Well strategy, as you may well know, is one of those glamorous business words. Strategy is something that business managers spend a whole lot of time thinking about and talking about. It's something you may need to prove that you can do well before you get promoted beyond a certain level in an organization. And if you've got your own company, strategy may be the thing that determines whether you fail or succeed. So business strategy, I think we all agree, is quite important.
But then it brings us back to a fundamental question. What is strategy exactly?
You probably think you know what it means already. Most people do. But the problem is strategy, as a word in business, is used in many different ways and we can't just choose one definition because all of the different flavors and varieties of the word turn out to be fairly important.
So that's the first item on our agenda is to explore the different ways that we use the word strategy to provide examples of each so that we kinda know what we're talking about. Henry Mintzberg, one of the great strategy professors in the world, professor at McGill University, is famous for saying, it turns out that strategy is one of those words that we inevitably define in one way and yet often use in another way. So let's dig in to what we mean.
Strategy as a Plan
We're gonna use some examples here to present strategy in different varieties and in different flavors. The first one we're gonna start with, we're gonna give an example
of strategy as a plan. And the plan we're gonna use, maybe you've heard this phrase before, is called embrace, extend, and extinguish. (This is an example of a plan).
Embrace means that if you're a tech company and you've had a commanding lead in a particular technology space but the world is moving toward open standards in that space, which is a threat to your power in that space. First of all, you act like a good corporate citizen. You embrace the emerging common standard. You go to the meetings. You make positive sounds and noises. That's the embrace part.
What do you do next? Well, you've been very positive, you've been involved in the community but you're also noticing that the common standard has some short comings. It doesn't have all the bells and whistles, and as a good member of the community you like to add some bells and whistles. So, you start to extend the standard, start to add bells and whistles but the only real sort of nuance here is you're not necessarily, as a profit making company, willing to contribute the bells and whistles you make to the common standard. Those are gonna stay proprietary. So you extend the common standard with proprietary extensions. That's the extend part.
What's the extinguish part? Well, because you have the market lead as a company, everybody migrates to your version of the standards with the bells and whistles. All the people who make software for your platform, they want to include all the best features that include bells and whistles that you have extended the standard with. So, you end up owning the standard. The standard now becomes the common open standard plus the proprietary extensions and since some part of it is proprietary, essentially all of it is proprietary. And in that sense the open standard is extinguished and you end up back in control of the standard if you're a for profit company.
Now, a lot of companies that are accused of this don't admit it, but you will find a lot of people who believe a lot of tech companies that are in a position of dominance have used this strategy as plan to extend their dominance of technological space.
So that's it. That's the strategy as a plan. You end up staying in charge because you've executed this plan.
Strategy as a Pattern
Another way that we can use the word strategy is to indicate a kind of a pattern, a way that companies behave consistently over time. So we might say, for example, that a company has a high end strategy. The example we have here of a company that uses a high end strategy is a company called Vipp. It's a Danish company that creates things like trash bins and toilet brushes that are very high end and very expensive. It’s very good at making it seem reasonable to pay a very high price for something that in the history of trash bins and toilet brushes you might have considered very functional or very mundane. This company's good enough at it that their trash bins and toilet brushes find their way into the permanent collections of the world's design museums, like The Museum of Modern Art in New York City. So that's strategy as pattern. A high end strategy is a strategy aimed at convincing people that products are worth spending a lot of money on. Products that may be in categories that you wouldn't have historically thought to spend a lot of money on.
Strategy as a Position
Another sense of the word strategy is strategy as position, position within a market within an industry, with respect to competitors, with respect to customers. Great example of this is Apple in the music and in the media industry. Apple established a dominant position in the media industry in the early days of Internet music with the iTunes platform. Wasn't just the iTunes platform, they also made it integrate very nicely and very tightly with various of their devices, the iPods, the iPhones, also the Mac computer. And one of the implications of holding this strategy, for example, is that people are more likely to buy Macintosh computers because they serve as the media center that makes all of your other devices and the iTunes service work best. If you watch an old iPod advertisement, you'll notice that it ends with the statement iPod + iTunes. Very important that both those components are a part of this strategy. Another example of Apple's dominance in the media industry has to do with the relationship it came to have during this time with musicians. Now in the pre-Apple, pre-iPod days, typically a company would pay musicians for use of their music in an advertisement. But these advertisements became so dominant, so popular that musicians were willing to contribute their music for free to an Apple advertisement, because this was a way for a band to become famous. There are many examples of this. Daft Punk became quite a thing when it was used in an iPod ad, and of course it's gone on to greater fame. You may also remember that Yael Naim's great song, New Soul was used to introduce the MacBook Air. It was the first time many people had heard that song, and people said, I gotta have it.
Strategy as a Perspective
Let's look at another version of the word strategy. Strategy can also refer to a perspective that a company takes. A good example of this is McDonald's. As you well know, McDonald's operates all over the world, and everywhere that they operate, they operate with noticeable similarities. They're always low cost, there are always the same kinds of food, they have a particular system which in the early days was called the Speedee Service System. Don't use that so much anymore, but very many of the elements are still there. And everything that McDonald's does tends to follow that same pattern. Standardized processes, low costs, low cost labor, quality assured by automation of the processes that they use in the back of the kitchen.
Strategy as a Ploy
The final meaning of the word strategy is strategy as a ploy, as a maneuver intended to trick an opponent or a rival. Good example of this, and by the way it's an example that probably neither player in this story would agree to, is when Boeing, some would argue, tricked Airbus, its European rival, into committing to a very large development effort for the A380, a very large airplane that they went very big on what was called the Sonic Cruiser. They announced plans to create a supersonic airplane that was going to have particular strengths and particular weaknesses. Airbus shows the A380 as a way of going a different route of entering the market in a different way, appealing to airline customers in a completely different way. But then, part of the way through, or well down the path of the A380's development Boeing decided not the pursue the sonic cruiser and instead to create the 787 Dreamliner. Some people would suggest, and some people have suggested, that Boeing decoyed Airbus into developing the 380 and then switch gears after Airbus had gone far enough down that path to make the move irreversible. And in the end, the A380 has not proven to be a very good strategic move for Airbus.
The Boeing Sonic Cruiser was never built. Do you think it was a decoy? Was it a ploy? No one will ever really know, probably, other than the people who were close to the decision making at Boeing. But it did have the effect of creating an airplane at Boeing, the 787, that has since, dramatically outsold the A380. For many companies, the A380 has proven to be just too big.
So that's it. Five different meanings for the word strategy. The field of business strategy takes an interest in all five of those meanings for strategies. So we can't just choose one. We can't ignore any of them.