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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Definition of Business Strategy (aka Competitive Strategy)
🔥 One of the most important aspects to understand about strategy in an organizational sense is that it comes in two flavors: business and corporate. In this short post, I will define each of the dimensions or elements of business strategy. The key aspect of the phrase 'business strategy' (or, in Michael Porter's characterization, 'competitive strategy') is that it applies to an undiversified business. Think of a locally owned restaurant, furniture store, medical practice, or dry cleaner. Strategy in this context can be defined as "a unique system of complementary activities that delivers superior value to customers and compelling value to capital-providers." Let's break this down into its constituent parts.
- Unique system - one-of-a-kind; there's nothing else exactly like it.
- Complementary activities - activities that mesh with and reinforce one another. A good example is the pieces in a well-made jigsaw puzzle. They are truly unique because they fit together only one way and once they're together, they stay together unless they're separated manually.
- Superior value - monetary worth that customers perceive to be better than the alternatives. In this context, even expensive items--diamonds, cars, paintings, etc.--are deemed to have superior value because buyers perceive (key word) that they are getting more than they're paying for.
- Customers - buyers of a good or service. They can also be clients, students, patients, patrons, and the like.
- Compelling value - this is a relative phrase. Think of it in terms of 'bang for the buck' (as we would say in the United States). In this context, even if something costs a lot of money, it can provide 'compelling value' when it's compared to alternatives.
- Capital-providers - there are two groups of these: investors (owners of equity in a company) and lenders (banks and types of lenders that must be repaid with interest).
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Jaap de Jonge
Editor, Netherlands
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Definition of Business Strategy Thank you for starting this important topic. Your definition is very good. However, I am missing a key element.
That element is: "(sustainable) competitive advantage". After all, to be successful, a firm needs to gain a competitive advantage over rival companies operating in the same business area (market). And a business strategy is aimed at achieving that.
So I suggest to update your definition as follows:
Strategy can be defined as "a unique system of complementary activities and resources that delivers superior value to customers, compelling value to capital-providers, and a (sustainable) competitive advantage over rival companies operating in the same business area (market)."
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Your Concern About 'Sustainable' @Jaap de Jonge: Jaap, the first element of the definition is UNIQUE. I believe that fixes any problems having to do with 'sustainable.' After all, if it's unique, why WOULDN'T it be 'sustainable'?
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Trilok Sindhwani
Consultant, India
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Unique and Sustaintainability are Independent NOT Dependent I think, every situation is unique but every strategy is NOT sustainable. In a fast changing business environment every management-move has a life-span. The life-span of a strategy is defined by its objective and environment.
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Jaap de Jonge
Editor, Netherlands
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A Business Strategy also Has to Provide a Competitive Advantage My main point was in fact not that in the definition of business strategy the word "sustainable" was missing. Because indeed as Trilok says that is often very difficult - if not impossible - to achieve. That is why I put sustainable between brackets.
However really important is that any business strategy should achieve or at least aim for a competitive advantage. If a business strategy does everything else in the original definition by Warren, but does not aim at a competitive advantage, then for me it is not a strategy. So that's why we should improve the definition by adding ", and a (sustainable) competitive advantage over rival companies operating in the same business area (market)".
One should make everything as simple as possible, but not simpler (Einstein).
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Every Strategy is not Sustainable @Trilok Sindhwani: I agree with Trilok and with Jaap: no business strategy is sustainable indefinitely. Neither competitors nor economic evolution will permit that.
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Reply to Trilok Sindhwani @Trilok Sindhwani: Thank you for pushing back. As I said in my initial reply to you, "I agree." You are correct, sir. I didn't think long enough about the issue of sustainability before I made that post. Let me add a few more thoughts:
First, let me state that my comments apply solely to for-profit businesses. I don't know enough about non-profit businesses to be able to make an intelligent comment.
That said, the competitive environments surrounding every type of for-profit business that I can think of right now are in a constant state of evolution. That state lies on a continuum from Glacial to Frenetic. As trade barriers and also barriers to entry come down, and as more industries go through one or more stages of deregulation, their competitive environments move more in the direction of Frenetic. In most cases, the primary beneficiaries of such deregulation are the customers of a given industry because deregulation usually means lower prices due to great competitive intensity.
