Strategy is not simple

Like marketing, finance, or any large topic of consequence, strategy doesn’t easily narrow down to sound bites. There is a reason why you study this stuff over 3-4 months with heavy use of case studies, discussion, and debate:

• Strategy sits within a context of industry, company’s strengths, macro consumer trends, trade, regulations
• The key drivers of competitive advantage shift; what made GE great in the 1980s-1990s, is not true today
• In 2020, 100% of strategy departments were somewhat wrong; that’s not a surprise, or an indictment

What’s your key takeaway?

I ask this question regularly of my students, and of myself. Please find 100+ delightful takeaways on the topics of economics, competitive advantage, game theory, vertical integration, supply chain, digital payments, subscription services, blue ocean strategy, RBV, industry analysis, and corporate strategy.

Yes, there are 2 exams, 3 papers, and a lot of discussion and debate. Yes, this is a rigorous class, and yes, we learn a lot together. Great privilege to teach smart, ambitious, curious people. Initials of (contributor). 

Strategy, business, career

1. No two companies are alike because no two have the same experiences, assets and skills, culture (JG)
2. You shouldn’t trust a singular, precise answer to a complex problem (AM)
3. It’s not about if you will take risks, but when (NL)
4. When it comes to strategy, choosing what not to do is just as important as what you’re actually doing. (CK)
5. Frameworks are a good tool, but are not absolute and are not perfect. (EA)
6. “Beware of false choice.” You need elements of BOTH. . . (SB)
7. You either want to be small and niche or massive and broad. (KL)
8. It feels like an important question to ask ourselves that can business be good AND profitable? (OC)
9. Success requires identifying the next few steps along a broadly defined strategic path and then learning and refining as you go. (JS)
10. From Dr. Shetty [founder of Narayana Health] himself, “Charity is not scalable, good business practices are scalable”.  (MZ)
11. A subscription service is NOT a strategy. However, it can be part of a strategy as a way to bundle value for the consumers and hopefully solve a “forever problem.” (ZA)
12. A lot of strategy is how to deal with the future. Leading indicators help us think about what is going to happen in the future. (AO)
13. It’s more important to be the first to scale, not first to market. (TS)
14. Culture is an incredibly important factor to create a virtuous cycle. (RL) 
15. Any decision must come attached to a specific time frame. Very few decisions are viable across all time frames (MD)

Planning vs. strategy

1. Planning is not equivalent to strategy (CZ)
2. Strategy setting is not a one-time event (KJC)
3. Successes and failures can snowball and how you adjust and battle the test of time will determine your longevity and degree of success. (ET)
4. Willingness-to-pay is NOT the same as price. (JA)
5. Strategic planning is an oxymoron – strategies don’t come out of a formally planned processing. The most interesting strategies emerge out of thoughts and direct problems that grow into major shifts of perspective. (MZ)
6. Strategy is never 100% top-down or 100% reactive. It’s interesting that the mix of these two principles used is often only realized in retrospect and often not clear at all. (BS)
7. There are many ways to analyze the value proposition and value chain of a single company/endeavor. For example, we can begin from a marketing perspective, spurring increased demand, and using the profits generated from this demand to finance further growth. Or, we can examine a company from an operational perspective – the internal fixes (cost-cutting/synergies, efficiency in utilization, etc.) can be the catalysts for lower prices, then leading to higher demand. Furthermore, we can imagine financing as the key catalyst in that financing can generate R&D, new hires, and most imaginable improvements. (AT)
8. Considering the “Time-frame” is important. In the long-term, the fixed cost is important. In the short term, marginal is important because the fixed cost is sunk. (VL)

BiG lie of strategic planning 

1. Strategy is scary, but using that angst and nervousness generated by that uncertainty is key in making calculated bets (not gambling) in order to maintain a sustained comparative advantage. (SY)
2. Amazon’s approach to strategy is think like its day 1. This is they don’t get complacent. (KN)
3. If you are comfortable with your strategy and feel that nothing can go wrong, it is likely a bad strategy because there will be risks involved that you are not considering. You need to find a common ground between comfort and confidence. (JG)
4. Strategy is more like poker than chess – great success can be great decisions plus luck. (MZ)
5. Wandering is not the same as being lost! It is so important to keep an open mind and not allow the fear of risk to blind your true range of possibilities. Focusing on both long-term AND short-term will help keep track of goals; life is not linear, so being careful of falling into the track of simply planning but not actually strategizing as well! Flexibility is key!  (LL)
6. Progress, both for individual and corporates, are S-curves, not a straight line.  When you graduate, there’s no syllabus. Be a little bit patient, and keep your passion and think like it’s day 1. (TS)

