Business and
Functional Strategy
Business and Functional Strategy
A plan is not a strategy — the term “strategy” is endlessly elastic, frequently employed to make casual inclinations or direction-setting sound more thoughtful and important than they really are. We view strategy more rigorously: as a coherent set of choices governing action, taking others’ behavior into account.
There are three important elements in a strategy:
it comprises choices governing action, not merely the actions themselves. These choices are decisions about which principles to follow, thus guiding action in a variety of circumstances. That way, strategy has some 'legs' — it doesn't need to be defined in every variant for each conceivable (or unanticipated) situation. In the context of business strategy, these principles are about "how to win" — for example, with lower costs and prices than competitors for the same products and services? With differentiated products and services? With superior execution? But never with "all of the above" — real choices require tradeoffs. A strategy is as much about what you will not do as what you will — a key way it guides actions.
it is a coherent set of such chosen principles — coherent in the sense that these principles are mutually reinforcing and consistent (or at least not contradictory); and a set in the sense that together they are sufficient to guide actions within the domain. Once again, in the context of business strategy, it will usually need to specify not only "how you win" but "where you compete" — that is, in what markets, products, and services, for which customers. What constitutes a complete enough set depends on a company's particular circumstances.
it takes the behavior of others into account — it considers what other actors might do, particularly in response to your own actions. These actors may be competitors, or partners, or regulators — anyone whose actions could affect the outcomes of your actions. For example, pursuing a lowest-cost strategy against similarly-endowed competitors who are also employing that strategy may be futile — or at the least, it will require specifying how you’ll win if the competitor then further reduces its costs.
What, then, do we mean by "functional strategy?" While a business strategy's scope is the business as a whole, a functional strategy’s scope is each of the functional units of the business: IT, finance, marketing, engineering, manufacturing, etc. A functional strategy describes how that business function will deliver on its responsibilities within the business strategy. Included are: what must the function be able to do? How will it do that, especially in light of what the other functions of the business ore doing? Or of what the same functions in competitive businesses are doing?
Our Business and Functional Strategy Practice helps companies rapidly address the key elements of strategy — whether at the business unit or functional level. We help you focus on "what really matters" and achieve clarity that drives action — and avoid getting distracted by the multitude of factors that often "bog down" strategy development efforts.
