Strategy: A Persistent Dilemma
Strategy – is it really a figment of someone's imagination? One would hardly come to that conclusion judging by the popularity of the word in the business media. Scarcely any business word is invoked more frequently and with greater fervor. Business leaders take great pride in referring to “their strategy.” A simple search for the word “strategy” in the Financial Times online (FT.com) for the 12-month period of 2014 results in 6,506 hits. The term is being used; in fact, it is being used a lot.
Yet many business leaders have difficulty articulating their strategy. Ask a business leader to explain their organization's strategy in simple terms and how it sets them apart from their competitors. More often than not, this simple question elicits an evasive response. Ignorance of the firm's strategy extends down through the ranks; recent research reports that only 55% of middle managers surveyed can name even one of their firm's top five strategic priorities.1 Simply put, this means that when managers are given the task of explaining strategy to their subordinates, almost half fail to get it right. It doesn't end there; not only are strategic objectives poorly understood, they often appear disconnected from the firm's overall business strategy. The sobering reality is that most business leaders cannot articulate their organization's strategy in a simple, compelling way.
Many boards fail as well in providing appropriate strategic guidance to their companies. A recent survey of non-executive directors indicated that merely 34% of those polled believed that boards on which they served fully understood their companies' strategies. Just 22% were of the opinion that their boards really understood how their firms created value and only 16% affirmed that the boards on which they served had a good understanding of the dynamics of their firms' industries.2
This is worrisome when considering that these are the people who are responsible for the strategic course of their company. Although business leaders often see themselves as the architects of their organization's strategy, many rather quickly lose sight of the wood for the trees when it comes to strategy. Many are quickly baffled, if not by the jargon then by not knowing how to approach strategy in the first place. Surely, this cannot be for lack of “cutting edge” management thinking. Time and again, authors of best-selling business books, their publishers, and the media would have us believe that the holy grail of strategy – the strategy theory to put all previous ones to rest – has finally been found. And indeed, a number of useful advances in strategic thinking have been made over the years. The fundamental problems facing managers today, however, are related to putting that strategy to work in the field of practice.
Yet, even strategy scholars are still grappling with the notion of strategy. As a concept, strategy still suffers from a lack of precision in its definition. A number of significant gaps in the strategic management literature have left the discipline with a high degree of ambiguity, despite its popularity as a scholarly field of study. Rondo-Pupo and Guerras-Martin3 in their recent study note the following reasons for this:
- A paucity of knowledge regarding the evolution of the definition of the evolution of the strategy concept in the field of strategic management;
- A lack of consensus among scholars leading to significant diversity and ambiguity in definitions of the strategy concept;
- Ambiguity in terms of the constituent elements of the strategy concept;
- A lack of analysis and understanding regarding the structural evolution of the strategy concept; and
- A lack of sufficient evidence supporting the understanding of the evolution of the strategy concept, and its influence on the field of strategic management.
Opposing views, on the other hand, have argued for the need to retain an element of conceptual diversity regarding the definition of the strategy concept. For example, Mintzberg4 has argued that “…the field of strategic management cannot afford to rely on a single definition of strategy…explicit recognition of multiple definitions can help practitioners and researchers alike to maneuver through this difficult field….”
And so, the debate continues.
What then is “Strategy”?
In view of the proliferation of management publishing on the topic, it would seem reasonable to assume that we might at least begin with a clear and consistent definition of the notion of strategy. As has been argued in the previous section, however, this is not the case. Strategy has been defined in many different ways and it is still evolving as a concept. Early definitions of business strategy strongly imply deliberate planning and action, such as Chandler's (1962) classic definition:
The determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.5
A more recent definition of strategy proposed by Rondo-Pupo and Guerras-Martin3 introduces the notion of responsiveness on the part of the firm to developments in its environment:
…the dynamics of the firm's relation with its environment for which the necessary actions are taken to achieve its goals and/or to increase performance by means of the rational use of resources.
This definition, while an improvement on earlier definitions, still lacks clarity regarding purpose of the goals. The rational use of the firm's resources in response to opportunities and/or threats in its environment is no doubt important, but no end in itself. Rather, the purpose of any activity on the part of the firm is to fulfill its obligations to its stakeholders through the creation, delivery, and capture of value. Indeed, we argue in this book that the firm's very purpose for being revolves around its value obligations to its stakeholders. The form of that value created and delivered may range from explicit, readily measurable expressions of value to highly intangible, and difficult to measure forms of value. Indeed, the latter form of value is becoming increasingly important; many value offerings today encompass both tangible and intangible components. As a case in point, consider a typical purchase transaction across the counter at a Starbucks coffee shop: no doubt the actual cup of coffee served over the counter has attributes of “measurable” value, the least of which would be the price paid for the beverage. However, according to Starbucks' CEO Howard Schultz the overall “experience” perceived by the customer in the course of the transaction is of primary importance. Attributes of that “experience” encompass a complex amalgamation of numerous tangible and intangible attributes of value delivery associated with the Starbucks visit. These might include the friendliness of the barista preparing and serving the coffee across the counter, the ambience of the store setting, and the impression of cleanliness of the tables and chairs. In Schultz's view these intangible factors, more than the actual cup of coffee, reflect the real value delivered by Starbucks.
Centrality of the “Value” Notion in Strategy
The notion of value is indeed a central theme in strategy. In the broadest sense of the word, firms compete on the basis of value. This may relate to the value intrinsic to the firm's basis of competitiveness (such as might be reflected in the uniqueness and superiority of their resource bas...
