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The success of a business does not depend on its business
model alone. To succeed it must also have the right strategy. But what is the
right strategy? More fundamentally, what is strategy? Everyone agrees strategy
is important, but few people can agree on what it is. According to the author,
cutting away all the jargon, strategy is all about "how you are going to do
better by being different." It provides the basis for superior performance (in
comparison to competitors) and is critical to success. A good business model is
only the beginning of strategic thinking.
Though strategy is a common (and much overused) term today, its appearance in
management literature is relatively recent. Interestingly, Peter Drucker's
1964book, Managing for Results, was originally titled Business Strategies. |
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This title was however rejected, because people perceived strategies to
belong to military or political campaigns, and not to businesses. Although
nowadays many writers liken business to war, there are significant
differences between the two. A war is always a zero-sum game. If one side
wins, the other side loses. While strategy in management is also about
winning, competition in business need not always be a zero-sum game. Most of
the time, there is room in the markets for more than one winner.
For a business, an effective strategy results in competitive advantage,
which in turn translates into superior returns. In recent times, there has
been a growing body of opinion that the notion of sustainable competitive
advantage, which provides the basis for continuing superior performance, is
obsolete in an environment of rapid technological change and dynamic
markets.
While there is some truth to this assertion, the objective of strategy
remains unchanged - "figuring out how to hide from the competition, or
dampen it, or constrain it, so that you can earn superior returns." If you
see your business as a castle, earlier it was sufficient to build a moat
around it to protect it from competition. Now, you may even have to move the
castle - i.e., find new ways to differentiate yourself from the competition.
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