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What Is Strategy? The Fit Between Positioning & Capabilities

What is strategy?” seems such an easy question to answer as you hear the words “strategy” and “strategic” banded around like confetti.

But the “What is strategy” question hides a problem.

People often decide that they need to work on their business strategy before really understanding what strategy is.

And doing something that is not understood leads to disappointments when:

  • the strategy is not developed in the way that they were expecting;
  • is not implemented successfully; or
  • does not work in the way they thought.

What is Strategy?

My personal definition of strategy is:

“Strategy is how you achieve your own objectives by winning the hearts, minds and business of customers by out-thinking and outmanoeuvring competitors.”

The Fit Between Positioning & Capabilities

Strategy is about providing a consistent match (or strategic fit) between two words – your positioning and your capabilities.

Positioning is how the company is to be seen from the outside.

Positioning describes how your customers will see the company, how your competitors will see the company and how your company reacts and responds to all the external stakeholders.

Capabilities describes what your business is really good at and what special skills it is able to bring to the solving customer problems better than competitors.

The best strategies achieve fit like a perfect hand made glove.

Special and distinctive capabilities are used to create unique positions in the marketplace that give targeted customers an unbeatable combination of benefits for the price charged.

The Battle For Strategic Fit

It sounds easy but too often the emphasis is on operational effectiveness and efficiency rather than carving out unique space in the market by being different from all your competitors in ways that your targeted customers appreciate.

The big problem is that to achieve true strategic fit between your positioning and your capabilities, you have to make choices and choices are hard:

  • You have to decide what you are going to do so clearly that it rules out many things that you could do.
  • You have to decide who your target customers will be and who you will consciously avoid dealing with.
  • You have to decide how you are going to deliver your product or service so effectively and efficiently that you can avoid, beat or survive competition.

Michael Porter – “What Is Strategy?”

In a great article in Harvard Business Review called “What Is Strategy“, leading strategy guru Michael E. Porter explored these issues and looked at whether companies could straddle positions.

By straddling I mean, can a company occupy their own unique position while at the same time compete effectively in another position.

Michael Porter concluded that the only way a unique strategic position could be sustainable was if it forced competitors to make trade-offs with positions that they already held.

These trade-offs could include:

  • inconsistencies of image and reputation where a brand won’t travel convincingly from one position to another.
  • activities that require different levels of skills, abilities, attitudes and behaviour.
  • problems managing the complexities and the coordination of diverse customer needs.

What Is Strategy? Michael Porter on Video

Here is a short video of Michael Porter answering the question. It’s less than 2 minutes long and well worth watching.

Strategy is…

It’s about finding a unique strategic position that builds on your capabilities and which forces competitors to make expensive trade-offs if they want to try to straggle their existing strategic position and your new strategic position.

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