Business Strategy: You Can't Play Baseball Blindfolded
Imagine a baseball game where all the players and the coaches voluntarily put on blindfolds. Each team wants to win, but no one really knows what is going on. Pitchers know they want to throw strikes. Batters want to hit the ball. Fielders want to catch the ball. But no one really knows what is happening. Silly, right? Unfortunately, businesses too often operate this way. Owners, presidents, and CEOs want to make a profit, they want to win in the competition of markets, but they have no information or guidelines. Business strategy sets the guidelines for businesses to succeed. Sun Tzu, the ancient Chinese general and strategist, said it best: “Strategy is the great work of the organization. In situations of life or death, it is the Tao of survival or extinction. Its study cannot be neglected.”
What is Strategy?
Exactly what is business strategy? Rumelt, Schendel, and Teece in their book of compiled essays on strategy, define strategy as the direction of an organization that includes choosing products and services, creating policies on how the business will compete in the market place, choosing the size and diversity of the business’ presence in the market, and the organization chart that will best make it all happen. Perhaps a more simple definition would be Hill and Jones definition in their book Strategic Management: An Integrated Approach. They state that “strategy is a specific pattern of decisions and actions that managers take to achieve superior performance.” The idea behind these definitions is to lay out a plan, take the blindfold off, and try to win in the market place.
Rumelt, Schendel, and Teece list four things that belong in business strategy. The first is picking the right products or services. This comes from determining an organization's strengths and weaknesses. A baseball team that has mostly heavy hitters in its lineup should not try to build a strategy around stealing bases. Similarly, if an organizer of a business excels at accounting, that person should not start a business selling batteries. A business at a basic level should stay with what it knows.
The second point of the Rumelt et al definition is deciding how the business will compete in the market place. This point covers everything from marketing plans to supply chain decisions. A firm that does not make any decisions regarding its presence in the market place will have a difficult time attracting customers as well as defending against rival firms. This is similar to a good-hitting baseball team sending players out to play any position and bat anywhere in the lineup. A plan to score runs and to avoid being scored upon involves putting the right people in the right place.
The final two points involve understanding the marketplace and then structuring the organization accordingly. Not all markets are the same and a thorough knowledge of competitors and customers in the market is required before determining one's place in it. Similarly, a baseball team's strategy depends upon the league in which it plays.
The structure of a business refers to the reporting and command layout. Different products, services, markets, and competition can all play a factor in how the organization is structured. A good structure allows the organization to effectively operate while a poor structure can create bottlenecks and hurt the firm's competitive stance. A baseball team that has players who act on their own without regard to what the manager and coaches want is no longer a team but rather a collection of individual players.
Conclusion - Create an Effective Strategy
Business strategy is not something easily created. It takes time and serious evaluation of the firm, the competition, and the market. Firms that create a good business strategy have a plan to follow to create profit for the business and for other interested parties. This does not mean that creating a strategy will always lead to success. Like a baseball team, some strategies will be winners and some will be losers. But a business with a strategy will be far better off than one blindfolded because of no strategy.
Additional Strategy Articles
- Business Strategy: "This Is a Football", Part 1
This article is the first in a series on developing a strategy. Developing a good mission statement forms the basis for everything the firm does.
- Business Strategy: "This Is a Football", Part 2
This article looks at the second step in developing a business strategy: determining the strengths and weakness of the firm.
- Business Strategy: "This Is a Football", Part 3
This article is third in a series about actions needing to be performed before creating a business strategy. Specifically, the firm needs to examine opportunities and threats in the market.
- Business Strategy: "This Is a Football", Part 4
This article is the conclusion of a four part series on laying the foundations before developing a business strategy. This development includes a mission statement and a honest SWOT analysis.