Why Strategy Is a Building Block of Your Business’s DNA
Updated: Sep 1, 2021
Strategy is a word with life and an ecosystem of its own.
We all want to be strategic and involved in strategy.
Yet, we don’t even have a unified way of defining it.
You ask a hundred people the question,
“What is strategy?”
and you get a hundred different answers.
There isn’t one correct answer — it’s a bit like asking someone, “How much milk do you want in your tall latte?”
Take a second and go deeper into the meaning of this eight-letter word. You’ll find yourself with something that has so much pride and ego associated with it.
Synergy, pivot, SWOT, ideation… they’re all pre-requisite business jargons for senior management claiming to be strategic thinkers.
Add strategic to another buzzword like product, brand, or planning, and you’ll be turning heads in the boardroom.
As in turning them off into snooze mode from all the monotonous jargon fest.
Put some meaning back into the word
We’ve become a knowledge economy. Everyone just wants to think and decide — they are skills considered being supreme to effort and execution.
The world’s changed.
First, we raised animals and tended the land. We worked in factories, and now we’re living off the internet economy. The most “desirable” jobs where all talent is going are knowledge workers.
If you can think, analyze, and decide, you’re a super currency.
But are you really strategic, even if you can say you’re all of those?
What is strategy?
“A business strategy is a set of guiding principles that, when communicated and adopted in the organization, generates a desired pattern of decision making.”*
How’s that again? That’s… pretty esoteric.
B2B talk at its best.
What does that even mean for what you’re doing today, in practice?
Plus, if strategy is a set of “guiding principles” — aren’t those the most critical elements of the strategy itself?
So who comes up with those?
The CEO? COO? Some strategy person?
Or is it a collective effort headed by one individual?
What’s the timeframe? Short-term? Long-term? Quarterly? Annually? Every two years? Five?
We’re all latching onto a word that’s never even been defined properly
… until recently.
But there’s hope.
7 Powers, by Hamilton Helmer, is an alternative Bible for business strategy.
Helmer’s approach has been central for CEOs at Adobe, Stripe, Netflix, Spotify, Coursera for decision making.
It would seem strategy is “your plan as a leader to maintain power in your market,” where power is a “company’s ability to experience persistent profits.”
Nobody’s mentioned persistence before.
Why’s that suddenly important?
As most businesses get bigger and more profitable in a competitive market, they end up attracting other companies wanting to get a share of the profit your business is getting.
Netflix has gone from physical DVD rental to the streaming business. Because there’s profit to extract, they attracted competition along the way. They’ll keep doing that until there’s no more profit in that space.
Your power becomes your plan for maintaining profit over the long term in the face of competition while everyone’s trying to take your position in the market.
So 1990s. Yawn.
No, really. Intel.
It’s old, yes, but still so influential in technology.
Their invention and the proliferation of the microprocessor changed the world and made the internet what it is today.
Google, Facebook, Netflix, Uber, and the-list-goes-on companies wouldn’t even be here if it wasn’t for the tech Intel developed back in the days.
Robert Noyce and Gordon Moore (the one and only Moore’s law Gordon Moore) worked at a tech company in the late 60s. Not going to bore you with the details. They decided to do something on their own. Integrated Electronics (Intel) was born.
They built computer memory — SRAM and DRAM. All very innovative and profitable. Everyone wanted to work there at the best manufacturing facilities.
Memory was their thing, and memory made them the best tech company in the world.
But then, in the mid-80s, Japanese government-funded competitors started building more reliable memory technology at lower costs. Intel, the pioneer of the technology, struggled to compete and lost market share.
Intel resisted change because they thought of themselves as a memory company. Still, Andy Grove, one of its first employees, got out of the memory business because, despite all their efforts to niche down and invent new types of memory, they simply couldn’t maintain earning a premium for their product.
Just as they were being priced out of their own memory market, micro-processors were getting started and taking off.
With Andy Grove’s leadership, they got out of memory technology. They went into microprocessors, setting the way to become one of the most successful tech companies in the world, worth hundreds of billions of dollars.
$278* billion as of 2021, to be exact.
That one decision to focus on microprocessors over memory was their power and meant profitability for a long period.
According to Holmer, that’s a strategic genius.
It’s also vastly different from the original B2B blur about… um… what was it again…?
… something about a “set of guiding principles” that supposedly “generate a desired pattern of decision making.”
Wonder what Andy Grove would think of that.