Economics, industry analysis

1. A competitor with heavy fixed cost is dangerous. Because the large portion of cost lies on FC and MC of the company is low, it can sell the product at a very low price and sell more products as a result. (XZ)
2. Sometimes to maintain customer loyalty and your brand image you have to eat a lot of profit if costs go up. (KN)
3. Depending on your cost structure, your operating behavior will be very different. (BS)
4. Who would you like to be? Pricing is a really strategic decision (MK)
5. As long as MR is higher than MC, A restaurant should stay opened even though it is only 1/3 full because the goal is to stay fully utilized and gain more customers (increase volume) as there is a sunk cost and it is a better alternative than not earning anything and still having to pay for fixed costs. (JM)
6. Competition consists of more than just your rivals, it includes all entities that seek to reduce profits. (MC)
7. Substitutes are often overlooked because they are sometimes in different industries with different products. (JM)
8. Porter’s 5 forces framework purpose is to measure the industry’s profitability. Each drivers are not equal and can be more impactful on the competition and the profitability than other. (DB)
9. Economic moat is very important for a company, because once an industry becomes profitable, lots of competitors are likely to join in and imitate the winners. If the company has a moat, it can better defend its profitability. (XZ)
10. The essence of the job of the strategist is to cope with competition. Competition is not just rivals, but anyone who looks to shrink your profits (could be suppliers, new entrants, substitute products, etc.). (ZK)
11. Companies should not obsess over their rivals because they are all different and so the way that each company can succeed will be different. (TR) 

Financial ratios

1. Financial ratios are not perfect, but they are a great way to look at a “snapshot” of a company and to then drill down into where the issues might be coming from. (EM)
2. Don’t rely solely on the percentages, you need some context or else you’ll make some inaccurate conclusions (SS)
3. [For financial ratios] Audience matters. Different parties are going to care more about different ratios. (MC)
4. Suppliers care most about liquidity ratios because they’re looking to get paid for their supplies (JK)
5. Gotta make sure to compare apple-apple (not putting products against services) (KL)
6. Seasonality matters. If looking for an accurate comparison [of financial ratios], do not find yourself comparing summer versus winter, with yourself or a competitor in this way (SN)
7. Leverage can skew your ROE; some leverage is good because it can boost your return on equity, but too much leverage can be de(bt)trimental when being able to service the outstanding liability starts to come into question. (AF)
8. Financial Ratios are a baseline but are not the “answer.” (TY)
9. Ratios are symptoms not the disease (AO)
10. The ratios we care about depend on “how sick the patient is.” (SB)
11. One of the primary benefits of financial ratios is that they allow us to prepare for the “uncertain tomorrow” that Peter Drucker stressed the importance of preparing for. (CK)

What is strategy?

1. Culture eats strategy for breakfast. (HB)
2. The best thing Southwest did was finding that 1st piece of the domino effect: using the same type of plane – which had a cascading effect on its other operational efficiencies. (KL)
3. The consistent success of Southwest Airlines is a great example of strategic positioning. It is not just their low prices, but their cost structure (low gate fees, high aircraft utilization, preparation and risk-taking horizon for the future) that has allowed for continued longevity. (LL)
4. Herb [Kelleher, founder of Southwest] said this in the podcast– “Think small and act small and we’ll get bigger! Think big and act big, and we’ll get smaller.” This quote shows the humility that Herb has when thinking about operations and company culture. (AC)
5. Companies should carefully select a set of focused activities that are self-reinforcing and complementary in order to deliver a unique mix of value. (PL)
6. Strategy is about being unique and taking risks to get ahead of the competition…BE YOURSELF (AD)
7. Growing just to grow and overextending can be very detrimental for a business. (RW)
8. The importance of strategy is integrated with aligning culture, business models, and unique positioning to maintain a sustainable advantage (KD)
9. Best practices are really just common practices, and if your company is not doing them, you are probably losing money. (JW)
10. If many companies use the same practices (like benchmarking, outsourcing, CRM, strategy planning), its not strategy, it is “the norm”, the minimum you have to do to stay in the competition. (AT)

