Introduction to Strategy
Episode 01
Strategy: Episode 01 Transcript
Hi! I’m Jerry Thomas, President and CEO of Decision Analyst. Welcome to our series on strategy. And strategy comes to us from the military world from ancient Greece. And the original word that strategy comes from is based on the idea of a general, or military leadership, or the art of being a military leader. So, strategy comes to us from the world of the military. And what exactly is strategy is not totally clear, and it often is confused with tactics. And in fact, those two concepts overlap each other. But in general when we think about strategy, we’re talking about the long-term and tactics we’re thinking of shorter-term actions.
There are many books on military strategy, and a number of them outline various military strategies or strategic principles, such as objective, mass, maneuver, surprise, deception. Some books list eight strategies. Some lists 13. Some have over a hundred. So, who knows how many strategies that apply to the military.
And I’ve thought about military strategy most of my adult life, and it’s always been very confusing. But eventually I figured out that there’s a deeper underlying concept, and it’s the idea of concentration or focus. So, the whole purpose of military strategy is to get a bigger army, with more firepower concentrated against a smaller army. That’s the secret to victory; that’s the secret to winning. But the military model is not an ideal model for strategy that we can apply to the business world.
For one thing there’s only one enemy. In the business world, we have many, many, many competitors, many opponents. Secondly, you think of military strategy: there’s a beginning and there’s an end. There’s a fairly limited time dimension to military strategy; whereas, in the business world, strategy is ongoing, never-ending. We’re talking about the long-term survival. So, the military model doesn’t fit perfectly to the business world.
Another common model for strategy is sports, but sports has many of the same limitations of the military models for strategy. There’s only one opponent that we’re playing against, and many of the rules (and in the constraints and the time limits, don’t really apply in the business world. So, the sports model for strategy, or being the best, is not a good model for the business world.
A third model of strategy is nature, or the world’s natural ecosystems. And I love nature as a metaphor, or an analogy, where we can see strategy in a different environment that we might be able to apply to the business world. So, nature has been refining its strategies and organisms in nature for millions and millions of years, and ecosystems have (you know) pure unfettered, unlimited competition—and that’s close to what we face in the business world.
So I think we can think about these ecosystems—and you think about a forest, for example—there are trees, there are vines, there are grasses, there are bugs, there are bacteria. And all of these organisms, all of these plants are competing for sunlight, for water, and for nutrients. And so, that’s something that’s much closer to what we face in the business world, and within that ecosystem, each plant, each tree, each bug, each grass specializes in some way so that it can dominate a niche in that ecosystem.
So, the great strategy principle for nature here is specialization, and specialization is a really important concept— and we’ll come back to that. So, now we take these strategy ideas, or models, and try to apply them to the business world.
In most businesses there really isn’t a well-understood or a well-articulated strategy. We work with clients all over North America. And when you go in and talk to people and ask them what’s their strategy, what you typically get are blank stares, or, “Well, you know, that’s something higher up in the organization”; “I don’t really know what the strategy is.” But everyone within an organization ought to know what the strategy is.
So, as we start thinking about business strategy, let’s take these two concepts that we just talked about—the idea of concentration from the world of the military and the idea of specialization that we get from nature—and we’re gonna see how we might apply those in a business context. And by the way, many books and videos on strategy say there are four strategies or six strategies. There are an unlimited number of strategies. We’re only constrained by our imagination.
So, the basics of strategy and business, the first is, What markets do we attack? and What market segments do we go after? You know, What needs, or issues or problems are we trying to solve? So, this who to attack, we bring in the idea of concentration. Where do we concentrate our resources? Where do we concentrate and focus our guns? So, that’s a core element of strategy. And then, with what products and services or combination of products and services, do we attack those markets?
And as a part of that product, service discussion, or decision tree, How do we differentiate our products and our services from competitors? And so, differentiation is very similar to the concept of specialization that’s the core strategy in nature. So, how do we specialize, or differentiate, our products and services so that we can achieve dominance or concentrated effort against the markets or market segments that we want to attack?
And so, for example, we can think about how to differentiate or how to specialize our products and services as tangible. If we, we may say we’re gonna have the stickiest peanut butter ever. Okay, that’s a tangible product benefit or specialization that we can build into the product. But we can also have intangible specialization and differentiation. And this involves positioning and messaging and the symbol and symbolism that we attach to our company or our brands—the personality that we try to project, the emotions, the associations.
For example, Southwest Airlines: an intangible element of their strategy is fun—and it’s something that they do exceedingly well—but it affects many other things within the company that they have to change and do. They have to hire the right people, they have to train them so that they can express that fun. They have to create a political climate within the company that permits people to be that free.
So, there are many ways to formulate strategy, both tangible and intangible, to create specialization or differentiation for your products and services. As we bring strategy over and apply it in the corporate world—and we’re thinking primarily here of large corporations but of course, the concepts apply to any business entity or nonprofit or governmental entity, for that matter. So, there’s the corporate level, the overarching umbrella, there needs to be strategy at the corporate level. If it’s large company, it probably has major divisions or business units, and so, there needs to be a strategy for each division or business unit, and this should be compatible with and reinforce the corporate strategy. And then, within each division, there should be a brand, you know, each division typically will have multiple brands so there should be a brand strategy for each brand in each division. And then below that, there are all these support functions for the company and each of those needs a strategy as well. What’s the manufacturing strategy? What’s the IT strategy? The human resource strategy? And research and development? And legal? And purchasing? And so on.
And how do you, how does a company get to strategy? Well, you know, analyzing the markets, and so, marketing research is really important, it’s a very valuable component in getting to an optimal strategy. But formulating strategy is not just about research and data and analytics, it’s also about vision; what do you want your brand, or your company to be? What do you want it to stand for? How do you envision it performing ten years from now? Or 20 years from now? And that’s the kind of time horizon that we need to be thinking about when we think about strategy.
So, strategic vision is a really important part of strategy. And then a final word on execution: great execution can take a good strategy and enrich it and embellish it and bring it to life, so there’s a lot of research and fine-tuning and tweaking that can be done in the execution of strategy to make the strategy more effective. So to sum things up, strategy is the organizing blueprint for how a business is going to operate, and how it’s going to concentrate its resources, how it’s going to specialize and differentiate its products and services. And within this overarching strategy, everything must fit and be compatible and reinforce the overarching strategy.
Thank you.
Presenter
Jerry W. Thomas
Chief Executive Officer
Jerry is deeply involved in the firm’s development of new research methods and techniques and in the design of new software systems. He plays a key role in the development of Decision Analyst’s proprietary research services and related mathematical models.
Jerry describes himself as a student of marketing strategy, new product development, mathematical modeling, business survival, and economic growth. In his spare time, he likes to work on his farm in East Texas where he grows grapes, apples, pears, pecans, plums, and peaches; a forest of native trees, grasses, and insects; and wild plants of many types.
He graduated from the University of Texas at Arlington, earned his MBA at the University of Texas at Austin, and studied graduate economics at SMU.
