Is Strategy Enough?

 In 1999, a Fortune magazine study suggested that 70 percent of CEOs who fail do so not because of bad strategy, but because of bad execution.

In today’s fast paced world, strategic planning is critical. It is akin to the guidance system on an airplane; if not programmed to reach its destination, it cannot keep the plane on course in rough weather. A pilot has to log his destination and flight plan, get clearance from the tower, check the meteorological conditions and plan accordingly, check the aircraft and deliver a smooth flight for passengers and cargo, and then land safely. Everything has to work exactly to reach the destination safely and can only be done by the pilot and crew performing many interim checks to make sure they are on track. That is strategy and implementation in perfect harmony.

Michael Porter on Strategy Excution

A while back, The Wharton School published an article on strategy formulation, from Michael E. Porter, director of Harvard's Institute for Strategy and Competitiveness.

Porter's insights on strategy and execution? 

• Managers need to develop a clear strategy around their company's unique place in the market (and not worry as much about creating strategy to compete head-on with other companies.)
• Many, if not most, strategic errors come from within. The company does it to itself.
• The worst error is to compete with your competition on the same things.
• "Strategy' is a word that gets used in so many ways with so many meanings that it can end up being meaningless. Often corporate executives will confuse strategy with aspiration.
• Companies hoping to build a successful strategy need to define the right industry and the right products and services. Bad strategy often flows from a bad definition of the business. 
• Continuity is critical to successful strategy. If you don't do it often, it's not strategy. If you don't pursue a direction for two or three years, it's meaningless.
• Strategy is not something that is done in a bottom-up consensus process. The companies with really good strategy almost universally have a very strong CEO, somebody who is not afraid to lead, to make choices, to make decisions." Strategy is challenged every day, and only a strong leader can remain on course when confronted with well-intentioned ideas that would deviate from the company's strategy. You need a leader with a lot of confidence, a lot of conviction and a leader who is really good at communication.

BOTTOMLINE:  According to Porter: "Years ago, corporate strategy was considered a secret known only by top executives for fear competitors might use the information to their advantage. Now it is important for everyone in the organization to understand the strategy and align everything they do with that strategy every day."

Blue Ocean Strategy and ITC

Blue Ocean Strategy is the latest buzzword in business strategy today. If you haven''t heard of it, here's a quick video which will illustrate the gist of it : 

An Indian company which has adopted this strategy is ITC, by means of its eChoupal initiative.ITC Agro's CEO S Sivakumar recently gave a presentation about the same ( which can be found here ).

The traditional way of working in rural India was to follow the red ocean strategy.  Companies featured stripped products at low prices, or single serve packs at unit prices, while targeting rural consumers in India. These efforts did succeed to some extent, but growth & profitability were limited, because everyone was competing for a larger share of the same small wallet. The outcome was a bloody red ocean! 

Then came along ITC eChoupal, and said "why not raise the incomes of rural people and then get a larger share of their expanding wallets?" "And if we can raise their incomes profitably, that becomes a unique business opportunity in itself, and will also create a virtuous cycle; more profits to ITC --> higher incomes to rural producers --> more spends by the rural consumers --> more profits to ITC -->" In other words, fortune "for" the bottom of the pyramid as a route to discover fortune "at" the bottom of the pyramid!

Thus, instead of following the conventional logic of outpacing the competition on the same counts by offering a better solution (lower prices) to the given problem (low incomes), ITC eChoupal redefined the problem itself and offered a blue ocean solution that made the competition irrelevant. This 'reconstructed' the market boundaries and eliminated the 'search risk'.

BOS recommends a sequence in which the strategy must be created to ensure a win-win in the new market terrain, viz. 'utility' of the offering to the customer, 'price' that is relevant to the customer, a target 'cost' that leaves sufficient profit for the company at the relevant price, and finally make certain that the customer 'adopts' the offering... In fact, ITC eChoupal can be called a "deep blue ocean strategy" because this sequence itself was made redundant by "raising incomes, at no charge to the customer; the questions on pricing and adoption didn't even arise"!