compete for eyeballs, the eyeballs become diluted, especially with the less established up-and-comers.
Without anticipating what will happen in the market, the dot.coms bombed.
Establishing Win-Win Strategies
Strategy is not just about analysing competitors' responses. It is also about how common interests can be aligned, so that all parties can benefit from this type of arrangement.
The entire I.T. industry is the epitome of such strategic alliances. Microsoft can only release its latest versions of Windows when Intel produces a better chip. Microsoft can be so successful when the major personal computer manufacturers agree to ship their computers with pre-loaded Windows systems. Although it has its own MS SQL database, the Windows system is compatible with other databases such as IBM's DB2, Oracle, Informix etc. Even SAP, which is supposed to the one one system that manages everything, runs on Windows as well. The result is a win-win situation for all. While Microsoft may lose some of its MS SQL sales, it gains in terms of its Windows sales. By leveraging on the world's most popular operating system, software manufacturers are able to reach out to a lot more computer users in the world. Even bitter enemies such as Netscape partners with Microsoft to compete with the Internet Explorer.
However, such strategic alliances are actually very fragile, especially for smaller companies. If, for example, there are 2 courier services in town, and each one of them specialises in the eastern and western part of town respectively. The 2 courier services decide to partner, so that they can get more clients. If the Eastern courier gets a business for the Western courier, he will pass over the contact and perhaps get a referral fee, and vice versa.
You may be inclined to find that such win-win arrangements should be long lasting. However, the opposite may just be the case. If the Western courier happens to have 5 times more business than the Eastern courier, the Eastern courier may be tempted to "steal" some of these contacts and expand to the west. This will of course make the Western courier very upset, and that may be the end of the partnership. Such considerations may the reasons why certain businesses are not inclined to form alliances.
In the case of Microsoft, it will be less inclined to venture into hardware manufacturing, partly because by doing so, it will be diluting its business focus, which is software. (If only Amazon had learnt from Microsoft to "stick to the knitting" and stick to just selling books, but that's another story)
The greater reason is probably Microsoft takes a long-term view of its alliances with its partners, and decides that working as a loose strategic alliance will give everybody the chance to specialise in each company's respective strengths. Microsoft is also dominant enough to ensure none of its partners dare to break the alliance arrangements, and hence keeping everybody in line.
Survival in the Era of Insurgents
As mentioned earlier, a strategy cannot be formulated without anticipating the responses of competitors, suppliers, partners, substitutes, new entrants and even customers.
Traditionally, most strategies revolve around competitor analysis. Nowadays, the larger threats are substitutes and new entrants, people whom may be totally missed out in your radar screen.
If you would like to formulate a winning strategy, I would suggest you start with your customer first.
No matter what product or service you are selling, acceptance by your customer will be the most important of all. To reach out to customers effectively, you need to define what is your Unique Selling Proposition (USP), which in simple terms, what would make your customers definitely buy from you, and not from someone else?
Your USP can be defined when you find out what are the needs, wants and concerns of your customers that are not fulfilled by you nor your competitors as yet. Unlike the Porter's suggestion to analyse competitors' strengths and weaknesses, a focus providing unfulfilled benefits to customers is likely to give you higher chances of Marketing success. By focusing on the unfulfilled benefits to your customers, you can also catch a glimpse of your substitutes products, as well as possible new entrants to the game.
The next thing is to make sure you launch a blitzkrieg or surprise introduction of your new products and services, to as many customers in the shortest possible time. If budget is a constraint, use direct marketing techniques to make sure that only your customers, and not competitors, get to know and buy your products and services.
As in all strategy formulation, stealth is critical to your success. However, when you start to market, you will have to give out crucial information to your competitors and customers alike. To overcome this, you would have to plan a few steps ahead. You would have to anticipate how long would it take for your competitors to respond, and in what way would they respond. Remember, your competitor is not a piece of rock.
