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In this adaptation from his book, Markides offers Three Ingredients of a Unique Strategic Position.
Ingredient 1: A company must define what business it believes it is in
Explicitly answer the question, "What business are we in?" This is the single, most important step in the crafting of a superior strategy. Why? Because a company's implicit or explicit perception of the business it is in conditions everything that company "sees" and "does." The definition of the business is the filter through which all information passes. It is the filter that tells managers which opportunities to pursue and which to reject as "not applicable to our business." Thus, what business a company believes it is in conditions what it sees as its customers and its competitors and what it sees as its competitive advantage. It also determines what are thought to be the keys to success in the business and thus ultimately determines how it is going to play the gamethat is, plan and execute its strategy.
Ingredient 2: A company must decide >who will be its targeted customers, what products or services it will offer them, and how it will achieve all this in an efficient way
Find answers to the questions who, what, and how:
The questions of "who" and "what" are essentially strategic; the answers to these questions will define the game the company will play. And this must be decided only after careful consideration of the underlying economics of the business and the company's competencies. It should not be made ad hoc.
The question of "how" is also strategicas most managers perceive it to be. What they may not perceive, however, is that it is next to impossible to decide on "how" without first answering the questions of "who" and "what." Deciding on "how" involves making choices on numerous issues, such as how to configure the value chain, what technology to adopt, what activities to handle in-house and what to subcontract, what specific functional policies to adopt, how to organize internally, and so on.
Although these decisions are obviously important ones, strategy is much more than this! Strategy is all about combining these activities into a system that creates the requisite fit between what the environment needs and what the company does. Thus, it is not just the development of individual strategic activities that is important, but also the combination of these activities into a reinforcing system.
Ingredient 3: A company must construct the appropriate organizational environment that will support the choices made
Develop the necessary competencies and the appropriate organizational environment (culture, incentives, structure, and people) that will support the choices made. This means that to create a superior strategy, a company must think beyond markets, products, and customers. It must also decide what competencies to develop and what organizational context to create so as to facilitate the implementation of its strategy. But even after deciding on competencies or culture, structure, and incentives the firm is still not done with strategy. As in the case of deciding "how," the real challenge is to develop the individual pieces and then put them together in such a way that they support and complement each other on one hand while they collectively support and promote the chosen strategy on the other. The task is not only to create the appropriate individual parts of the system but to put them together in such a way as to create a strong and reinforcing system.
Breaking the Rules of the Game
Strategic thinking, says Constantine Markides in All the Right Moves, should be approached as a creative process - examining an issue from a variety of angles and experimenting with new ideas.
Pointing to a range of companies from around the world and in many different industries, Markides illustrates how these firms have created innovative strategies by breaking the rules of the game. For example:
The Edward Jones brokerage firm's rise to prominence in the financial services industry shows the who/what/how framework in action. While the traditional financial companies targeted institutional investors, Edward Jones sought to create a strategy that would enable the company to be "a merchant for the individual." The plan was to focus on individual investors (who); offer long-term products (what); and act only as a distributor rather than a manufacturer (how). The end result was that Edward Jones expanded its broker force at an annual rate of 15 percent, and now boasts more than 2,500 partnersup from a total of 8 in 1981.
The rise and fall of Xerox illustrates what can happen when an established company fails to continuously re-evaluate its strategy. A market leader in the 1960's, Xerox defined its customers as big corporations and designed copiers for high-speed, high-volume needs. Playing the game differently, Canon instead targeted small and medium-sized companies and focused more on quality. Xerox responded too late to the needs of the often over-looked smaller organizationswhile Canon jumped on the opportunity to serve them. Within 20 years of entering the industry, Canon emerged as the leader.
Hewitt Associates, the Chicago-based human resources consultancy, is an example of a company that was able to successfully phase in a new strategy while continuing to employ an existingand still profitableone. The firm moved from its traditional base of benefit and compensation consulting services to become a major provider of retirement and health plan administration. The company is now in the business of "human resources and consulting and services," which encompasses both strategic positions.