What is the first word that comes to mind when you think about strategy? Typically, the first word that is mentioned is plan or planning. (What is yours?) If you observe executives – which is very different from asking questions or sending surveys! – you find that there are two types of strategy, which happen alongside each other. No, it not strategy formulation versus strategy implementation. Strategy without implementation is not strategy.
Instead, there is strategy as design and strategy as practice.
Strategy as design is aimed at uniqueness, aimed at building competitive advantage.
- The focus is on things that other companies cannot imitate and that are valuable, rare, and disguised within the organisation;
- The process of strategy as design is not straightforward;
- Unique business insights often start as irritations with existing offers (iPhone) or as slow cultivated hunches. The process cannot be planned but it can be facilitated and encouraged by using a design approach (IDEO);
- The resource-based view and concepts like resources, capabilities, dynamic capabilities, and transient competitive advantage are important for strategy as design.
Strategy as practice is aimed at excellence through publicly known, imitable practices which can be transferred across companies. (link)
- The focus is on things that are common practices, which can significantly influence the performance of companies;
- The process of applying (best) practices is relatively straightforward (in theory);
- Implementing best practices – rather than mere business fads – is about “conscientious, explicit, and judicious use of practitioner expertise and judgment, evidence from the local context, a critical evaluation of best available research evidence, and the perspectives of those people who might be affected by the decision.” (evidence-based management);
- Typical strategy concepts like the Five Forces, BCG matrix, and strategic groups analyses fit within strategy as practice. However, also best practice in communication, hiring, teamwork, project management, total quality management, etc. belong here.
Strategy as design – particularly when successful – is more dramatic and receives most of the attention. And, most executives, when they have the choice, would prefer to compete on uniqueness rather than excellence. However, there is no “choice”. The focus needs to be on both, but most of the managerial effort will need to be on strategy as practice.
Fascinating research by Bloom and others in Indian textile plants demonstrates the power of strategy as practice. The textile plants who were assigned to use standard best factory practices (regular maintenance, recording reasons for machine breakdown, removing trash from shop floor, etc.) increased productivity by 11% compared to the textile works who were in the control group. (link)
There are two very distinct types of strategy that are both necessary for the prosperity of your company. And both types of strategy need to be intentionally managed and trained.