In a knowledge-based economy like this, time is of essence. Sometimes, the perfect product cannot be produced given the time allowable. Hence, companies such as Microsoft tend to launch imperfect products, and modify along the way. Using the Pareto principle, 80% of your products' benefits can be fulfilled by 20% of those products' functions. As long as your customers can accept 80% of the products' benefits, you can launch a product that is only 20% developed.
Besides allowing you to launch products in a very short period of time, it also allows you to throw your competitors of their track. As mentioned before, most companies have a propensity to copy, and perhaps generate copies that are better in terms of quality. Only few have the initiative to innovate and increase the range of product benefits. By the time your competitors introduce a copy-cat product into the market, and start undercutting each others' prices, you have now further developed your product, thus moving several steps ahead of your competition.
In addition, time, as well as other resources, ought to be well managed creatively. If you have 2 cows, and your business is milking cow's milk to sell the milk in the market, what you can do to exponentially multiply production is to sell 1 cow and buy a bull!
While most management textbooks would emphasize that a strategy is dynamically evolving, the tools and processes discussed are usually meant for static plans. The success in any strategy lies not just in having information about your competitors, but more importantly, in anticipating how your competitors will respond to your actions.
In closing, here is a joke that was found on the Internet, which simply illustrates the process of a dynamically evolving strategy.
A duck hunter was waiting in an open field near a pond when a covey of ducks flew over at low altitude. Aiming carefully and quickly he fired and down fell a duck. As he and his faithful dog approached their kill a rather imposing looking farmer appeared and motioned to the hunter to stop.
The 6' 6", 245 lb. farmer asked the hunter what he thought he was doing.
"Well, I'm hunting ducks," he replied to the farmer's question. "I just killed one and now I'm going to pick it up and put it in my bag."
The farmer then stated that the duck was not the hunter's because, "I own the land and the sky over it; Since the duck fell on my land - I own the duck!"
After a short but spirited argument the hunter and the farmer could see that neither was willing to give up the duck to the other. The hunter then offered a remedy to the problem. He said, "In the age of the Vikings, when problems such as this arose, the two arguing Vikings would agree to take turns kicking each other in the groin until one of them couldn't continue. The victor would then win the argument. I suggest we do this tried and true age-old remedy to settle the question about who owns the duck."
The farmer, who was much larger than the slightly built hunter, agreed and in a gentlemanly gesture encouraged the hunter to "go ahead and kick first."
Kick is exactly what he did! The hunter reeled back and, with all of his might, he kicked the farmer right square in the groin!
The farmer immediately fell to the ground. He writhed in excruciating pain for several minutes after which he finally struggled to his knees. Coughing and holding his gut he staggered to his feet barely holding his balance. Another ten minutes passed and still the farmer couldn't speak -- he could barely breathe! All the while the hunter and his dog stood nearby waiting for the farmer to take his turn...
Finally, when the farmer felt strong enough to stand he muttered in a very angry and determined growl, "Now it's my turn!"
He slowly regained his full massive stature and positioned himself to kick -- when suddenly the hunter said, "Nah, you go ahead and keep the duck!"
The moral of the story: before committing yourself, find out
1. If it's worth your while;
2. Has your expected payoffs or returns changed; and
3. If you're stuck in a no-win situation, why not just give it away!What Is Strategy?
c.j. is an Affiliate with HR Chally Group in China. Founded in 1973 through a grant from the U.S. Justice Department, the HR Chally Group provides predictive and compliant assessment system for management, sales, technical, customer care, and administrative talents. Unlike other assessment tools that just conducts personality profiles, Chally profiles what is exactly required by specific job descriptions and responsibilities and predict if these talents can succeed in these roles. The resulting effect is you'll get:
* Up to 40% reduction in turnover
* Up to 30% increase in employee productivity
* 85%+ accuracy in identifying effective performers
Prior to this, c.j. was Asia Marketing Manager for a Fortune 500 logistics company, as well as Corporate Training Manager for Ringier AG, Switzerland's largest media group, in China, where he was responsible for sales team development, and helped increase the % of new hires to close their 1st sales within 2 months by 30%, as well as increase overall sales targets by more than 50%. Visit http://www.psycheselling.com for more info.