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Derek Lark
CEO, Australia
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Unique Doesn't Guarantee Success Nokia, it could be argued, had a unique strategy - mobile phones that were very good at being phones - but that wasn't sustainable. Or have I missed the definition of unique here?
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Moshood Adelotan
Project Manager
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Business Strategy @Warren Miller, CPA, CFA: I have a slightly different perspective to the need for the word "sustainable" to be captured in the definition. Strategy is something that's applied over a minimum period of time. Hence the need for it to be sustainable.
It is not a strategy if it has to be aborted so quickly that it can't be implemented, based on the fact that it's meant to be competitive.
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Eric Muyaya
Manager, Congo, Democratic Republic of the
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Sustainability to Adapt over Disruption I agree that strategy must be applied over a period defined by the business environment. To keep a competitive advantage one needs to move as fast as the business environment changes.
Blackberry's (phones) strategy was unique, but not sustainable enough facing Android disruption.
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joan biondo
Project Manager
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Definition of Business Strategy A strategy is the plan of action designed to render positive results to its originator. Regardless of the business involved, current events and cultural climate weigh heavily on the success of any str...
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Barry Harrison
Consultant, United Kingdom
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Definition of Business Strategy Business and corporate strategies are actions, or categories of action, taken because, and only because, the management believe they would improve the organisations ability to achieve its purpose. Str...
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Careful with Mixing Up Corporate and Business Strategy @Barry Harrison: Unfortunately, you have conflated corporate strategy and business strategy. They are two VERY different things. We have discussed those differences in this forum, so I'm sure that if ...
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Dr. Alan Williams
Professor, Thailand
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Unique / Sustainable in Strategy I don't see "unique" as being the same as "sustainable".
I've consulted for many very large and smaller companies in many countries, most who had never thought about "sustainability" and how to achie...
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juan reyes
Entrepreneur, Philippines
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The Basis of Sustainable Competitive Advantage @Warren Miller, CPA, CFA: Hi, being unique does not translate to sustainable competitive advantage. Uniqueness just sets the initial intended strategic positioning of a company or the initial conditio...
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Iulian Ursache
Management Consultant, Canada
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Market Competitive Advantage - Redefining I would redefine a market competitive advantage as following: a market competitive advantage is the ability to increase the relative market share in a given market segment through an offering that's f...
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Franco Savanco
Entrepreneur, Argentina
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Business Strategy of Startup of Existing Company First of all thank you all for the time and knowledge you people throw here. We can be talking about either a starting business or a functional one where the implementation of the strategy should be a...
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Re: The Basis of Sustainable Competitive Advantage @Juan reyes: Thank you for your articulate and meaningful contribution to this dialogue. I agreed with everything you wrote. I only wish I could have said it even half as well as you did, Juan. Thank ...
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Gandhi Heryanto
Management Consultant, Indonesia
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A Good Business Strategy Should Aim to Avoid Competition Sun Tzu (500SM), a legendary war strategy expert, said that the smartest strategy in war is one that allows you to achieve your goals without having to fight. The same is true in business. Instead of ...
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Dr. Alan Williams
Professor, Thailand
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Unique Factor May not be Sustainable It is possible in many industries, professions, product area, markets to create/invent a unique competitive factor which attracts more customers, but:
it may be impossible to copyright, trademark ...
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Some Dimensions of Strategy can be Invisible Certain dimensions of an organization's strategy may not be readily visible. So they may be hard to imitate. There are a number of those; the most important one is its culture....
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Dr. Alan Williams
Professor, Thailand
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Invisible Factors in Business Strategy are Important I agree that certain factors are not really visible. In fact most of the points i mentioned earlier strongly attach to things like organizational culture/behavior, etc., all built to bring a good work...
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Paramathmuni srinivas Kumar
India
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Business Strategy and Unique System It is possible to have a unique system of complementary activities. Still, to make a compelling value out of such system needs further consideration and guidance....
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Maurice Hogarth
Consultant, United Kingdom
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The Customer as Competitor (Focus) in Business Strategy @Gandhi Heryanto: Agreed.
There is a tendency to consider those who are supplying the same type of product to the same target market as the "competition".
If these companies are actually buying thei...
