Strategy versus Operational Effectiveness

As the cheshire cat once said, “if you don’t know where you’re going then any road will lead you there.” It’s certainly true of strategy. When I ask companies what their strategy is, they often say things like, “we’re going to reduce our supply chain costs.”  While that’s a good thing to do, it’s not a strategy — it’s operations. Reducing supply chain costs is improving operational effectiveness, not refining your strategy.

To refine your strategy, it’s useful to ask yourself a simple question: “… and where will that lead us?” We’re going to reduce our supply chain costs … and where will that lead us? That will lower our costs … and where will that lead us? That will help us appeal to price sensitive customers … and where will that lead us? Keep asking the same question repeatedly until you reach a logical conclusion. That’s likely to be your strategy.

(Other useful questions to ask are: “…and who would be interested in that?” and “… and why would they buy from us?”. Or simply: “So what?”).

According to Michael Porter, there are really only three strategies that you can pursue. Learn about them in the video.