What is strategy? Has your boss ever said, I want you to think strategically here, or we need to be strategic in this decision? What do they want you to do? There's a good chance they don't know what they're asking for. First, because people often confuse strategy and tactics. Second, because nearly everyone assumes you can quote think strategically without situating that thinking within a context. Where are we now? What are our competencies and assets? What's happening in our industry? What are the likely future changes? Then where do we want and need to go to succeed? If you've ever been asked to do a SWOT analysis, strengths, weaknesses, opportunities, and threats, without figuring out the context, you've been asked to waste your time. The strengths and weaknesses are vis-a-vis the internal capabilities in relation to the external environment. Your organization's specific opportunities and threats are in relation to its capabilities and external environment. Strategy, as a term, came from war, military strategy. It's been applied to business for many years, but you can have a strategy for your long-term savings. For your career, you can use strategic analysis and strategic thinking and planning in just about every area of your life. A strategy is basically a plan that is designed to help you achieve a strategic objective, a big picture, long-term goal that enables you to achieve your mission and your vision. Tactics are the steps within the strategic plan, the actions you'll take to achieve your strategic goal. As a consultant, when companies ask me to facilitate a strategic planning meeting for their senior leaders and I say, sure, would you share with me some of your research on your competitors, customers, industry trends, and internal capabilities, the vast majority of time, the company has no idea what I'm talking about. They want to get their senior leaders in a room and in two and half hours knock out their strategy. But you cannot write a strategic plan in a vacuum. Furthermore, to achieve your strategic goals, your organization must ensure that all investment, all decisions, all actions are directed toward achieving that goal and when no one knows what the strategy is, when it is written entirely by senior leaders or a consultant without the input of employees at all levels, only sheer luck ensures that the time those employees spend and the money that gets invested actually achieves the strategic goals because people make dozens of daily decisions that add up to something and if they don't know what that something is that they're headed toward, employees may act at cross purposes to the strategic goal. Another reason to ensure everyone in the company has a shared and accurate understanding of the strategic goals, a 15-year longitudinal study showed that a 10 percent increase in strategic clarity can improve truth-telling by five percent. Sharing the goal can facilitate ethical behavior. What is a strategy? A strategy is a plan to develop, maintain, and grow a competitive advantage. That is, how we are going to provide value to our customers that exceeds the value those customers could get from a competitor. When we think about where we are competing now, we often use the word scope, product or market scope, geographic scope, and vertical and horizontal scope. The scope tells us the width of the market in which we intend to compete. A narrow product or market scope is one where we produce one or two types of products targeted to a narrow customer base. Geographic scope refers to where we're going to compete, and vertical and horizontal scope refer to where on the value system we intend to compete. Here is an exceedingly ridiculously simplified value system chart for the coffee industry. If you're in this industry, you're probably laughing right now, but it does show us what it means to backward and forward integrate. The system starts with growing the beans and ends with a cup of coffee in a customer's hands. If you own a coffee shop, you might backward integrate and roast coffee beans for sale. If you grow coffee beans, you might forward integrate and become a distributor of coffee beans. A close review of your industry's value system can uncover linkages and spaces between activities that might lead you to discover cost savings or ways to differentiate your business, or paths to expand your business. We also need to know which core competencies currently provide the basis of our competitive advantage. I will describe competitive advantage in greater detail later. Next, we'll look at the future. Although mission and vision are often used interchangeably, for the purposes of this lesson, I'm going to define them separately. A mission states why we exist, who are we, what is our purpose. A vision states where we want to go. I've heard many employees say our reason for being is to make money for the company's owners. I think you'll find this mission does not provide much motivation for most employees. They feel like they're cogs in the wheel of a machine that pumps out money that lands in other people's hands. I recommend spending some time with your employees working through a mission that is inspirational in some way. For example, employees of a company that makes corrugated shipping containers said, we make cardboard boxes and if we sell enough, the shareholders make a lot of money. That's the mission, make and sell cardboard boxes. They were not a very inspired group of people. They cannot imagine how their mission could be remotely inspiring because all they could see was the tedium of a task, they did nothing important. We aren't brain surgeons over here, one person said, no one's going to die if we don't do a good job. Unsurprisingly, turnover was high, and job satisfaction and engagement was low. After many discussions, the team came to this mission. Our mission is to provide strong cardboard boxes so that our customers' products arrive at their destination safely. Now that might not be thrilling, it's not brain surgery, no one's going to die, but it is an important mission, more important to the people doing the work than making money for some other people they cannot even see. They order stuff all the time, we all order stuff all the time and we are just as unhappy and they are just as unhappy as the next guy if the product is damaged in shipment. Their vision became, we want to be the company that enables manufacturers and distributors to ship their products anywhere in the world worry-free. Now that might get you out of bed in the morning. PetSmart is a pet supply store in the United States including Puerto Rico and also Canada. According to its website, PetSmart's mission is, "Every day with every connection, PetSmart's passionate associates help bring pet parents closer to their pets so they can live more fulfilled lives." Its vision is, "PetSmart is the trusted partner to pet parents and pets in every moment of their lives." It has several core values, passion for pets and people, play to win, be accountable to the pack, united together, and learn new tricks. They used pet language for their core values and they're a little vague, but they explain them in greater detail so that they can be lived by. Now imagine you are a PetSmart leader or a manager of a location, how might your decisions be influenced by your mission, vision, and values? How do those mission, vision, and values influence who you hire, how you train? How might it influence what products you stock, how you design a store? What else might they influence? You might have thought, if I was a leader at PetSmart who wanted to ensure that with every connection I bring pet parents closer to their pets, then I need to hire store employees who love animals. If I was hiring for another store that sells pet supplies, I might just look for someone with cash register experience, for example. But if I need people who can make that kind of connection with a pet parent, I need someone who is completely comfortable walking around with a rat on their shoulder, someone who would love to scooch down and pet your dog and won't express disdain when the dog slobbers and sheds all over their clothes. If the vision is to be a trusted partner and my values include "learn new tricks", I might invest heavily in employee training that goes beyond how to restock shelves and count the cash register at the end of a shift. I'd want my employees to know how to care for a wide range of animals, from parrots to goldfish, and be able to advise the pros and cons of getting a gerbil versus a ferret with parents of small children. If I were designing a store layout for a different company, I might focus on how people will move through the aisles with shopping carts. But at PetSmart, I would also consider how dogs might move through the aisles. Every decision at every level must be aligned with your mission, vision, and values. How will you allocate investment in capital expenditures for research and development? Will you grow organically or through mergers and acquisitions? Which customer segment will you target and how? What will be the new employee onboarding process? How will you resolve customer complaints? No matter what the decision is, it must be aligned with your mission, vision, and values, or it will not help you to achieve your strategic goals. You might have a vision and a mission for yourself personally as well as your organization. For example, my mission is to facilitate students in getting their brilliant ideas heard and implemented at work. That's why I get up and go to work every day to help you succeed. My vision is to be an instructor who designs and teaches current management theories and practices in a challenging yet supportive learning environment. What is your mission? Why are you in your job? What is your vision for the future? In summary, your strategy is your plan for how you will deliver value to your stakeholders that they cannot get from a competitor. To figure out a strategic plan first, we conduct a strategic analysis; an internal and external analysis of where we are now and what might be changing for us and our industry in the future. In the next video, we'll explore a framework for evaluating one's industry.