Defining Strategy

11 December, 2014

What comes to mind when you hear the word “strategy”? For most of us (whether Project Managers or not) it suggests some sort of high-level, long-term plan. It also conjures up images of a “big picture” – some sort of over-arching vision for the organization in question. Terms like “long-term” and “high-level” are useful in defining strategy, but the word “plan” most definitely is not.

According to Wikipedia, a plan is “any diagram or list of steps with timing and resources, used to achieve an objective”. A strategy should be regarded more as an approach than an actual plan. For instance, if we decide that we need to grow the company, how will we go about it? There are several possibilities: we can increase production of whatever it is we make; we can merge with or acquire another company, or we can reach out into new markets either by creating different products and services, or by setting up sales outlets in new territories.

These growth strategies can be explored by using various techniques, such as the Ansoff Diagram, as shown here:

We need to decide first of all do we want to develop new products and services, or increase demand for our existing range? Then we have to decide if there is enough potential in the existing market or do we need to break into new, overseas markets? If we choose to stick with our existing products and try to increase market share in our domestic market, we have decided on a consolidation strategy. The interesting aspect of this strategy is that for us to increase market share someone else has to lose share. This creates a conflict. So our strategy to increase market share might prove impossible if the other players are too strong. This is why we need to do market research and competitor analysis before making such a strategic decision – is there enough of a market to justify extra effort and will the other players be willing and able to defend their segments?

If the local market is full of strong players, we might decide to introduce our offerings into a different market. Again market research is required and we have to make further strategic decisions in order to develop this new market.

Choosing to create new products and services can provide more opportunities in the domestic market, but it requires research to determine what new offerings to produce. This is all part of new product development. Finally we can decide on a new range of products that appeal specifically to a particular overseas market. This involves diversification – localizing existing products or creating totally new ones to satisfy demand in this new territory.

The Ansoff Diagram helps us to decide what we are going to do to achieve growth. We need another tool to look at how we are going to get there. The Expansion Method Matrix, which is also known as the Lynch Matrix, provides some interesting choices of how to go about growing the company.

We can decide to use our own resources to grow. If we have made good profits and have a “war chest” at our disposal, we might choose to invest in research and development and our sales and marketing department. In this way, we can offer new products and services through internal development. We can also set up our own overseas offices and carve a niche in overseas markets ourselves.

However, that might not really make too much sense. Many companies in the last few decades have been lured by the massive Chinese market, but have found the way of doing business there too slow moving to get a return on investment in an acceptable timeframe. In these circumstances, it makes sense to form a coalition with either an indigenous company, or an outside company that has already established a presence there. Various business models are available – you can acquire that company, franchise your offerings to someone else or enter into joint ventures.

Anyone who is a Project Management Professional (PMP)® will see the problems here. Going into business with another party involves risks – similar to the risks we have seen in Project Procurement Management. We will need good contracts and, sadly, good lawyers as well. Picking the wrong partner can, not only jeopardize our growth strategy, but can also damage our reputation – guilt by association.

In summary, our strategy provides guidance for our detailed planning – the programs, project and operational work needed to achieve the goals. However, inherent in strategic thinking is the potential for conflict. Breaking into a new market, or growing your presence in an existing market involves squeezing out other players. Strategic thinkers need to be prepared for competitors to squeeze back. Another key ingredient of strategy is the formation of alliances. A group of small companies may form a consortium to compete with a dominant player. This has been a political staple for centuries. The French strategist, Armand Jean du Plessis, Cardinal of Richelieu, coined the term “Balance of Power” to explain how he guided France into alliances alternately with England and Germany to make sure one party did not become strong enough to dominate the others together.

Of course strategies might not work and it is the wise leader who can accept this and decide to change strategy. Good football managers are adept at this – bringing on “impact” substitutes to add a different ingredient to the play. Indeed, many millions of lives could have been spared had either side in the First Word War been willing to abandon the stalemate that was trench warfare and tried something else.

Velopi is offering Program Management Professional (PgMP)® exam preparation courses in 2015. These courses will cover the corporate- and program-level strategies that justify the need for the program. Even if you have not planned attempting the PgMP® exam, the subject matter at this level is fascinating and is well worth knowing, if only to be a more effective Project Manager. Please visit our training page or contact us directly for more details.

By Velopi Seamus Collins

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