Mistaking planning for strategy is a common trap.
Strategy is often confused with planning, which is a problem as they are two very distinct processes. Planning is a product of strategy, it’s where the resources required to execute the strategy are obtained and managed.
Strategy on the other hand guides all the decisions that follow, it is the process where an organisation decides where to play, how to allocate resources in order accomplish key objectives and how to win that space.
Making the hard choices.
As a clear roadmap, a good strategy provides a set of guiding principles that help decision makers to determine which actions managers should and shouldn’t take and provides a framework to determine the allocation and prioritisation of resources. It helps in creating alignment across the organisation and ensuring that people work towards a common goal.
Understanding your environment is key.
A crucial element of strategy making is understanding the environment the organisation operates in. For capital intensive industry, understanding the environment can be difficult, the decision horizons can span decades and the future is unknown. Building good strategy is highly dependant on good information and reducing uncertainty.
Organisations that are able to reposition are those that prosper.
Amazon Web Services (AWS) is a behemoth, owning nearly a third of the infrastructure as a service (IAAS) and bringing in excess of $100b USD annually. AWS sprang from an understanding of what was likely to happen in the future (how people would use computing) with an understanding of their own internal capability. The result is a subsidiary that drives huge value for the parent.
Look to the future with greater certainty.
Being able to peer into the future with greater certainty allows organisations to prepare better for big decisions. If those decisions involve spending billions on assets that will last for 30 years, then having an understanding of the likelihood of that scenario occurring is a huge advantage.