What is Corporate Strategy?

What is Strategy?

Corporate Strategy is a concept that we all assume to be grounded into the way business is managed today. As I read the book The Passion Economy, a few observation by Adam Davidson has, however, drawn my attention to investigate this topic a bit more. Additionally I came to investigate a few other dimension of Organisation Design (Business Models, Operating Models and Organisation Models above all), and found it important to better define what Strategy is, and what it needs to be.

First of all, the topic itself is not that old. Strategy had always been a military concept, sometimes applied to Diplomacy and Politics, but never really to the business. Let’s look at Google’s NGram viewer, and see the usage of the term Corporate Strategy across millions of books. The word appears only after 1960 and becomes common only after 1980. For sure, the appearance of Michael Porter‘s article How Competitive Forces Shape Strategy in 1979 and the subsequent 1980 book Competitive Strategy have had their influence.

Fig.1: Ngram of usage of the term “Corporate Strategy” from Google Books.

Porter’s book, as well as much of the research that followed, concentrated on the concerns of large businesses. For many years still, Strategy was something that large companies (often supported by specialised consulting companies) did.

Strategy was more akin to some form of mystical shamanism than it was to a learnable business tool.

Adam Davidson, The Passion Economy, page 20 (Davidson, 2020)

What is Corporate Strategy?

There are many definitions of what Corporate Strategy is: some tend to look at complexity, others might be too simplistic. I find the definition used by Michael E. Raynor to be spot-on: how an organisation creates and captures Value in a specific product-market (Raynor, 2007).

This definition has the advantage of helping to define three elements:

  1. You need to identify the Organisation
  2. You need to identify the Product Market in which the Organisation operates
  3. You need to determine what Value it creates (and be able to measure it).

The points above may seem trivial but are the core of how to define the exact sense of the existence of an organisation. Any organisation.

When I taught Strategic Management of Non-Profit Organisations at the University of Bologna, the question about Strategy was put exactly in that sense. Those elements are present for any Organisation. Businesses are usually focused on revenues and profits in terms of Value Creation. But this is not necessarily the only Value created. Any non-Profit organisation still operates in a specific Product market (those who fail to recognise this, tend to become irrelevant quickly).

The binding element of the answers to the three questions needs to be The Purpose that an organisation has. We have already discussed this. But Purpose and Strategy are not precisely the same.

Generating Value and Managing Uncertainty

Corporate Strategy is also not a plan. Too many organisations limit their interpretation of the Strategy to the Strategic Plan they create every few years. That part is the Execution of the Strategy, a significant factor for sure, but is not the same. Another typical confusion for some is the identification of Corporate Strategy with the way the Organisation is designed. Organisation Charts alone don’t tell the real story, and again the risk is that we mix Execution with the way we develop the real Strategy.

The truth is that a successful Organisation Strategy is a somewhat fascinating mix between two seemingly opposite elements: Value Generation and Management of Uncertainty. This is especially true as we address an era where change seems to be continually accelerating.

Many tools exist that can help create identify the right mix. Along with a structured mindset that understands that Strategy Definition needs to be a circular process, capable of constantly reviewing itself through a feedback loop. Insight, Foresight and Intuition are still critical components for the definition of a valid Strategy. Yet, so it is Flexibility and the capacity to review it and update it over time.

Strategy as a component of the Organisation Evolution Framework

I’ve recently introduced a Visual Framework that allows visualising all essential building blocks of Organisation Design. Strategy is a critical component of it, and although I did not go deep in this article on the different meanings associated with Strategy, I wanted to ensure there is a visual link to the model. Which is now available in its first release, and open for feedback. The model associates a definition to each component, and the identification of the Critical Element associated, which in this case are Strategic Priorities.

2. Strategy | Organisation Evolution Framework
Fig.2: Strategy | Organisation Evolution Framework

Introducing the Organisation Evolution Framework

Visual representation of Organisation Design building blocks and their dynamic relationships.
Now released in Version 1, open for feedback.

Linking in Strategy and Execution

Here comes the one key element of good Strategy: Execution. Too often, many managers (and consultants) seem to put a higher stake on the development of a Strategy. But good Strategy necessitates proper Execution. This is the core of what an organisation stands for.

Disciplines and tools like Organisation Design and Governance are vital components of this, together with culture and the correct balance of skillsAll of this is Execution.

The key in today’s world is ensuring a level of Deliberate Consistency that is much higher than before, which is why glueing mechanisms like Passion and Motivation, or being Deliberately Developmental become the valid winning arguments.

What’s funny is that we end up labelling all these elements as part of a rebel movement. The real rebellion seemingly being into linking successful strategies with excellent Execution.

What do you think? Leave a comment in the box below.

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Reference List

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Davidson, A. (2020). The passion economy : the new rules for thriving in the twenty-first century. New York: Alfred A. Knopf.

Porter, M.E. (1979). How Competitive Forces Shape Strategy. Harvard Business Review. [online] Mar. Available at: https://hbr.org/1979/03/how-competitive-forces-shape-strategy.

Porter, M.E. (1980). Competitive strategy : techniques for analyzing industries and competitors. New York: Free Press.

Raynor, M.E. (2007). What is Corporate Strategy, Really? [online] Iveybusinessjournal.com. Available at: https://iveybusinessjournal.com/publication/what-is-corporate-strategy-really/ [Accessed 27 Feb. 2020].

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Cover Photo by Michał Parzuchowski on Unsplash

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