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The Strategy Terminology Map

I have to admit that I'm a little fed up of seeing the question 'What is Strategy?' pop-up, directly or indirectly, in all sorts of articles, forums and blog posts or comments. Maybe you feel the same.

And it's not that much about the definitions of the Strategy, as some of them are quite good (two examples given below), in their quest for the balance between brevity and relevance. The trouble is the confusion we often see between concepts (or Strategy building blocks) and strategic processes.

First of all, considering Strategy a concept, the process or chain of activities that handle the Strategy is the Strategy Management. As any process is made of sub-processes, or chain of activities, so is the case of the Strategy Management.

Its two sub-processes are Strategy Formulation and Strategy Execution. Depending on the strategic framework considered, they may be presented as strictly sequential, or overlapping and interacting cyclically over time.

Strategy Formulation

Sometimes referred to as 'Strategy Development', or 'Strategy Design', the Strategy Formulation process is employing a number of concepts or building blocks and at least a sub-process, the Strategic Analysis. Which are the concepts / building blocks that are used here?

Note: The focus, within the rest of article, is on the Business Strategy, which is applicable to for-profit organizations. Some of the terminology concepts are applicable to the public sector and not-for-profit organizations, as well, but some are not (e.g. Competitive Advantage).

Above the Strategic Analysis process, we have the main initial building blocks used in the Strategy Formulation process, including the MVV (Mission-Vision-Values), the Winning Aspirations or the Major Challenges the organizations is facing (see Prof. Richard Rumelt's definition below), usually quantified by 3-5 Strategic Goals.

We also have here the Strategic Horizon, which defines the time-frame for which the Strategy is formulated. A separate article is dedicated to it, highlighting defining its time fame is not at all a random or subjective act, being driven by pragmatic considerations.

The Strategic Analysis process uses the building blocks above as well as its specific ones for generating a number of outputs, which are illustrated below it. The main specific building blocks of the Strategic Analysis are the current Strategic Choices(ours and our competitors'), the possible Strategic Choices (where-to-play and how-to-win there) to be analyzed, and the main Influence Factors (and their anticipated trends) that can make one Strategic Choice or another better suited for our Strategy, given the opportunities and threats related to the Influence Factors, over the Strategic Horizon considered.

On the Strategic Analysis's output side, we have first the Competitive Advantage, which positions our new mix of Strategic Choices, selected within the Strategic Analysis process, against the competitors' Strategic Choices, at the end of the Strategic Horizon.

The Capabilities System specifies the set of Core & Complementary Capabilities that are required to enable & support the new mix of Strategic Choices selected, bringing them from intention to reality.

The Strategic Gaps are probably the most important concept & building block of the Strategy Formulation process, or at least the most lucrative one for the Strategy Execution process. They describe, on one hand, the gaps between our current positioning (current mix of Strategic Choices) and the desired positioning that is based on the new mix of Strategic Choices selected. These are the Strategic Positioning Gaps.

On the other hand, we have the Strategic Coherence Gaps, which describe the Capabilities that have to be developed, created or acquired, as resulting from the comparison between our current Capabilities and those required to support our new mix of Strategic Choices selected.

Finally, Strategy Formulation's output includes the Strategic Priorities, which are defined by prioritizing the main clusters of Strategic Gaps that have to be closed by the Strategy Execution process.

Strategy Execution

Sometimes called 'Strategy Implementation', or even 'Strategy Realization', the Strategy Execution process is aimed solely at transforming the formulated Strategy into reality, for the purpose of accomplishing the Winning Aspirations or overcoming the Major Challenges the organization is facing.

An important observation is that the term 'Execution' is often used in a casual way and with various meanings unrelated to the Strategy. In most such cases, it's more related to Operations Management or to Operational Effectiveness, which is not Strategy (as clearly stated by Prof. Michael Porter).

Which are the sub-process and the concepts / building blocks of the Strategy Execution process?

The main sub-processes are the Strategic Planning and the Strategic Plan Execution, with the former one having several sub-processes of its own, the Strategic Alignment and the Operational Planning (and Budget) Integration, which follow the development of the core building block, the Strategic Plan.

The Strategic Plan has three main building blocks: the Strategy Map, the Scorecard(including the KPI & KRI Measures and their Targets), which monitors Objectives' accomplishment, and the portfolio of Strategic Initiatives, which are correlated with the Objectives that are expected to be accomplished through their effects. The Strategy Map includes the Strategic Objectives and the Cause-Effect Relationships between them.

The Strategic Alignment process replicates and synchronizes the Strategic Plan at all levels of the organization, adapting it to the specifics of each unit, down to employee level.

The Strategic Plan Execution process is what makes the Strategy Execution a continuous and adaptive process, collecting the learning and the feedback that represents an input for the next Strategy Formulation iteration, closing the loop of the PDCA cycle, on which the Strategy Management process is built.

The picture of Strategy's processes, sub-processes, concepts and building blocks is now complete.

The Definition of Strategy

Do you want to create a definition of the Strategy? All you have to do is to combine with brevity the most relevant building blocks and processes from those described above. Let's see how two of the most regarded definitions of Strategy, owed to two Strategy thought leaders, do this.

Prof. Jan Rivkin (chair of the Strategy Unit at Harvard Business School):

Strategy is an integrated set of choices that position the firm, in an industry, to earn superior returns over the long run.

Which Strategy concepts / building blocks and/or strategic processes are used in this definition?

Prof. Richard Rumelt (UCLA Anderson School of Management):

Strategy is a coherent mix of policy and action designed to surmount a high-stakes challenge.

Which Strategy concepts / building blocks and/or strategic processes are used in this definition?

Even if the definitions above are not using the exact same terminology described, we can see how they focus on certain Strategy components ('superior returns' = Winning Aspirations, 'over the long run' = Strategic Horizon, 'policy' = Strategic Choices, 'action' = Strategic Initiatives).

Now you have a reference terminology map for interpreting any Strategy Definition that you'll encounter, as well as for building your own point of view when you encounter opinions saying that Strategy is made of 'this' and 'that'.

Any feedback, critique or suggestions, related to the above, are more than welcome. Thank you.

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