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Exploring the multiple levels necessary in strategic thinking

First choose your approach to strategy, then choose your strategy

In the world of strategic thinking and models there are many ways to think about strategy: but there are also several levels.  In this post I want to explore three levels or dimensions.

Let me take a simple example.  Some people are quite keen on the Michael Porter model of three ‘Generic Strategies’, in a two by two matrix:  One dimension of the matrix is about choosing a type of Competitive Advantage, either cost leadership or Differentiation; the other dimension of the matrix is about choosing the Competitive Scope, either narrow or broad.  This is about choosing a position in a market. (Porter, Competitive Advantage 1985)

Porter’s three Generic strategies, is one of a number is positioning models.  For instance, Treacy & Wiersema’s “Discipline of Market Leaders” which uses “Product Leadership, Operational Excellence & Customer Intimacy”.  Again these are three potential positions.  In Kim and Mauborgne’s  ‘Blue Ocean Strategy’ (2005) that distinct competitive position is defined as a distinct capability that the customer values, separate from any the competition offer.

An even more generic approach is embodied in Ries and Trout’s ‘Positioning: the battle for your mind’ (2001) where position is defined as the position the customers have in their mind (no matter what you might choose as your position).  This is an important distinction – it matters not how you think you are positioned  – what matters is what the customers think your position is.

All these approaches see strategy as a position in a market, or inside a customer’s head.  A position that leads to economic advantage if the nature of the market, customers and competition mean that they are defendable and sustainable.

Strategy as position: an analytical process

Henry Mintzberg (‘Strategy Safari’ 1998) describes Porter’s approach as an example of a positioning matrix, that defines strategic choice as a question of position.  There are other positioning models. Treacy & Wiersema, provide three potential positions for Market Leaders.  Both are making explicit, a choice about where the management team believe that the organisation should play.

Interestingly, Mintzberg is classing Porter’s approach in the school of positioning strategies.  Mintzberg sees Porter’s Generic Strategies as just one of a potential set of ways to think about positioning.

Let us move up a level.  In Mintberg’s view, Positioning is just one way of looking at a class of strategic thinking.  It is one school of strategy.  Strategy as Position, and the Positioning School of Strategy, includes Strategy as Perspective.  They are both about strategy as a process of analysis.  Mintzberg identifies other Schools of Strategy: The Design School of Strategy (strategy as a process of conception), The Planning School of Strategy (Strategy formulation as a formal process), Strategy as power (A process of negotiation), The environmental school (Strategy as a reactive process).  In total Mintzberg identifies ten distinct schools, and processes, of strategy.

However, these positioning models, are not yet ‘the strategy’.  These are about ‘where to play’, not yet ‘how to play’.  The clue to their role is in the phrase that Porter uses to describe these strategies: He calls them “Generic strategies”. These are not specific strategies, but generic strategies: holders for a class of strategies that might be executed within this chosen position.   This is really important.

If the process of analysis of the structure of the industry suggests that there is a possibility of sustainable competitive advantage, and therefore above average profits, the management team still have to choose how to achieve and defend that position.  So there is still the question of “What specifically is our strategy?”, rather than simply, “Where do we believe our strategic position should be?”.

A meaningful strategy: Enter Richard Rumelt

Now let us move down a level and make the strategy tangible, meaningful and specific.  Both Porter and Treacy & Wiersema provide in their books, tools and techniques to make their specific strategy explicit.  They are useful, but for me they are not enough.

This is where I find my clients appreciate that we bring an aspect of Richard Rumelt’s thinking and approach to our strategy engagements.  Richard Rumelt defines a strategy as needing three pieces to be in any way a complete and meaningful strategy:

  1. A clear understanding of the situation and a diagnosis, or framing, of that situation.
  2. A Guiding Policy (a strategy) to address that situation and diagnosis, and
  3. Coherent Actions to implement and learn from that strategy.

At Excitant we find that expanding Rumelt’s three stages into six stages really helps clients unpick their thinking at this stage, but for this discussion let us keep it simple.   So Rumelt is saying that you still need a clear Guiding Policy with which to implement and achieve that position, and coherent focused actions to implement that strategy (Strategy does not exist without action).  In other words, the positioning piece is a diagnosis of the market situation.  It is not a strategy (noy yet anyway).   Despite the apparent statement of strategic intent, the positioning statement still leaves people with a wide degree of ambiguity and complexity.

