Entrepreneurial strategy is about taking risks to pursue opportunity beyond resources currently controlled. Business strategy is more about not doing so, and limiting business actions so as not to lose a competitive position to a rival. For example, an entrepreneurial rival.
Reflecting on the word strategy, it comes from ancient greek stratgi, meaning "office of a general". Also stratos means army. A general has an army of resources to organise, even to recruit, train, operate and pay for. The army has to defend the country from enemies. In a military sense, strategy is distinct from tactics. A strategy is a longer term positioning of all a nation's forces to ensure security or victory. Whereas tactics deal with the use and deployment of troops in actual combat. A military environment contains strategic points, that is places or regions which afford an opportunity for their possessor to gain an advantage over his opponent. A mountain pass, a junction of rivers or roads, a fortress, the use of spies, outposts and scouts. Picture a strategic line joining strategic points. You have a potential advantage, a strategic vision, if you like.
In business, hundreds of activities are required to create, produce, sell, and deliver products or services. Each action is a source of cost and differentiation. Activities, then, are the basic units of competitive advantage. However, like the difference between military strategy and tactics, and as Porter says strategy is not simply operational effectiveness. Rather establishing a "strategic line" of selected actions creates a competitive position in an industry. The competitive advantage builds from the way each action either fits with others, or does not, forcing trade-offs between them. The essence of strategy is then choosing which actions not to do. It's the whole set of selected activities that makes up the competitive position as reducing cost or increasing differentiation. If there were no trade offs then a company could not achieve a sustainable advantage because everyone would copy each other (me too). Whereas the more a company's position rests on actions based on this strategic fit, this strategic line, the more difficult it is for rivals to untangle activities from outside the company, and therefore the harder it is to imitate, and the more sustainable the advantage.
Strategy is the creation of a unique and valuable position from the selection of actions. With a time horizon of a decade or more.
Some other things to think about may be:
- Industry attractiveness over the long term. Does the industry enable high prices to be charged for quality products or services?
- Industry size and your market share. What's the industry size? Can you achieve market share?
- Ideation and creativity. Where's the industry going?
- Gap analysis of actions required to move from current state to target state.
- Recruiting the best people and assigning different actions to different people. Who does what and why?
- Theory X or Theory Y management. How to manage people best?
- Selecting a fit of actions and making trade offs to create a superior value chain or business model. Basically strategic thinking.
Then within the industry:
- It can't be competition only for price. There are other competitive forces besides pricing.
- Try and work out supplier, customer and competitor actions. See where are the strategic lines. What's the market share of each competitor?
- The meshing and integration of each value chain of actions creates a value system. ie each supplier, customer and competitor has a value chain and the value system is the way the whole industry operates. What strategic points in the value system are up for grabs?
- Experimentation. Encouraging innovation in order to inspire and retain the best staff.
- Experimenting with adjacent activities from core activities to spur growth. However, beware that growth causes incompatible actions and more trade-offs.
- In a bigger company, putting old ideas from one department to work in other departments.
- Articulating vision, and articulating stories which inspire and direct value actions. This is to motivate staff, and customers, and shareholders.
- Measuring performance using metrics and scorecards. Each activity has to be measured.
- Investigating customer groups and determining segmentation criteria. Allows you to tailor your product and charge a higher price for it.
- Trading-off market segments and business processes to meet a focussed target. The core of strategy as limiting actions towards a target, and prioritising.
- Ordering a competitive fit of resources. Action adds value.
Other ideas are:
- Segmenting up the market according to separate business processes (value activities).
- Segmenting up the market according to competitive positions (value chains).
- Designing and matching new actions to a target market.
- Finance and funding actions.
- Operations and marketing actions.
- Maintaining an ability to monitor the environment for opportunities and threats.
- Maintaining strategic relationships with resource owners and providers.
- Managing the long run direction of the firms activities (visioning).
- Using the vision to create growth stages and goals for the organisation.
- Creating a culture to handle success, inspire teamwork and settle conflicts. Otherwise a culture will create itself.
- Delegating profit centres to staff teams to encourage motivation.
- Considering change for the organisation.
Further concepts of strategic thinking:
- Long term sustainable superior economic performance.
- Relationship between functional disciplines.
- Coordinate and fit relationship consistently.
- Make the firm unique and distinctive.
- The nature of strategy is in industry context, business level strategy, corporate level strategy, national and international contexts, corporate governance, change and rivalry.
- How do firms decide to compete?
- What makes a firm successful?
- What is the nature and structure of the industry?
- What is a good or bad industry or firm?
- What is the nature and structure of a firm?
- What is the nature of competition?
- How do you make trade-offs or a choice of actions?