Close your eyes for a minute and imagine a strategy.

Are you imagining a simple, specific document you refer to for helpful guidance that summarizes your company’s north star?

Or are you imagining absolutely nothing?

Don’t blame yourself. In Michael Porter’s books, or anywhere else, I haven’t been able to find many examples of what a strategy should look like.

Here’s a proposal: open any book on strategy and go to the Index. Lookup “Strategy, an example of”. Find anything?

The “4 Steps to Develop a Strategy” outline the four major components that a good corporate strategy needs:

A strategy could cover these four components in ten to twenty sentences.

Why not a 200-page plan? Because if every one of your employees can’t remember the strategy and don’t know how to use it to prioritize their day, what good is it? A strategy needs to be specific enough to be helpful, but short enough to be memorable. It should be something that everyone can refer to. Companies often either do too little strategic thinking and/or create too much “strategic material”. Either way, they avoid the hard work of these 4 Steps.

Here’s my best guess at Southwest Airlines’ strategy circa the 1970s (it has changed little since)

Southwest Airlines’ Strategy Buyer + $ value pool. What’s the high $ pain point or unmet need? Anyone who travels distances that take 4-8 hours by car (e.g. over-served by major airlines) who want a faster and similarly low-cost alternative. Need will only grow (unless high-speed rails take off). How to unlock the $ value pool. What’s keeping the value pool from being unlocked? How unique is our chosen method? When an existing airline attempts a short-hop flight, the airports they fly into (the major urban hubs) take a long time for passengers to get to. And it takes a long time to park, get through security, and board—so the total door-to-door time is too long. You might as well drive the whole way. We’ll specifically choose hubs and processes with the explicit goal of shortening that time as much as possible. Why us? What are our sources of advantage? What trends will we ride? Founding team’s deep knowledge of what is required to build and operate an airline The insight that all the major airlines have purchased the rights to gates of all major airports, thus locking new airlines from flying into them. However, this has also caused those incumbents to ignore gates at smaller suburban airports. By buying the rights to those gates, Southwest can overcome this barrier to entry. This means Southwest can reduce door-to-door travel time for passengers but also limits the ability to transfer passengers between other airlines. Unique customer insights about sources of unmet customer needs The existing airlines are stuck in their long-haul models and can’t reorganize to challenge us serving customers on these types of trips. Over time, scale, as a dedication to building our approach into all areas of our delivery systems will make it impossible for anyone to mimic us. There is a big trend emerging in airline de-regulation. For example, profitability now has to be earned but the existing airlines have been guaranteed profits under regulation. User + how we will delight them. What are the two to five unique and pivotal decisions that will define our solution? Limited passenger services Such as no first class; no frequent flier miles; open seating/first-come-first-on; passengers cleaning up after themselves to speed up gate turnarounds; no meals Be lowest cost Such as flying one aircraft type, the 737; thus, also not needing to train and certify pilots on other aircraft; No travel agents or 3rd party travel websites—you can only book with the airline thus avoiding royalty fees. Highly agile and invested grounds and air crew Such as personality-infused pre-flight safety presentations; employee stock ownership; ground and flight crews well compensated; crews allowed to join unions; crews empowered on any safety issue. Let employees be our “eyes and ears” for new ways to continually improve our service to customers.

Every employee can understand this and can apply it to decisions they make day-to-day. Even though it (or a variant of it) should be shared across the company, it should be specific enough to be confidential.
 
Here’s my guess at Fitbit’s strategy circa 2015:

Fitbit’s Strategy Buyer + $ value pool. What’s the high $ pain point or unmet need? Regular people looking to do more exercise. They see regular exercise as a way to increase the years and quality of their life. Ways to unlock the $ value pool. What’s keeping the value pool from being unlocked? How unique is our chosen method? Instead of focusing on different types of exercise (as a gym might do), focus on the activities they do every day—especially walking—and allow them to track the impact of it and encourage more. Why us? What are our sources of advantage? What trends will we ride? Founders’ expertise in gaming methodologies. Ability to create simple physical devices at scale (so a pure internet-based startup could not compete). User + how we will delight them. What are the two to five unique and pivotal decisions that will define of our solution? Make tracking exercise that is already being done easy to do. Build encouragement from the exercise they are already doing. Make it easy to set daily goals (such as 10,000 steps) and use the fact that by any given evening, they’ll already be close to their goal as a mechanism to get the extra 1,000 steps or so. Allow them to see progress over time, earn badges, and feel good about what they are doing (as opposed to gyms and weigh-ins that are a mixture of positive and negative experiences). Build in social aspects—for example, allow them to have friendly competitions with friends and family.

In the Southwest example, note the four top-level bullets in section four are the “two to five unique and pivotal decisions of our solution”.

The “such as…” examples in the lower-level bullets are the specific activities. Not having meals is not part of a strategy. It is an example, among many, that reinforce a commitment to limited passenger services and being low cost. Not having meals means also that they don’t have to wait for a lot of food to be loaded at the gate. That’s possible because they only fly short distances and it helps make the door-to-door faster as well. Southwest’s four unique and pivotal decisions are coordinated.

What strategy experts often overlook

I’ll also point out that all four decisions follow a natural storyline. Once they established the core concept of short routes to compete with driving, then deciding to be low cost made sense. Flying into smaller airports was a natural decision as well. And so they followed the thread to establish a full list.

The examples in Section four are important. They give the strategy real punch. But you need not have figured them all out on Day One. This is something that experts either miss or overlook explaining. As much as I’m a big fan of both Michael Porter and Kim and Mauborgne’s Blue Ocean Strategy, neither one observes this in their analysis of Southwest.

The Blue Ocean Strategy book, for example, introduces a “strategy canvas”. This is a set of five to ten customer-facing attributes that each competitor is scored on. For Southwest, the list includes lounges, meals, and hub connectivity.

Michael Porter has the “activity map” with eighteen activities in the graph. I have two issues with the activity map:

1. Showing these details that way makes them appear as if they have always existed and were prescribed in advance. (In fairness, Porter’s activity maps often have major/hub and minor/spoke activities colored differently. In that case, the major ones are the “two to five unique and pivotal decisions”; the minor/spoke ones match the sub-bullet “such as…” items. Though Porter himself doesn’t explain the development of a strategy as such.)
2. I see people confused about what to put in activity maps. In Playing to Win, an otherwise great book on P&G’s strategic evolution, the P&G activity map listed are sources of advantage (e.g. “scale”, “innovation”, “go to-market capabilities”, “customer understanding”)—not decisions made. And the co-author of the strategy and book is a long-time consultant of Porter’s own consulting firm, Monitor!

Why is it important to get the guiding principles and not a full list of all the specific tactics? For one, listing out the ten ways you will compete can’t always be possible on Day One of a startup. You need to learn them over time. For another, not everyone in the company can remember all ten in their heads, thus violating the “keep-it-short” rule.

And finally, a company like Southwest learns over time. It wants all of its employees out there thinking about new ways to reinforce these approaches. Provide a list of ten detailed ideas to your employees and it will always stay ten. Provide four governing thoughts and your employees will give you hundreds of new specific ideas. Toyota made their Toyota Production System a strategy because they made it strategic and evolutionary while none of the other automakers did; others simply tried to copy specific parts of the system they observed.

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All books and other resources referenced in this article