Removing the ambiguity of high level strategy positioning

It is vital to remove this ambiguity in the strategy, especially when it comes to cascading and explaining the strategy in the organisation.  Otherwise people will hear it, but they won’t get it and execute it.  Simply saying, “We will position ourselves as narrow differentiators in our market” does not help anyone.  This is where the Guilding Policy comes in. is what helps people in the organisation understand what it is that they actually need to do to make decisions within that framework.    It is the Guiding Policy that create the position.  For instance “We will create a unique and different supply chain that provides a defendable cost position in our market”, or “Our IP in smart phone security” will allow us to charge premium prices or differentiate ourselves, and we will defend and continue to develop that IP”.  Both of these are Guiding Policies that simplify complexity, remove ambiguity, and direct actions and resources.

This is really important in understanding where you have a strategy or not.  It is important in the process of developing a strategy and strategic thinking.  By choosing to think and analyse within the Porter positioning framework you are implicitly diagnosing the situation as one where the industry structure has potential long-term opportunities for above average performance or differentiation.  However, you are yet to actually choose a policy or specific strategy to address the space and opportunity you have seen in a differentiate and sustainable way.

Implications for diagnosis of your situation

This approach of looking at the strategy at two levels, what type of strategy and what specific strategy, has implications for situation diagnosis.  In Rumelt’s first step, and on our strategy tablet and decision process framework, there is an explicit “framing’ or diagnosis stage.   Just making this frame with which you see the problem explicit, is a big step forward in choosing a strategy or making a decision.

However there is a higher level piece.  What is the lens through which the framing and diagnosis is being made?  If you are strongly in the positioning school, or a particular class of the positioning school, then the frame and diagnosis will be coloured by that lens.  If you think it is a question of differentiation or cost leadership, those are what you look at.   One challenge at this stage is to question the lens and provide or notice alternatives that could be true or useful.  For instance, positioning in the mind of the customer, and even particular customer segments, is far more subtle than that of Porter’s generic strategies for positioning in a market.  The lens of positioning, or not, will determine how you diagnose the strategy situation and how you choose a specific strategy .

The third level of strategic choice: How we manage our strategy

So your positioning strategy needs a defendable implementation strategy.   Choosing your position is not enough.  You don’t want to choose a strategy and then find out that it has become out of date.  So there is a third choice associated with the strategy: How you will manage it.

So far all the conversation has been about the content of the strategy: a) Should we think of a positioning strategy and which position is appropriate? b) How should we achieve a defendable position in that market?

There is quite a different way of looking at this strategy: one about how we choose to manage the strategy and learn from it.

Many organisations have adopted and use an annual strategy process.  Yet stuff happens through the year, not just in the month preceding an annual strategy away-day.  So managing the strategy is a continuous process.  I am not talking about managing the implementation – of course that is continuous.  I am talking about

  1. Reviewing the strategy to see if it was the right one and whether the strategic choices are working:  Was it the right strategy?
  2. Reviewing the external world to check whether the assumptions of existing conditions have changed: Is the strategy still appropriate?
  3. Reviewing the subtle positioning: How are we defending and sustaining this strategy, keeping it fresh?

These are quite different questions to “Is our strategy being implemented correctly?”.

These three questions about the strategic management process, how we manage, maintain and refresh our strategy, go to the heart of our strategic learning approach.  Strategy is no longer a deliberate deterministic annual event.  Rather strategy is a process of continuous learning, refinement and awareness.  Organisations, and their Management teams, also have choices about the management systems they are choosing and how they manage their strategy, as well as choosing their approach to strategic thinking and particular strategies to adopt.

It is awareness of these multiple levels, or dimensions of strategy, and strategy management, that helps us to help our clients to unpick the dilemmas they face and make good conscious choices about their strategy and how to manage it.  You might summarise these as “Where to play? How to play? And how to manage?”.

The strategy conversation and strategy mapping

To us all three of these aspects of strategic thinking are interrelated.  They are aspects of quality of thinking, and the quality of conversation, that go into the strategy and its execution.

We often enter an engagement with a conversation about mapping the strategy, using our strategy mapping approach.  Our understanding of the types of strategy and levels of strategy conversations means we often back track a little with the client to explore where they are coming from, which schools of strategy they are using and how they are thinking about their strategy.  Of course the specific strategy, especially where it is about market positioning is captured on the strategy map in the relationship between the organisation and its customers, and the proposition and http://www.excitant.co.uk/strategy-maps-are-about-cause-and-effect/ that is created.  It is also in the business model that we work through with them, (business models that today are often quite innovative & different), and that underpins the strategy map.   The mind of the customer is captured in the customer perspective.  Our strategic learning model helps to track and manage the strategic conversations and how the strategy is being reviewed and managed.

If you are want to improve your choices about how to develop, map and manage your strategy, get in touch.

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