Having looked at the strategic intent, market activities, and business models of hundreds of companies over the past two decades, I am sure of only one thing: most companies don’t really understand strategy. A recent article in Strategy + Business by Ken Favaro tackled this issue head on.
“When discussing strategy, executives often invoke some version of a vision, a mission, a purpose, a plan, or a set of goals. I call these “the corporate five” Each is important in driving execution, no doubt, but none should be mistaken for a strategy.”
When I discuss strategy within organizations, I try to get to the heart of intent by asking four simple questions:
- Who are you?
- Why are you here?
- What do you do?
- Why should I care?
Now, those questions don’t cover all the bases, but if an organization can’t answer those, they don’t understand where they are trying to go or what they are trying to be. Favaro has a different set of questions that crosses the same territory. He calls them” the strategic five”.
“Before they get to the corporate five, companies need to address five much more fundamental, and difficult, questions. Let's call them the “the strategic five”:
1. What business or businesses
should you be in?
2. How do you add value to your businesses?
3. Who are the target customers for your businesses?
4. What are your value propositions to those target customers?
5. What capabilities are essential to adding value to your businesses and differentiating their value propositions?”
I also think it is important to recognize that “the corporate five” have historically become hard-coded as an “aspirational” raison d’être, often resulting in sclerotic environments that are neither agile nor adaptable enough to maintain success in today’s rapidly evolving markets.
Answering Favaro’s “strategic five” prepares an organization to much more easily roll with the punches that their marketplace will almost certainly attempt to throw their way.