A Brief Introduction To Strategy

What is strategy? I entered this phrase into everyone’s favourite search engine and got over 900 million search results back. The search took all of half a second and the search engine was able to provide me with a standard dictionary definition of strategy, a wikipedia excerpt and a whole slew of articles from Harvard Business Review magazine. These articles featured Michael Porter as the authority on the subject, with several other authors trying to supplement his ideas with their own interpretation of what strategy really is.

I read through many of the articles. I was looking for the definition of what strategy really is. Here’s some of the better explanations. “Strategy is a plan of action or policy designed to achieve a major or overall aim” said the Google supplied dictionary definition. Andrew Wilson from US Naval College sees strategy as a “process by which political purpose is translated into military action”. The Firm, McKinsey, sees strategy as “an integrated set of actions designed to create a sustainable advantage over competitors”. And finally, Alfred Chandler writes that “Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals”.

The definition gets even more confusing when people mention the phrase “Strategic Plan”. What is a Strategic Plan? If strategy is a plan, that what is the difference between the two. This confusion is compounded by the multiple spheres in which strategy is used. Strategy is defined differently in military, political, business, and personal spheres. So what is strategy?

The best definition that I found came from Richard Rummelt, a professor of Business and Society at University of California. He defined strategy as a type of problem solving. You or your business have a problem to solve and strategy is a type of framework for solving that problem. Rummelt defined three distinct pieces that formed a good strategy: a correct diagnosis of a challenge to overcome or a problem to solve, a guiding policy for dealing with that challenge, and a set of coherent actions that are designed to overcome the challenge or solve the problem. These three pieces are what Richard Rumelt calls a kernel of strategy.

This definition is the easiest to explain and it makes the most sense to me. Let’s look at some examples to see how Rummelt’s definition of strategy can explain three different undertakings: a military operation, an election and a reshaping of a business.

On January 24, 1943 Glyndwr Michael passed away in St.Pancras Hospital in London. Homeless, friendless and depressed, Micheal had drifted to London from Wales in search of a better fortune. Two days prior to his death, he was found seriously ill in an abandoned warehouse. Hungry, he ingested bread crusts which were smeared with poison to attract and kill rats. If it weren’t for the way he died, Michael would have passed on into abyss of history just as a note in hospital’s records. Fortunately, for the unfortunate Michael, the condition of his body resembled a man who’d been floating at sea for a few days, having died by hypothermia and drowning.

A couple months prior to Michael’s death, the Allies were planning an invasion of Europe. Codenamed Operation Husky, Allied planners chose Sicily as a the primary target for invasion. The problem was, according to Churchill, that “everybody but a bloody fool would know that it’s Sicily”. Their challenge was to convince Hitler that the intended invasion target was Greece and Sardinia. The invasion of Sicily had to be seen just as a feint.

Choosing Greece as an invasion target made strategic sense. Adolf Hitler was concerned with Allies invading Greece. The country was an important source of raw materials for the Germans. It provided copper, bauxite, chrome and oil for the war industries. The Allied command decided to act upon this information and try to influence German strategic thinking in the process. In order to accomplish this, they needed to employ a policy of deception.

Two plans of action were developed. The first, Operation Barclay, included setting up headquarters in Cairo for a fictional Twelfth Army. Military manoeuvres, with inflated dummy tanks, were conducted in Syria in order to deceive German spies. The second plan of action was to plant a set of misleading papers on a corpse that would then be found by the Germans. The plan was code named Operation Mincemeat.

This is how Glyndwr Michael contributed to allied victory. Two intelligence officers, Charles Cholmondeley and Ewen Montagu, found Michael’s corpse and determined it to be suitable for the operation. They invented a fictional Royal Marines Captain, William Martin, created a personal and professional history, complete with army service records, personal letter and a fiancee. His body was dressed in the uniform, provided letters from fictional father, fiancee, bills and most importantly, the deception documents outlining the purported invasion of Greece and Sardinia. The corpse was dropped in the waters near town of Huelva, in southern Spain.

The ruse worked. Martin’s body was found by local fishermen. They brought the body the local soldier garrison, who sent Martin’s letters to Madrid and from there, the intelligence was shared with the Germans. Hitler fell for the deception and moved German divisions from Sicily to Greece, Sardinia and Corsica. The Allies stormed Sicily, meeting little resistance.

The success of the Operation Mincemeat was, arguably, the biggest reason for the eventual German defat. To defend Italy, Hitler recalled troops from the Eastern Front, where the German forces were already meeting significant resistance from the Soviet Union. The reduction of troops put German army on the back foot. It weakened the Eastern Front, eventually leading to Germany losing the war.

What was the strategy there? Operation Husky’s strategy consisted of three distinct pieces. The first piece defined the challenge: convince Hitler that the invasion was to begin in Greece, instead of Sicily. The second piece outlined the guiding policy: the Allies decided to employ a policy of deception. They followed up with a third piece: two plans to deceive Hitler and the German high command, Operation Barclay and Operation Mincemeat.

Both, Operation Barclay and Operation Mincemeat, can be broken down into these same three pieces as well. Operation Barclay’s challenge was how to deceive German spies in Middle East that the invasion of Greece was being prepared. The guiding policy was adopted from the parent Operation Husky, mainly the policy of deception. And the setup of headquarters in Cairo and military manoeuvres in Syrias was the coherent action.

Similarly, Operation Mincemeat’s challenge was how to deliver misleading operations papers into the hands of German commanders. The policy was that of deception, like it’s parent Operation Husky. The use of Glyndwr Michael’s body and the creation of a fictitious caption Martin was the coherent action.

