One of my consulting colleagues recently asked a group of us to come up with our definition of strategy. My first reaction was to give a flippant response. My colleague is however right to point out that strategy is not easy to define in simple terms and many versions abound. Strategy is not simply a grand document or even a series of documents and clearly should be externally focussed on markets and not internally obsessive about matters of indifference to clients. Some definitions focus on decisions that the firm makes about its direction whilst other definitions concentrate on beating competitors. None of these aspects of strategy are wrong and in a profession where it is hard to look or be unique, firms generally can become very successful simply by being better or more efficient than their rivals. What is more, it is always helpful to unpack strategic intent into the three elements of “Identity” (what sort of firm are we?) “Purpose” (why are we in business together?) and “Vision” (where are we trying to get to?).
For me however, one helpful clue about the meaning of strategy forms a diagnosis (rather than a definition) that distinguishes between plans that are divergent in nature (in that they move the firm in a different direction to competitors) from those that are just convergent (in that all firms in crowded markets are trying to do much the same thing). There is nothing of course wrong (in the right circumstances) with copycat strategies, as there is often much to admire in other firms. Equally firms should always be working to develop and to attain best practice, but plans that focus entirely on getting better, becoming more efficient or even continuing to do more of the same end up being just improvement plans. Differentiated strategies on the other hand need to ensure that firms differ from competitors in ways which clients find meaningful and therefore such plans will almost always take firms on a divergent path to seek what one book has described as the blue ocean where the competition is left behind or absent.
There are two problems with a divergent approach. The first is that such an approach is simply not practicable for firms trying to survive or prosper in busy and shark-infested waters. For many such firms a convergent plan is an entirely logical approach in which efficiencies are sought, client relationships improved and business development efforts re-doubled both to increase market share and to improve the client list. The second problem is that most competitive advantage is just temporary. Disruptive strategies – so beloved of business writers – may change the game to open up an effective lead for the disrupter but others sooner or later catch up. Take taxi firm Uber, or even Apple, as examples that show the advantage quickly erodes unless a constant and repetitive programme of innovation takes place. The recent news that Friends Reunited – the first UK social media platform – has collapsed, reveals that even a first mover advantage fails to guarantee delivering a sustainable platform unless constant efforts, innovations and financial resources follow. Disruptive strategies are nothing new but need huge quantities of vision and innovation to spot and exploit the big and emerging opportunities. It requires you to be able to assert, in the words of Rudyard Kipling, “They copied all they could follow, but they couldn’t copy my mind. And I left ’em sweating and stealing a year and a half behind.”
Apart from game-changing or disruptive strategies (only available to a few firms), there are two generic divergent strategies that firms can consider.
The first is the pursuit of dominance. Global dominance of its nature is available only to a handful of firms, but local, regional and national dominance provide wider opportunities. Divergence here does not necessarily involve moving into blue oceans but focus on the gaining of power and position above rivals. Achieving pre-eminence is particularly beneficial for firms in growing and emerging countries where the top firms can claim the biggest shares of inbound work from global clients, but only if they get their client service offering right. Dominance however can also have negative effects. I am far from impressed, for instance, with the service I am given by my anonymous global bank. Like all differential strategies, dominance must bring positive benefits to clients.
The second generic divergent strategy is the development of extreme expertise. We are living in an aged of instant specialisation in which it is generally considered enough to be an expert if one has read a few books, gone on the odd course or googled around a bit. Extreme expertise can however only be obtained by long immersion and experience, by observing the ten thousand hour rule or sometimes by dual qualification. One or two so-called specialists in a firm can be no match for highly specialised firms like Littler Mendelson (US employment law) or Bird and Bird (Intellectual Property).
Convergent strategies may be easier to implement but are subject to the laws of inevitably diminishing returns as firms approach positions where further improvement becomes difficult. Divergent strategies are clearly both difficult and costly to develop for firms and individuals, but remain the holy grail of strategic planning.
This article first appeared in Managing Partner Magazine for March 2016 and is reproduced with their permission