Category Archives: Importance of strategy

Reacting is as important as planning

Reacting is about reshaping the strategy to match unplanned events. To be able to react it is needed to get feedback from the inner (inside the company) and outer world. A firm may react after factors such as government policy changes, consumer demand etc.

Reacting is also about adapting the company direction in order to compete with other firms and their activities; it is the “me too” approach that usually doesn’t drive the company to more profitable markets as they are constantly imitating others.

After applying a new business plan, a strategist has to start to monitor the inner and outer reactions to the new strategy.

The firms’ new strategy is less value innovative the sooner the competitors are able to react to the market changes. This is due to the fact that with highly value innovative strategies a new market is opened and other competitors have to deeply redesign their activities to follow your company moves. In order to reorganize their activities they will lose time allowing your company to set up countermeasures to limit new comers’ success. The strategist should be continually shifting through events for evidence about how the deployed plan is working. The danger is that following the plan too slavishly (without responding to events) will lead the company “efficiently” in the wrong direction.

The right plan can be made wrong by events and therefore the strategist must monitor these events too. Even worst would be not to follow any plan. It would almost definitely lead the firm to reach low to no profitability as the firm would find it difficult to link actions to create value for the consumer.

A good strategist will consider possible events in the market while planning (different scenarios) therefore being prepared to react to events faster and intellectually, which may possibly give the company the leading edge.

In the real world, it is highly possible that the intended strategy (deliberated strategy) is different from the realized strategy due to the adjustment applied in deployment phase to better focus environmental changes.

Some strategies or part of them turn into unrealized while emergent strategies, driven by market events, become part of the realized strategy. This phenomenon was first highlight in the H. Mintzberg’s “deliberate and emergent” theory (1985).

Mintzberg’s deliberate and emergent

Author: Carlo Olmi

The importance of strategy

“Mission is at the heart of what you do as a team. Goals are merely steps to its achievement”. e.g., (Dixon P. 2012).

“The expert in battle seeks his victory from strategic advantage and does not demand it from his men.”  e.g., (Tzu S. 2009).

A company is made up of people, assets and financial resources. It is a collection of skills and resources. Combining these items and focusing them toward a shared objective is the main strategy goal for the company. The importance of combining skills and resources was well highlighted by Porter in his “value chain” concept from business management.

A value chain is a chain of activities for a firm operating in a specific industry. The business unit is the appropriate level for construction of a value chain, not the divisional level or corporate level. Products pass through all activities of the chain in a set order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of the independent activities’ values.Porter1

The value-chain concept has been extended beyond individual firms. It can apply to whole supply chains and distribution networks. The delivery of a mix of products and services to the end customer will activate different economic factors, each managing its own value chain. The industry wide synchronized interactions of those local value chains create an extended value chain, sometimes global in extent. Porter terms this larger interconnected system of value chains the “value system”. A value system includes the value chains of a firm’s supplier (and their suppliers all the way back to the basic raw materials of the product), the firm itself, the firm distribution channels, and the firm’s buyers.

Author: Carlo Olmi