This was an example of how strategy works in the military sphere. Lets look at another arena where strategy plays a prominent role.

The month of November brought an upset to the world of politics in Minnesota. The 1990 election saw an incumbent and a heavy favourite to win senator Rudy Boschwitz lose to Paul Wellstone. It was a long year for both candidates. Paul hit the pavement early in the election cycle. Knocking on people’s doors, he appeared dressed in work shirts and jeans. When travelling, he stayed in people’s homes instead of hotels. His mode of transportation was a rickety school bus that broke down as often as it hit the road. Yet, this seemingly unorthodox approach to politics worked.

Paul was a son of Jewish immigrants from Ukraine. He was married to a daughter of Southern Baptists from Appalachia and they both had raised 3 children. He worked as professor of political science at Carlton College in Minnesota. Over the course of his career he became known as a sort of a rebel. Twice cited for civil disobedience, Paul liked to challenge the status quo and protest for the rights of the less fortunate.

The incumbent in the senate race was a twelve year US Senate veteran representing the Republican party. His persona exemplified the establishment. Though Rudy Boschiwtz was also Jewish and raised in an immigrant family, he tried to run a smear campaign against his opponent. His staff sent a letter to Jewish groups in the state complaining that Wellstone did not raise his children as Jews. The letter backfired because even though the Jewish leaders were outraged, the number of Jewish voters in Minnesota was small and their vote would have had a negligible effect. The biggest damage was done in people’s minds. Paul Wellstone had levelled a charge at Rudy, accusing him of running a negative campaign. The letter to the Jewish groups confirmed people’s suspicions.

When the campaign began Paul was the underdog. He knew that he was an underdog and he showed everyone that he was an underdog. While his opponent could count on big money donor contributions, Paul’s budget was limited to small contributions from his grassroots movement. Outspent 7 to 1 in the campaign funding, Paul took that disadvantage and made fun of it. In one TV commercial, he quipped that he did not have the kind of money that his opponent did, “so I’m going to have to talk fast”. Paul’s humour, down to earth attitude and his ability to connect with regular voters played a crucial part in his winning the election that year.

In politics, just as in war, the best way to win is to have a proper strategy. In this case, Paul Wellstone’s kernel of strategy can be defined as follows. First, the challenge. How can a newcomer to the political arena beat an established and financially secure incumbent? Second, the guiding policy. In order to overcome his challenge Paul adopted the underdog image. He developed a set of behaviours to help him maintain that underdog image. He followed it up with a a third piece of the kernel of strategy, a set of coherent actions. Instead of having an expensive campaign bus, Paul rode to campaign events on an old school bus. He dressed up as an everyday person and used humour to highlight the differences between himself and the incumbent. Paul Wellstone had developed a simple, but very effective strategy for winning the campaign and executed it to perfection.

Let’s turn to a business case and see how strategy works in that sphere.

In 1991 NeXT Computer Inc. was burning through its pile of investor cash like it was gunpowder. In September of that year Steve Jobs had orchestrated a superb and dramatic performance to show off the new version of a computer workstation dubbed the NeXT Station. It came with a built-in floppy drive, a hard drive, and a super fast 25 MHz Motorola processor. All of it, packaged in a nice looking black plastic pizza box.

The biggest feature and something that made everyone go “OOOH” was the colour display. During the conference, Jobs showed a video of the Wizard of Oz on the its screen. The audience was impressed, but the presentation was later found out to be a fraud. The computer was not playing the movie. The prototype was not fully functional. Instead, NeXT’s team hooked up a laser disk player to the monitor to play the movie.

Despite a successful presentation and rave reviews, NeXT Inc. was loosing money. Monthly workstation sales were hovering at around a few hundred mark. This was a problem that Steve and his board needed to address quickly. How could they make the company profitable? In order to overcome this challenge, they need to look at all aspects of the business and identify what worked and what didn’t.

From the beginning, NeXT Computer Inc. had some major disadvantages. Mainly, it was not setup to produce computer hardware efficiently. The company tried to emulate Apple’s early business plan that called for in-house assembly of each computer. It did not work. The structure of the industry had changed. Low cost, large scale manufacturing made the industry extremely competitive on price. Also, the new workstation was a money losing proposition. It’s main disadvantage was it’s most prominent and most expensive feature — the colour display. At almost $8000 per workstation, few people could afford to splurge on that type of a computer.

What NeXT Computer did have was an operating system called NeXTStep. Ahead of it’s time in terms of ease of use, stability and technology, NeXTStep was something that everyone wanted. More importantly, it was somewhat that everyone could afford to buy. The cost of developing the operating system was already accounted for, the distribution costs were negligible. This was the high profit product that could save NeXT Inc. The company decided to focus on operating system business. In 1993 NeXT Computer Inc. sold off it’s hardware unit and became NeXT Software Inc. Switching focus to operating system development had saved NeXT and made the company profitable.

Looking back at how Steve Jobs turned NeXT Inc around, it is easy to spot the three pieces of the kernel of strategy. The challenge, how to save a struggling company. The policy, review all business operations, leave no stone unturned, eliminate unprofitable units. The action, sell of the hardware unit and focus on the operating system side of the business. It is so simple, it feels like a no brainer. But the simplest of strategies could be the hardest to execute.

So what is strategy? The best explanation that I have found is the one from Richard Rumelt. Strategy is a type of problem-solving. It consists of a diagnosis and a definition of a challenge, a policy for overcoming the challenge, and a set of coherent actions that will make sure the strategy is going to be executed and bring about some form of benefit.

And since a set of coherent actions is a plan of what needs to be done, I would define strategy as a framework and plan for solving problems.