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How Do We Think Strategically?

Within today's rapidly changing corporations, individuals at all levels are increasingly called upon to demonstrate their ability to think strategically. However, many are inadequately prepared to perform this task. Many new executives, and even those long within the executive ranks, are unsure how to properly engage in strategic thinking.

While there are many seminars and classes that provide the well-codified elements of management education such as project management, planning, leadership, finance, sales, and communication skills, training in strategic thinking per se is largely absent.

What is strategic thinking today?

What Is Strategy?

The word "strategy" is originally from the Greek word strategia which refers to an act, device, or plan employed by a leader. Aristotle, the famous 4th century B.C. Greek philosopher stated it well when he said, "...as there are many actions, arts and sciences, there ends are also many; the end of the medical art is health, that of shipbuilding a vessel, that of strategy victory, that of economics wealth." (italics added)

Thus, strategy is an act, device, or plan used to achieve victory, while strategic thinking is a way of thinking toward the end of "victory", "success", "winning", or, in modern parlance, "competitive advantage". But how do we actually go about "thinking strategically", and in particular, gaining a competitive advantage in the marketplace?

Operational Effectiveness

After two decades of refining the management tools that deliver operational effectiveness, many executives continue to confuse these tools with strategy and the achievement of competitive advantage.

However, they are easily copied by competitors who seek the same optimization of their operational aspects for their enterprise. These management tools do not confer competitive advantage. They are the price of entry, but not the key to ultimate success.

All players in a market will strive for quality, the lowest price, and the best service, but these are easily copied by competition and fail to differentiate one enterprise from another in the marketplace. Thus we may say that operational effectiveness is a necessary, but not sufficient, contributor to enterprise success. Of course we must strive for the most efficient operation, and also to deliver the highest quality and the truest service, but our competitors can do the same. So, a focus on the management tools of operational effectiveness will provide no real advantage over our competitors.

Where and how do we get competitive advantage?

Differentiation and Competitive Advantage

Competitive advantage only arises from establishing differentiation. While the management tools of operational effectiveness ultimately deliver sameness and homogenization among competing enterprises, competitive advantage is the principal outcome of successful differentiation.

"The more competitors stake their strategic thinking upon being the lowest price producer or delivering the highest quality, the more they start to look alike in their marketplace, thus losing their competitive edge over one another."

The more competitors stake their strategic thinking upon being the lowest price producer or delivering the highest quality, the more they start to look alike in their marketplace, thus losing their competitive edge over one another.

Remember, competitive advantage arises out of meaningful differentiation from the other players in the marketplace. Thus the strategy that delivers marketplace advantage must be founded upon being different in some genuine way. Such strategic differentiation is based upon choosing and tailoring activities that deliver a unique mix of value which cannot be easily duplicated.

Wise strategists create unique value by refusing to base their strategic thinking on homogenization, following, and imitating. Instead, successful strategists combine activities from among their core competencies that fit together in unique ways to reinforce each other and build value. They realize that creating unique value in this way locks out imitators and creates true competitive advantage.

The New Strategy Model

If strategy is about an act, device or plan that delivers competitive advantage, then it is the ideal complement to the operational effectiveness delivered by modern management tools that deliver homogenization around price, quality, and service to all players.

Of course, the drive for enhanced effectiveness will always be necessary. But it will never be sufficient to provide the sustainable competitive advantage that we can achieve through strategic differentiation.

Carefully orchestrated and integrated differentiation is the premier device of strategic victory. It cannot be easily reverse-engineered nor copied by competitors. Strategic differentiation, achieved through choosing and tailoring activities to deliver a unique mix of value, is the strategic competitive advantage of choice.

In summary, strategy and strategic thinking are fundamentally about combining activities that fit together to reinforce each other, deliver marketplace value, and thus provide true competitive advantage.

Management tools are for optimization and operational effectiveness. Strategic thinking achieves competitive advantage through differentiation and the delivery of unique value.

Thinking this way is thinking strategically about the enterprise.

Extracted from KLM Inc. Management Consultation.

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