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John Bell

Management

Why Strategy Withstands the Test of Time

Today’s business world is a complex place. Strategy cuts through the clutter.

Published: Monday, February 8, 2016 - 18:05

How often have you heard people say, “Our strategy is to become the biggest and the best?” This isn’t strategy. Strategy is not the what. Strategy is the how: How will you become the biggest and the best?

Of course, within that definition, there are good strategies and bad ones. Good strategies help to define a company or differentiate a brand. But that seldom happens without sacrifice, without giving up something to strengthen the chosen niche.

You can’t be all things to all people. Or can you?

Today, shareholder and customer demands have never been greater. Leaders and managers are expected to do more, to do it better, faster, and at lower costs. Strategic focus is taking a back seat because people find strategy constraining. They won’t admit it, but they secretly want to be all things to all people; hence, the quest to seek every opportunity to boost sales and profit.

Most of these opportunities fall outside of the company’s core competency or the positioning of the brand. The fallout? An organization taken in several nonstrategic directions.

Business models change and so do core competencies

By its nature, strategy is constraining. That said, business models need not be static. At one time every brick-and-mortar merchant keen to enter e-retailing had to figure out digital commerce. Many, like Walmart and Target, sourced the competency from third parties. Although late to the dance, Walmart and Target are now making huge strides as their own online retailing know-how develops.

Social media is a new model in which brand positioning is not only misunderstood but also ignored. When social media types talk strategy, they talk media strategy—whom to target, how to reach the target, and how to maximize engagement. Engagement is critical, but not at the expense of sticking to company’s character and the core positioning of its brand. This is what guides content. Inherent in that is content constraint, and for good reason. Those who thrive on creativity need not be deterred. These constraints better define the brand’s relationship with customers.

Today’s business world is a complex place, but strategy cuts through the clutter. Here are five reasons why great strategies withstand the test of time:
1. Great strategies define the playing field. To some, a playground without boundaries is glorious. That’s what you get without strategic clarity. Now, try to run a company in which people can pursue any opportunity they like. Your organization will become dysfunctional, bloated, and ill-defined by employees and customers alike.
2. Great strategies tell you what not to do. Back during the 1980s, Coca-Cola divested everything in its portfolio that you couldn’t drink. This strategy of category constraint continues. Coke isn’t wasting time assessing non-beverage markets or searching for food acquisitions. The company is using that time to get better at producing nonalcoholic beverages. The proof is in the numbers: Coke’s profit and market cap consistently outpace their beverage and food rival, PepsiCo.
3. Great strategies enhance expertise. At one time I worked on a global assignment for beer giant Interbrew, the precursor to Anheuser-Busch InBev. This gig afforded me the opportunity to meet CMOs from all over the world. Never did we discuss anything other than beer. Imagine the know-how that emanates from giving 100 percent of your attention to one category rather than juggling the needs of 10 others. This is the power of focus.
4. Great strategies create long-term stability. When strategic intent is clear and concise, it provides the impetus for uncovering long-term opportunities. Because Nestlé defined its core competency as convenience coffee rather than instant coffee, it was able to pioneer an entirely new category rather than flog a dead horse. Today, the Nespresso innovation generates more than $5 billion in new revenue.
5. Great strategies guide short-term execution. Promotions that drive short-term sales ought to be connected to the brand’s positioning. Red Bull does an awfully good job of this. In keeping with Red Bull’s image, every event goes to the extreme, from thrilling space jumps to daring sports stunts. These promotions fortify the emotional claim that “Red Bull gives you wings.”

Of course, this is all for naught without disciplined leaders with the passion to guide their teams in the direction indicated by the strategic compass.

First published Jan. 20, 2016, on the CEO Afterlife blog.

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About The Author

John Bell’s picture

John Bell

John R. Bell is a retired CEO of a consumer packaged goods company, and a former global strategy consultant. Bell is the author of the book, Do Less Better: The Power of Strategic Sacrifice in a Complex World (Palgrave Macmillan, 2014), and the novel, The Circumstantial Enemy (independently published, 2017), a historical thriller based on true World War II events. A prolific blogger, Bell’s musings on strategy, leadership, and branding appear in several online journals including Fortune and Forbes.