My definition of business strategy – which runs through all these pieces like a thread – is simple:
It’s the unique value the business seeks to bring to the market.
Businesses are nothing more than vehicles for value exchange, therefore it stands to reason that if you maximise the value you give, you’ll maximise the value you take. That’s the whole story really, everything else is just details. Use this definition and you won’t go far wrong.
Still, simple though it is, it is also technically wrong. The true “textbook” definition of strategy is much wider than that, something more along the lines of:
The path you’re going to take to achieve your goal.
The main reason I don’t use this definition is because it’s so broad and wooly that it’s almost meaningless. It’s another way of saying “you could do anything to achieve anything”. Where do you even begin with that? By drilling down to something specific and directional, as the first definition does, we take a practical first step, rather than getting lost in abstractions.
Nevertheless, I must acknowledge that by adopting this narrower framing of strategy, we are actually excluding many legitimate strategies a business might adopt; strategies I call “non-value strategies” because, obviously, they get their leverage from something other than delivering value.
Let me give you an example.
The Mars corporation, through various clever means, found a way to make chocolate bars far more cheaply than their competitors. Rather than doing the obvious with this – selling their product more cheaply – they instead chose to sell at the same price as everyone else, and use the extra margin to buy shelf space from retailers. When you see a Mars product in a store, chances are that either today or in the past they bought that presence, rather than landing there “organically”.
I actually experienced this directly with one of my clients, Eat Natural. The most physically similar of their competitors were KIND, an American brand which had been bought by Mars and exported to the UK. Although Eat Natural had a higher rate of sale than KIND (which would normally allow it to command the superior shelf position), Mars paid retailers to give them better listings. This was smart of course, because in time that shelf position had the potential to embed the product in consumer consciousness, ultimately resulting in the product being able to hold that space on its own.
(I should add that Mars are by no means the only brand who play this game, but as I understand things it is a historic strategy of theirs that has served them well for decades)
As you can see then, this is a classic “non-value strategy”, because it is totally unrelated to the value they are bringing to the consumer – or even the retailer frankly, since “paying someone to buy you” is not a sustainable long term position.
Non-value strategies like this are extremely common – especially, I would suggest, in the more old school mega-corporate world, where scale and complexity allows organisations to uncover hidden efficiencies, and leverage influence. It would be foolish to assume that all the successful products and services you come across have achieved that status by being “the best”; of course they haven’t. There are many other ways to play the game.
Considering this, we might ask why I don’t advocate more for non-value strategies, since they can be extremely effective?
There are three reasons for this
1 – UNIVERSALITY
The vast majority of businesses simply don’t have a viable non-value strategy at their disposal. Speaking broadly, such strategies are typically only accessible to large corporates. Sure, in some cases smaller businesses will have some sort of non-value leverage to call upon – for example the use of a proprietary technology, having a celebrity founder, or something random like that. But mostly they won’t.
By contrast every business – including those using non-value strategies – must have some sort of value strategy. Mars’ game of buying shelf space wouldn’t work if nobody liked their products. Tony Soprano’s waste management company may be able to call on the extremely effective non-value strategy of whacking their competitors – however even that wouldn’t work if they didn’t at least manage some waste.
Sure, a business with a good non-value strategy can get away with pretty shoddy value provision. But clearly they’d be better off if they addressed that side of the equation too. Therefore, since every business needs to deliver value to some degree, it’s a good place to start.
2 – EASE
The second issue with non-value strategies is that that they are extremely difficult to arrive at methodically. They start from the broad definition of strategy – “anything we can do to achieve a goal” – and as such leave us floundering for a place to begin.
For this reason I’d suggest that non-value strategies are generally stumbled upon or post-rationalised, rather than being “engineered” in a deliberate manner. Businesses recognise that they have a particular ace up their sleeve, and deploy it, rather than “coming up with” that ace in a strategic development exercise.
You couldn’t simply decide to copy the Mars strategy, since it’s predicated on a manufacturing advantage that you can’t will into existence. Instead you have to have the manufacturing advantage in the first place, and then leverage it – a back to front process that their are no rules for.
Certainly if I was giving strategy advice to the board of General Electric or whoever I’d be on the alert for these opportunities, as they’d almost certainly be there. And equally if I stumbled across them randomly with a smaller brand then we’d use them too. But what you can’t really do is develop them out of thin air – whereas with value strategies you pretty much can.
3 – EFFECTIVENESS
Finally, although this is dependent on the example at hand, I’d generally say that value strategies are simply more effective.
Non-value strategies are often little more than glorified “hacks” to success, which are extremely dependent on some weird and likely non-permanent condition. A sudden shift in circumstances and – poof! – the advantage is gone.
Good value strategies, by contrast, can be reasonably timeless.
Part of the reason for this is that value strategies are deeply entwined with and protected by brand. Brand, as we know, is essentially the vehicle through which value is communicated, and by which a business builds a given reputation in its market. This reputation is robust to change. Let’s say another brand comes along which provides the same value, as good or maybe even better than you. Assuming you’ve built the reputation for this value, that doesn’t really matter, as your position is basically “locked in”. The newbie will struggle to gain traction. Apple haven’t really had a “tangible” strategic advantage for years, but their brand lets them hold position regardless.
How about if market circumstances change, and your product is suddenly no longer fit for purpose? Again, your brand reputation protects you, allowing you to develop a new product that continues to offer the strategic value in the new context, without skipping a beat.
Non-value strategies, by contrast, have no brand connection to protect them. Consumers are totally unaware of them. When their leverage disappears, the strategy vanishes completely, leaving the business totally exposed and floundering.
This is why the most switched-on megacorps – like P&G and Apple – deliberately force themselves to put consumer value at the heart of their strategies. Could they get away without doing this? Of course they could. Would it be easier? Probably. But they’d be vulnerable. Vulnerable to ending up like the many non-value focused corporations who fell on hard times despite their once unassailable market positions (e.g. General Motors).
In conclusion, although non-value strategies are a huge part of the strategic field, we serve ourselves best by seeing them as a “bonus” – something to be jumped upon if they fall into our laps, but not worried too much about otherwise.
They are not true alternatives to value strategies, which to me are fundamental, and non-negotiable.