The core theory of economics rests on the fact that all resources are limited. The same holds for the institutions that keep today’s economic system turning. Capital is limited. Time is limited. Human resources are limited. For this reason, the purpose of strategy is to make a conscious choice of direction among options that seem unlimited.
So what is the “strategy” that finds its way into so many sentences in business life? And more importantly, what is it not?
At the foundation of strategy lies identifying the real challenge an institution faces and making a conscious choice in response to it. A sound strategy first gives an honest answer to the question “what is the main obstacle ahead of us?” Then it determines which area to focus on and what to give up.
The two strongest references in the strategy literature point to the same place. Michael E. Porter sees the essence of strategy as “choosing what not to do.” Richard P. Rumelt sees it as “honestly diagnosing the real challenge.” One puts giving things up first, the other puts diagnosis first, but both speak of the same discipline: using limited resources for a conscious choice.
This is because strategy does not only answer the question “what will we do?” It also answers a question that matters at least as much: “what will we not do?” An institution’s competitive stance often shows less in the areas it chooses than in the areas it is able to give up. Which direction resources flow is a strategic decision, and so is which direction they do not flow.
Kodak’s story is instructive in this respect. Throughout the 1990s, the company tried to move in several directions at once: leadership in digital imaging and protecting profitability in the traditional film business. Yet Kodak itself had invented the digital camera in 1975 and received the patent in 1978. In other words, technologically it was far ahead of its industry. However success in digital imaging meant directly destroying its own profitable film business. The company wanted to protect both businesses at the same time. It lost money in digital for years, and in film it lost market share to Fuji. Kodak struggled not because it failed to see digital photography, but because, even though it saw it, it could not decide what to sacrifice. When it filed for bankruptcy in 2012, it had plenty of initiatives, targets and plans. What was missing was strategy.
Many companies fall into the same pattern. Instead of developing focused strategies, they list a set of desired outcomes: growing more, increasing efficiency, being innovative, achieving customer focus, or entering new markets. These statements sound right but give no direction on their own. Unfortunately, they are not strategies, only goals or plans.
That is why strategy does not mean prioritizing everything at the same time. Running after every opportunity or trying to solve every problem is not strategy. Strategy does not scatter a company’s energy, it focuses it. It selects which problem is truly worth solving and concentrates resources on that point.
Under the banner of strategy, many conversations turn out to consist of nothing but plans and goals. Without awareness of this distinction, such a conversation feels perfectly natural. What is said sounds reasonable, but it does not solve a problem, because the absence of strategy is often packaged in the language of strategy.
At Corax & Company, this is why strategy work begins with one question: what is the real challenge the institution faces, and what conscious choice will be made in response? For an institution that sees opportunity in every area, there is no direction to choose, only scattered energy. Strategy is the work of turning that scatter into a conscious choice.