Executive Summary on Business Strategy
by Jeffrey Nielsen

The goal of business strategy is to gain sustainable competitive advantage in order to be able to achieve the organization's purpose and objectives. Business strategy is most effectively broken up into three core components: business horizon, business focus, and business performance.

Business Horizon

Strategic direction is decided by a thoughtful eye on the business horizon. The foundation of competitive strategy is matching up an organization's strategic capabilities with the present and future needs and wants of both current and hoped for customers. The fit between what an organization does best - its strategic capabilities - with what customers both need and want determines the strategic portfolio of products and services the organization should deliver. This clarifies the business horizon in the sense that it lets the organization establish in which market segments it wants to acquire superiority in the near future. The key to establishing this strategic direction is to answer the following four questions:

  1. What is your competitive advantage in markets that gives you a sustainable edge over rivals? Or (1) What do you do better than any rival, (2) is hard to imitate, and (3) doing it adds value to customers? (This question reveals strategic capabilities)
  2. Who are your customers (include hoped for customers) and what are their current and future needs? (Michael Porter calls this "Needs-based strategic positioning")
  3. Which products and services will you develop and support/which not? (Michael Porter calls this "Variety-based strategic positioning")
  4. How will you contact and deliver to your customers? (Michael Porter calls this "Access-based strategic positioning")

Formation of a strategy team or council is suggested to keep reviewing these questions and to make needed adjustments in a fast-paced marketplace.

Business Focus

After determining strategic direction, an organization must focus its energy and engage rivals in the "intelligent clash of wills" in competing for customers. Marshalling the "troops" to meet and defeat competitors while creating value for customers is referred to as tactics. It is bringing the organization's strategic vision into clear focus in the present. The Chinese strategist, Sun Tzu, gives three strategic guidelines for tactical operations when engaging competitors: first, disrupt competitor's strategy; second, upset competitor's alliances; and third and last, attack competitor directly. In doing this, it is helpful to remember the four keys to tactics given by the Prussian strategist, Carl von Clausewitz:

  1. Surprise - do the unexpected
  2. Compete on advantageous terrain - always pit your strength against competitor's weakness and only compete where you have absolute or relative superiority
  3. Attack from many sides - avoid tunnel vision or either/or thinking
  4. Identify the "centers of gravity" - remember the Pareto Principle (80/20)

There are four basic tactical maneuvers to keep in mind in the direct attack of competitors. Note they are all explained in military terms, their analogy to business strategy is best worked out for each specific case.

  1. Penetration, including "Blitzkrieg" is a main attack that attempts to pierce the enemy line while secondary attacks up and down the enemy line prevent the freeing of the enemy reserves.
  2. Envelopment is a maneuver in which a secondary attack attempts to hold the enemy's center while one (single envelopment) or both flanks (double envelopment) of the enemy are attacked or overlapped in a push to the enemy's rear in order to threaten the enemy's communications and line of retreat. This forces the enemy to fight in several directions and possibly be destroyed in position.
  3. Defensive/offensive is a maneuver that attacks from a strong defensive position after the attacking enemy has been sapped in strength.
  4. Turning maneuvers are indirect approaches that attempt to swing wide around an enemy's flank to so threaten an enemy's supply and communication lines that the enemy is forced to abandon a strong position or be cut off and encircled.

It is recommended that a tactical team or council be formed to monitor tactics and make needed adjustments in the "friction and fog" of competition and to discuss the best ways to engage both customers and competitors.

Business Performance

Operations is where the rubber meets the road, it's actually doing it. However, in competition and interaction with others, nothing ever goes as planned! The best strategy and tactical plans break down, it's inevitable. Clausewitz, the Prussian strategist, blamed this on the "fog and friction" of the intelligent clash of wills. So, in the actual performance of an organization's strategic and tactical plans, expect the unexpected. The key to operational effectiveness and success is constant feedback from the frontlines. This requires that the organization place a high value on open and honest communication. Everyone in the organization needs to have permission and opportunity to talk to anyone else in the organization.

It is recommended that an operations council or team be formed to monitor and correct any problems in communication within the organization and to constantly ask how to improve operations and make them more efficient. It must be on guard for "High-Level Dumb" - a condition characterized by a large and growing gap between the beliefs of those at the top of the organization and the reality in the trenches.

Conclusion

For any strategy to be successful in the long-run, it must be aligned with the basic desires and values of all individuals who have a stake in the life of the organization. These are not only customers and equity owners, but all employees, suppliers, and vendors as well. Luckily, we all share the same basic desires and values; namely, we desire freedom and economic security and we all value self-worth, connection to something larger than ourselves, and contribution to others. For a more in depth presentation of these core components of strategy, and how they apply to your organization, contact Jeffrey Nielsen at icdmethod@netscape.net.


Jeffrey Nielsen is the founder of Intellectual Capital Development. Jeff is passionate about working with organizations to develop robust strategic business models that help them be creative, solve problems, and optimally adapt to their environment to create success. He specializes in strategic consulting and training so that all individuals in an organization act strategically, acquire knowledge-based skills that will not become obsolete, and begin to think like owners. To this end, he has created strategy, training, and organizational design models that give organizations the ability to transform challenges and crises in the environment for their gain and growth.

Jeff began his consulting and training career working with the Franklin Covey Company where he presented both the Seven Habits of Highly Effective People and the First Things First Time Management workshops. He also taught interpersonal communication workshops for special clients of the former Covey Leadership Center as well as overviews of Principle Centered Leadership. In this capacity Jeff has traveled internationally consulting with many of the Fortune 100 companies. He has also worked extensively with health care companies, computer and information technology companies and has frequently visited Washington D.C. to work with a variety of groups within the Federal Government. Jeff is also visiting lecturer at Brigham Young University and formerly at Utah Valley State College. He can be reached at icdmethod@netscape.net or mythofleadership@hotmail.com .

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Copyright 2002 by Jeffrey Nielsen. All rights reserved.

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