Strategy is a choice, not a wish
Ask ten managers what their company's strategy is and you will often hear ten different answers, most of them targets: grow revenue by a fifth, become the market leader, delight customers. Targets are useful, but they are not strategy. A strategy explains how the company will reach a goal given the competition it faces and the resources it has. Former Procter & Gamble chief A.G. Lafley and Roger Martin put it in two questions in Playing to Win (2013): where will we play, and how will we win there?
Reading the industry first
Before choosing a position, a company needs to understand the ground. Michael Porter's five forces, introduced in a 1979 Harvard Business Review article and expanded in Competitive Strategy (1980), remain the standard lens. They are rivalry among existing competitors, the threat of new entrants, the threat of substitutes, the bargaining power of suppliers and the bargaining power of buyers. Together they explain why some industries earn steady returns and others struggle no matter how well individual firms are run.
Porter also argued that firms tend to succeed through one of a few generic approaches: being the lowest-cost producer, offering something customers will pay more for, or focusing tightly on a niche. The danger, he warned, is being "stuck in the middle", neither cheap nor distinctive.
Telling good strategy from bad
Richard Rumelt's Good Strategy Bad Strategy (2011) offers a practical test. A good strategy has a kernel of three parts: a diagnosis that names the central challenge, a guiding policy that sets the overall approach, and coherent actions that put the policy to work. Bad strategy, by contrast, tends to show up as fluff, a failure to face the real problem, goals mistaken for strategy, or objectives that are simply a wish list. Running a strategy deck through those three questions quickly shows whether it contains real choices.
When good companies get overtaken
Clayton Christensen's The Innovator's Dilemma (1997) explained a pattern that puzzled many boards: well-managed firms losing to smaller rivals with cheaper, simpler products. Established companies listen to their best customers and improve products for them, while disruptors start at the low end or in new markets and move up. The lesson is not that incumbents are foolish, but that their own sound processes can blind them. Some respond by creating separate units with different targets.
W. Chan Kim and Renée Mauborgne of INSEAD offered another angle in Blue Ocean Strategy (2005): instead of fighting rivals in crowded markets, create uncontested space by reshaping what customers value. It is a useful prompt, though real blue oceans are rare and often attract competitors quickly.
How strategy reaches the board
In most companies, management drafts strategy and the board approves and challenges it. A common rhythm is an annual strategy session, sometimes held off-site, followed by a multi-year plan and an annual budget that funds the first year. Non-executive directors test assumptions about markets, competitors and capabilities, and ask what would have to be true for the plan to work. Once approved, strategy should guide where money and people go. If the budget does not reflect the strategy, the budget is the real strategy.
Using this in your next meeting
When a new initiative is proposed, ask three questions: which customers and markets does it target, why would we win there against current rivals, and what are we stopping to make room for it? Those questions tend to cut through slide-deck language faster than any framework.