40. What Is Strategy?

I find it interesting that there are so many different methods and theories about strategy, yet few describe a process for how to create them. Michael Porter defines strategies as fitting into three generic categories: (1) cost leadership (competing on the basis of low production and distribution costs), (2) differentiation (superior products or service), and (3) focus (on only a few product or market segments).¹ He says the evidence of strategy in a company is when it “performs different activities from rivals or performs similar activities in different ways.” Michael Treacy and Fred Wiersema, authors of The Discipline of Market Leaders, write that companies should focus strategy on one of three value disciplines: Operational Excellence, Product Leadership, or Customer Intimacy.

What all marketers seem to agree on is how to evaluate what makes a good strategy. I believe Phillip Kotler summarized it best when he said, “Companies will have a unique strategy when (1) they have defined a clear target market and need, (2) developed a distinctive and winning value proposition for that market, and (3) arranged a distinctive supply network to deliver the value proposition to the target market.”² Nirmalya Kumar has a similar strategic method that he calls the “Three Vs,” which are value target, value proposition, and value network. His concept is explained in an article interview in Chapter 56, “Nurture a Culture of Innovation.”

All of these “strategies to create strategies” are valuable and yet there are other factors that must be considered. It’s easy to get lost in the complexity of strategy, so my goal is to take the “BS” out of strategy development and provide you with a process and the most essential information you need to know to develop successful strategies. Strategy will always be an art, but it you apply science and process it will be far less risky. The information in this section builds on everything you have already learned throughout this book, so the new information is concise, but meaty.

Selecting the right strategies to implement for your business depends on many factors, including product life cycle, market size, number and strength of competitors, and customer characteristics and buying behavior. You will also consider other factors such as: Is the market growing or mature? Is your company a market leader or one of many competitors vying for customer mind share? What resources do we have available for growth? Do our people have the skills needed to execute the strategic plan? All of these factors will influence the strategic direction and pace of growth. Competitive intensity is another factor. If the market is growing, it is much easier to win market share and market share gains are worth considerably more in a growth cycle than they are in a mature market.

Strategy Process

As you progress through this section, you will note the following:

• Target Market, Competition, and Customer strategies have been discussed in previous chapters; therefore, the new information is provided to help you consider additional factors and refine your strategies in these areas.

• Pricing and Distribution strategies that you drafted in Section III, “Analyze: Growth and Profit Potential,” can now be finalized and integrated with the other strategies you are about to develop.

• Growth and Innovation chapters will give you ideas to help you develop long-term strategies with an eye on differentiation, innovation, and business growth.

• Promotion strategies will be developed after you complete Section V, “Implement.”

• And finally, please note that Chapter 43, “Positioning Strategy,” is the most lengthy in this section as this topic has not been discussed yet; it is a catalyst for strategy development in other areas.

While individual strategy topics are discussed throughout this section, you will notice that many of the strategies you create are not discrete, but integrated. After you have learned about different types of strategies, you will define your sales goals and learn to write marketing objectives that are clear, concise, and measureable. The final step is developing your own strategies to achieve these objectives.

Keep in mind that strategy requires you to make tradeoffs. As you review concepts and examples for different types of strategies throughout this section, you will need to make choices and purposefully limit the size and complexity of your go-to-market strategy. It’s just as important to figure out what to stop doing as it is to focus on what needs to be done. Prioritize strategies and tactics to achieve the most important goals, both short- and long-term, so that you can realize your long-term objectives.