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Trilok Sindhwani
Consultant, India
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Dynamics of Uniqueness and Strategy In current competitive, dynamic and disruptive business environment, how can any "uniqueness" or "strategy" have a long useful life-span?...
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Dr. Alan Williams
Professor, Thailand
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Dynamics of Uniqueness and Strategy One of the companies 'strategies' could be to do an analysis of the most capable or all competitors and their most recent competitive strategy etc., every Monday, Wednesday and Friday and/or when ther...
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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RE: Trilok Sindhwani (Dynamics of Uniqueness and Strategy) @Trilok Sindhwani: The short answer to your question is, "It depends"--but on what?
For starters, it depends a whole lot on the structure of the industry/'strategic group' of which the company in que...
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Jaap de Jonge
Editor, Netherlands
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Dynamics of Uniqueness and Strategy See also following knowledge center for a lot more more information on maintaining a sustainable competitive advantage. Like many things in strategy it is complex and hard, but perhaps not impossible....
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Alex
Business Consultant, Germany
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Strategy Definition @Jaap de Jonge: Seems unfair to disagree but this is a definition of a successful strategy. We all know that strategies can fail. Strategy thus positions for future success but is not foolproof. Strat...
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Jaap de Jonge
Editor, Netherlands
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Updated Definition of Business Strategy @Alex: You are right. As I already added earlier, it should indeed actually at least @aim for a (sustainable) competitive advantage. Also the obvious remark by joan biondo has to be included ("@render...
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Alfredo Ceballos
Strategy Consultant, Colombia
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Strategy is a Hypothesis This has been a long and interesting discussion with many participants and quite interesting contributions.
But in my opinion, the main subject of the definition of strategy, defined as "a system of ...
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Trilok Sindhwani
Consultant, India
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Strategy - a Chess-game Perspective @Warren Miller, CPA, CFA: Very much appreciate your views. I think business, like chess is a strategy-driven game.
How does the effectiveness of strategy-related concepts like:
- unique, sustainable...
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Anonymous
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A Strategy is a System @Alfredo Ceballos:
Even if strategies nowadays are not cast in stone (they never were really), I think we can and should still see strategy as a system. The term "system" can accommodate both a p...
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Alfredo Ceballos
Strategy Consultant, Colombia
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Strategy as a Hypothesis @Anonymous: If strategy is a system, then we have to begin by defining a system.
A system is a set of interdependent components interacting to reach a shared or common goal. Its outcome is emergent a...
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Jaap de Jonge
Editor, Netherlands
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What is a Business Strategy? @Alfredo Ceballos: Yes, a (business) strategy is typically built on several hypotheses or assumptions, like: How will the future and the market look like. I prefer the wording: "strategic vision". And...
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Alex
Business Consultant, Germany
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Strategy as Theory @Alfredo Ceballos: Agree entirely. The late logician Karl Popper pointed out that only a theory can be predictive. If strategy is to predict a future competititive advantage and sustain it then it mus...
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Reply: Strategy as Theory @Alex: Thank you. For what it's worth, I do not see that "strategy is to predict a future competitive advantage, etc." To my way of thinking--dating back to 1983, when I first began to study the pract...
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Paul Stuijt
CEO, Netherlands
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Competitive Advantage Must be Sustainable @Warren D. Miller, CPA, CFA: I agree with Jaap. Today something one offers can be unique, but the next day it could be copied. This means it does not sustain time / is not sustainable. The CA of choic...
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Maurice Hogarth
Consultant, United Kingdom
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Referents for 'Strategy' Picking up on the comments relating to the nature and form of a "strategy"... Is "strategy" a process, a system, a plan? What common referent or definition should it have so that we can communicate us...
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Warren D. Miller, CPA, CFA
Strategy Consultant, United States
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Some Comments on 'Sustainable' @Moshood Adelotan: Your point is well-taken. However, if one includes 'sustainable,' then I think one should also stipulate a minimum for the duration of 'sustainable'. That is why I avoid using 'sust...
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John Henry
Project Manager, United States
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Relationship is a Key Differientiation @Warren D. Miller, CPA, CFA: Warren- In the smb space you noted, differentiation is key. It may often have a key component, high quality customer service and reliable availability. While your product ...
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