If business strategy is the answer, what is the question?

The writings of Sun Zhu and Alexander the Great on military strategy provided metaphors for business strategy which, extended by modern studies, yield essentially three different perspectives.

The first is one of ‘position’. This is popularised by the work of Michael Porter on competitive forces. It is based on the insight that business strategy should address the opportunities and threats of the external environment. In particular, competitive strategy should be based on an understanding of industry and market structures, barriers to entry and the way they change.

The second emphasises capabilities. This has been made popular through the ‘core competence’ approach of C K Prahalad and Gary Hamel. Here strategy is about accumulating and combining resources to create a set of ‘capabilities’ that will set a company apart from its competitors. Top management adds value by delivering a strategic architecture that guides capabilities acquisition in such a way that competitors will not be able to copy them.

The third perspective concerns the flow of know-how to sustain the business – ‘perhaps the only competitive advantage is the ability to learn faster than your competitors’. Organisations need to be good at ‘knowledge generation, appropriation and exploitation’. In this context Peter Senge (The Fifth Discipline 1990) explored ‘The art and practice of the learning organisation’. A defining contribution was made by Donald Schon, who explored the extent to which companies, social movements and governments were learning systems – and how those systems could be enhanced.

So there you have it: a potted overview of business strategy. Although there are significant differences between the three perspectives, they do converge and complement one another to good effect – especially when lloydmasters work with you in the ‘real’ world.