Of course, every company says it has a strategy. In fact, I am pretty sure most of them have a document labelled "Our Strategy", or at least a PowerPoint presentation under that name. But, in fact, not many companies really have one. Here are some of the most common mistakes – or poor excuses for a strategy.
Goals are not strategy
"We want to be number one or two in the market"; I am pretty sure you have heard that one before. Well, it is not a strategy; it is a goal. And there is nothing wrong with having an aspiring goal, but strategy is how you endeavour to accomplish it.
Strategy involves making choices; genuine choices. Of course, being number one or two in the market is not really a genuine choice, which requires trade-offs and giving up something that could have worked as well. Nobody would choose to be number 32. In fact, a Silicon Valley chief executive wrote to me saying: "It is like stating ‘My strategy to win the 400 metres at the Olympics is by running faster than anyone else.’"
A good goal, but it does not tell you anything about how you intend to achieve it. Your route toward the goal – that is strategy.
Strategy is not what you were doing anyway
Most companies, when writing up their strategy, look for some formulation that fits in all the things that they were doing anyway.
There is nothing wrong with that, if what you are doing happens to constitute a consistent set of coherent choices – that is, a strategy. But, more often than not, it leads to some amorphous statement that is designed with the sole purpose of not giving anything up, no matter how disjointed the current set of activities.
The worst example of this I have seen was the supermarket conglomerate Ahold, which stated its strategy was to be "multi-format, multi-local, multichannel". It did not exclude anything. Not coincidentally, this was shortly before it collapsed.
Strategy is not secret
Some companies really have formulated a wonderful strategy – a coherent set of genuine choices about their value proposition and the precise set of customers that they are going to serve; but when I ask middle managers lower in the organisation, they are unable to tell me what it is. So, I am sorry, but they do not have one either.
A strategy is only really strategy if it alters the behaviour of the people in your organisation. If nobody knows about it, it cannot influence their actions and decisions. In which case, it may be an impressive PowerPoint presentation, but a strategy it is not.
Professor Costas Markides, of London Business School, put it well: "Strategy is about making choices; about ‘who, what, how’: who is our chosen customer; what are we going to sell; and how are we going to deliver that value proposition." It should lead to a coherent set of mutually reinforcing choices.
For example, Nespresso’s strategy is to sell an easy-to-use system for consuming high-quality espresso at home, sold directly to individuals via its Nespresso Club. It involves a clear set of choices that fit together. The litmus test for any strategy is whether what you are not doing is meaningful and could be profitable for someone else (for example, serving offices, or filter coffee, or selling coffee in supermarkets).
If someone else is making money on what you choose not to do, it just might be a sign that you have a good strategy.
Freek Vermeulen is associate professor of strategy and entrepreneurship, London Business School