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Essential Strategy Concepts

by Ruth Malan and Dana Bredemeyer, Bredemeyer Consulting, April 2003

What is Strategy?

Our business mission delineates what business we are in, and establishes boundaries between different corporate entities. Our business vision identifies and makes luminous and compelling the desired future state of the business. The business strategy expresses at a high level how we will reach the vision. In particular, the business strategy determines the unique way that we will create value and hence competitive advantage.

What is Competitive Advantage?

Competitive advantage is simply the advantage that we have over competitors, stemming from our unique value proposition(s) as perceived by customers in some market segment(s). It is what keeps us in businessif we have no source of competitive advantage we face a death-spiral with a shrinking customer base and/or shrinking profits. Creating and sustaining competitive advantage has been the focus of business strategy for two decades, under the thought-leadership of Michael Porter (1985, 1998).

A heavy focus on competitors encourages an incrementalist perspective with strategies that are easy to emulate because they concentrate on adding some point of differentiation to what competitors are doing. Competitors can easily match an incremental improvement over what they are doing, and the game becomes one of constant catch-up-and-edge-out. This point is made by Timothy Galpin (1997), in his summary of the evolution in business strategy thinking since it was introduced by Ken Andrews and C. Roland Christensen in the early 1960's.     

What is Strategic Advantage?

We use the term strategic advantage to capture the advantage that stems from building a set of enterprise capabilities that create leverage and synergies that are hard to emulate. By their nature, business capabilities blend knowledge, process, technology and assets. This blend is hard to copy, because it leverages all the cumulative history of the company, as well as its unique perspective on the future, together with culture and values. By combining these hard-to-emulate capabilities into systems in a value network, the enterprise creates an advantage that surpasses products and even product lines or families, and has a broader reach than market segments and even markets. This is not new. Many companies have reaped strategic advantage without explicitly and consciously targeting capabilities in the business strategy process. But the opportunity is so much the greater when strategic advantage is the planned foundation for competitive advantage, rather than a side-effect or fortuitous coincidence.

We focus on capabilities, rather than simply activities, as the building blocks of differentiation at the corporate level. The Business Process Re-engineering wave surfaced the need to look at process and technology together, rather than process in isolation, because technology influences and constrains process. Early approaches to Enterprise Architecture focused on technology, and in particular, on infrastructure. This was too narrow a focus to make the kind of strategic contribution that Enterprise Architecture was envisioned to make, and the trend has been to broaden the focus, to include business architecture, and in particular, business process architecture. From the past decade of maturation in Enterprise Architecture on the one hand, and Business Process Re-engineering on the other, we have learned that we need to look at the integrated bundle of business process, knowledge/skills, technology, and resources that yield business capabilities. 

The strategy process needs to determine how business capabilities will be used to create differentiating customer value propositions, and where these capabilities will be leveraged to create strategic advantage that is more than a simple aggregation of the competitive advantage of each of its products or services. 

References

Galpin, Timothy, Making Strategy Work: Building Sustainable Growth Capability, Jossey-Bass, 1997.

Malan, Ruth, and Dana Bredemeyer,  "Less is More with Minimalist Architecture", (MinimalistArchitecture.PDF, 47 kb), published in IEEE's IT Professional, September/October 2002 (a). 
2002 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE. (ArchitectureDefinition.PDF, 124kb), May 2002.

Malan, Ruth and Dana Bredemeyer, "Strategy Competency Elaboration", part of our Architect Competency Framework, which is published on the Papers and Downloads page of the Resources for Software Architects web site at http://www.bredemeyer.com/papers.htm. September, 2002 (b).

Malan, Ruth, and Dana Bredemeyer,  "Enterprise Architecture: Balancing Centralization and Decentralization", published the Resources for Software Architects web site at http://www.bredemeyer.com/ArchitectingProcess/VAPColumns/MAPandBCA.htm. April 2003.

Porter, Michael, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, 1985. 

Porter, Michael, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, 1998.

Porter, Michael, Michael E. Porter on Competition, Harvard Business School Press, 1998.

 

See also:

Recommended Books

Acknowledgments

We would like to thank Raj Krishnan who inspired and championed the Business Capabilities Architecture as the cornerstone of our approach to Enterprise Architecture. He recognized the centrality of capabilities, and drafted our Enterprise Visual Architecting Process (E-VAP) using capabilities as the organizing theme. We have taken that initial work and advanced it, used it with clients, and moved the whole frontier forward, but Raj deserves credit for the inspiration and genesis of the capabilities approach that we promulgate. Aaron LaFrenz, too, was instrumental in moving us into the Enterprise Architecture space. His ideas and energy have had a great impact on our work, and we are much indebted to his influence.

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Copyright 2003 by Bredemeyer Consulting
URL: http://www.bredemeyer.com
Last Modified: April 15, 2003