Strategy: An Executive’s Definition

English: Cover for the Business Strategy Wikibook.

Maximise long-term Value

The question “What is strategy?” has spurred numerous doctoral dissertations, countless hours of research, and hearty disagreement among serious management thinkers. Perhaps this is why many executives also struggle with it. Nonetheless, decision makers seeking to steer a business to sustained success need a succinct and pragmatic response. After all, it can only help executives to have a shared definition of strategy when they are creating, communicating, and implementing a strategy for their business. (An excerprt from an article by Ken Favaro with Kasturi Rangan & Evan Hirsh – Strategy+Business).

So, what is a business strategy? Strategy is different from vision, mission, goals, priorities, and plans. It is the result of choices executives make, on where to play and how to win, to maximize long-term value.

“Where to play” specifies the target market in terms of the customers and the needs to be served. The best way to define a target market is highly situational. It can be defined in any number of ways, such as by where the target customers are (for example, in certain parts of the world or in particular parts of town), how they buy (perhaps through specific channels), who they are (their particular demographics and other innate characteristics), when they buy (for example, on particular occasions), what they buy (for instance, are they price buyers or service hounds?), or for whom they buy (themselves, friends, family, their company, or their customers).

 “How to win” spells out the value proposition that will distinguish a business in the eyes of its target customers, along with the capabilities that will give it an essential advantage in delivering that value proposition. Choices must be made because there is at least one way to win in every market, but not everyone can win in any given market. With good choices, a business gains the right to win in its target markets. The target market, value proposition, and capabilities must hang together in a coherent way. And good strategies call for the right amount of “capabilities stretch”: not too much or too little change from the capabilities a business already has.

Where to Go - How to Win

Every company faces innumerable options for where to play and how to win. Often they have to sort out seemingly conflicting objectives, such as the need for both long-term growth and short-term profitability, to choose which options to pursue. To “maximize long-term value” means — when there are mutually exclusive options — to select those that will give the greatest sustained increase to the company’s economic value.

It’s worth emphasizing that “maximizing long-term value” is not the same thing as “maximizing share price” or “maximizing shareholder value.” Those objectives typically represent the most short-term demands of current shareholders or their advisors, and they do not always align with what is best for all shareholders, particularly long-term owners. On the other hand, “maximizing long-term value” does not mean forgetting about the short term. Economic value takes into account growth and profitability, short-term and long-term value, and risk as well as reward.

In the end, to define the fundamentals of your business strategy, you need only to answer three questions:

1. Who is the target customer?

2. What is the value proposition to that customer?

3. What are the essential capabilities needed to deliver that value proposition?

Without clear and coherent answers to these three questions, you may have an exciting vision, a compelling mission, clear goals, and an ambitious strategic plan with many actions under way, but you won’t have a strategy.

Business strategy is the result of choices made to maximize long-term value.

Full Article :

About Georges Abi-Aad

CEO, electronic engineer with MBA in marketing. Multicultural; French citizen born in Lebanon working in the Middle East and fluent in French, English and Arabic. I have more than 30 years of proven experience in the Middle East with European know how. I am good in reorganization and in Global strategic management business. I am a dependable leader with an open approach in working with people, forging a strong team of professionals dedicated to the Company and its clientele. Perseverance is my key word. Married to Carole and having 2 children: Joy-Joelle and Antoine (Joyante!).
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