Monday March 15th 2010

What is Strategy?


The title of this entry is taken from an article of the same name, which appeared in the Harvard Business Review in 1996.  The article was written by Michael Porter (“we’re not worthy”) and is viewed as a classic in business circles.  I have returned to this article on numerous occasions and always come away reminded of the basics of strategy (not to be confused with the process of strategic planning, which can only be done well once we understand fully what strategy actually is).  I’d like to share some of the basics of strategy with you.

First, as Porter reminds us, operational effectivenessis a given.  If you develop a plan that is aimed at doing more things, doing things better, or doing things more efficiently, you do not yet have an organizational strategy.  What you have is…well, it is a plan for operational effectiveness.  A plan that is truly strategic in nature encompasses the following:

  1. Staking out a competitive position, which is a statement of your target population, the needs of that population you will address, and how you will meet those needs.  To this, I would add that your competitive position includes an analysis of your competitors and collaborators as well as a breakdown of the ideal funding mix to support the work of the organization.  Though there are several competitive and sustainable positions, a nonprofit must identify its core position and resist the temptation to straddle two positions for fear of defining itself too narrowly.
  2. Making the trade-offs required to achieve that strategic position, meaning that in defining your future you are choosing what not to do.  For many nonprofits, this means developing a set of criteria (I believe David La Piana refers to it as a “strategy screen”) that will guide future decisions of the organization.
  3. Creating fit among your organization’s various activities.  Porter describes various levels of fit, starting with consistency between individual activities and the overall strategy; moving to activities that are mutually reinforcing (i.e., doing one thing well helps you do other things well); and finally to the optimization of effort, at which point the entire system if mutually reinforcing.

The key concept in all of this is organizational choice.  The opposite of this is organizational tentativeness or, worse yet, organizational paralysis.  The whole point of strategic planning is to determine where your organization needs to be positioned for long-term viability and effectiveness.  Even if we can’t predict what the journey to that position will look like in all its operational detail, we at least ought to be firm in who we are, where we fit in, and where need to be headed.

Thus is the essence of strategy.