Vertical integration, RBV

1. Vertical integration is often driven by a desire for control (eg. control over buyer power, control over pricing, control over new product development. (HH)
2. Finished products on the market are actually backed by complex and often international value chains; the management of these value chains is an integral aspect of strategy. (RC)
3. One person’s price is another person’s cost: impact of the value and supply chain for industry structure. (TY)
4. Strategy evolves over time – as market growth slows, expect consolidation. (ZA)
5. You need to stick to what you are good at, but the rule is trickier when you are a giant like Coke when there isn’t much you haven’t done. How do you grow? (AB)
6. A company’s assets and capabilities are what make the company who they are. They [must] be evaluated [within a] context. Also, value is relative, based on context, and time-dependent. (VL)
7. Advantage needs to be measured in a time frame, your main advantage now might not be your advantage in the future. (LM)
8. RBV is the guts of the business – how to see what you are doing well so you know where to reinvest in your business.  (AB)
9. Superior resources are great, but do not guarantee success. (TS)
10. A major element of good strategy is causal ambiguity, meaning that the main driver of value can be difficult to pinpoint. Rather, it is a combination of a bunch of things working together that help to create a sustainable, competitive advantage. (ZK)
11. The biggest pro of vertical integration is control. Control over, quality, price, and information all come with owning more parts of the production process. (AO)
12. When you vertically integrate you have just inherited another set of people who hate you! BOO!! 🙁 (AD)
13. It’s important to remember that vertical integration can actually hurt a company. It is incredibly capital intensive and difficult to reverse. Once completed, it can distract from the core business and be hard to pivot away. (AV)

Innovation, evolution of strategy

1. A successful company will likely face multiple inflection points throughout its lifetime. The strategic decisions made at each inflection point will determine if they stay relevant or not. (SK)
2. A company’s strategy has to constantly evolve and adapt, creating barriers to entry for others, otherwise the company risks becoming like Intel and Casper – blue oceans turned red and they lose their market position and market share to other competitors, and struggle to adapt. (IC)
3. Comfort zones are comforting… until you lose. (NL)
4. Disruptive innovation is interesting because you would think people always want the high-tech, best version of a product but in reality, sometimes customers just want the simple version. (EJ)
5. Clayton Christenson emphasizes the importance of theory and how it allows for organizations to look into the future. Apple looks into the future by leading with products that customers don’t know that they need yet. (AC)
6. It’s hard to predict disruptive innovation. It goes against best practices and the common sense at the time, and while everyone else is going for more, disruptive innovation aims for less. (PK)
7. You can’t target a small percent of a huge market – need to target a large percent of a niche/specific market (GA)

Corporate strategy

1. Competitive strategy is how to compete, and corporate strategy is where to compete. (YZ)
2. Core competency = resources + capabilities (TP)
3. Trees need strong and stable roots to fight hurricanes and tornadoes. Same for companies – they need to know what they are best at and use these skills to encircle their entire organization. (NL)
4. Mergers and acquisitions commonly fail because corporations often wrongly diversify from their core businesses and lose their focus and/or identity. (ZK)
5. Cost synergies are more easily estimated while revenue synergies are more difficult to estimate due to uncertainties in customer reactions. (LY)
6. Treat products/investments like stocks – pour resources into the ones that are working (hold winners) and move on quickly from the ones that aren’t (sell losers) (IS)
7. A business structure must emulate the intended decision-making hierarchy. Any other form creates unnecessary tension and bureaucratic gridlock. (MD)
8. Strategy is all about winning, making choices, and trade-offs. (JC)
9. Changes to the business model requires significant alignment within the business units of a company. (JM)
10. Profits often go down in the short term which is why Goldman Sachs focuses on being “long-term greedy.” (NM) 

Network effects

1. Network effects take place when a product or service becomes more valuable the more people use it. (MD)
2. A company can have network effects that are weak. (JA)
3. Networks can grow very quickly, but also shrink at a rapid pace. It is very important to retain trust in the network to preserve its size and value to the company. (MA)
4. Not only do network effects create a barrier to entry, but a barrier to exit as well. (DM)
5. Network effects are a blessing for incumbents and a nightmare for new entrants, but networks effects change over time and are not always going to be a part of an economic moat; companies must adapt to keep their network effects. (JTR)
6. From Facebook to Roblox, not only does the size of the network, but the quality and intensity of your network’s engagement indicates strong network effects. (OB)
7. The U.S has A LOT of work to do if it wants to be on par with the Chinese Digital Payment Economy. But that is a big if. (MS)
8. Getting access to data for company’s with a subscription model is becoming more and more important as Apple continues to limit 3rd party access to data. (RK)
9. Google has revolutionized the ad industry buy automating both the purchase of ads and the posting of them. Essentially google runs one of the most successful ad agencies with only AI. (JB)

What comment was your favorite, and why?