What Strategy Is, and Five Things It Gets Mistaken For

Eleven priorities, 21 new terms, no strategy

A technology company brought its executives to an off-site to present the strategy. The strategy arrived with company: 11 corporate priorities, a set of values and a dictionary of 21 new strategic terms. Donald Sull, Rebecca Homkes and Charles Sull, who included the company in their research on execution, report that the managers left unsure what mattered most ⁶.

Nobody in that room lacked effort. They lacked a choice.

So what is strategy? A strategy is a small set of linked choices about where you will compete and how you will win, made in response to a specific challenge, that deliberately rules other options out. Michael Porter put the core of it in one line: "The essence of strategy is choosing what not to do" ¹. If a document commits you to nothing you would otherwise have avoided, it is something else.

That is the argument of this page: a strategy is a choice that costs you something, and anything that costs nothing is one of five impostors. Goals, plans, visions, efficiency programs and initiative lists all do useful work. None of them makes the choice. They get mistaken for strategy because they look like it and spare everyone the pain of choosing.

If your strongest competitor could sign it without changing a word, it is not your strategy.

Why the impostors keep winning

The serious accounts of strategy differ in vocabulary and agree on substance. Richard Rumelt describes its working parts as a diagnosis of the challenge, a guiding policy for dealing with it, and coherent actions that carry the policy out ². A.G. Lafley and Roger Martin frame the central choices as where to play and how to win ³. Each version has consequences someone can feel.

That is the problem. Every real choice creates a loser inside the building. Concentrate on large contract accounts and the team serving small ones loses its budget. Exit a segment and a vice president loses a business. The impostors are popular because they create no losers. A goal asks everyone to grow. A list gives every executive a line. A vision offends no one.

Martin makes the same diagnosis of planning: preparing a comprehensive plan with goals, initiatives and budgets feels safer than placing bets, partly because costs are under the company's control while customers are in charge of revenue ⁴. The comfort is the tell. So the useful question about any strategy document is not whether it is ambitious or thorough. Ask who it disappoints.

For the wider primer on definitions and schools of thought, see What Is Strategy? A Complete Guide. The five sections below take the impostors one at a time.

Impostor 1: the goal

Rumelt counts the confusion of goals with strategy among the hallmarks of bad strategy ². A target such as 15% annual growth, top-quartile margins or first place in the category describes where you want to end up. It says nothing about the obstacle in the way or the approach that gets you past it.

Watch how the goal gets cascaded. A corporate growth target is split into business unit targets, and each unit is told to find its share. No one has made a strategic choice. Each unit invents its own answer, and the answers do not have to fit together. The arithmetic adds up; the strategy does not.

What good looks like: the goal sits next to a sentence that names the obstacle ("our cost to serve small accounts is higher than what they will pay") and the approach ("move small accounts to a self-serve channel and concentrate field sales on the top 400 customers"). Now the goal tests the strategy instead of standing in for it.

A goal is the scoreboard. A strategy is the play that moves it.

Impostor 2: the plan or the budget

A strategic plan lists initiatives, owners, dates and funding. Martin grants that planning can produce more thorough budgets, and warns that this must not be confused with strategy ⁴. A plan answers what will we do and what will it cost. A strategy answers why will customers choose us over the alternative. The first question can be answered without ever touching the second.

Planning is not the enemy. Once the choices are made, a plan is how you resource and sequence them, and you need one. The trouble is order. If the plan comes first, the strategy becomes whatever the plan happens to fund. The annual planning cycle page shows how to put the choices ahead of the budget on the calendar, and the Lexicon entry on the strategic plan covers the document itself.

The test: find the sentence in your plan that says what the company will stop doing, or which customers it will turn away. If there is none, you have a plan with no strategy behind it.

Impostor 3: the vision

A vision describes the future an organization wants. It can supply energy and direction. It does not make the choices. Donald Hambrick and James Fredrickson, writing on what a complete strategy contains, contrast vision statements, which tend to be general, with the arenas of a strategy, which must be specific enough to tell managers what to pursue and what to avoid ⁵. Their full list of elements is arenas, vehicles, differentiators, staging and economic logic, and they stress that the elements must form a unified whole ⁵.

Lafley and Martin put a winning aspiration at the top of their cascade, but it is the first of five choices, followed by where to play, how to win, the capabilities required and the management systems that support them ³. A vision with no answers beneath it is an aspiration waiting for a strategy. Mission vs. vision vs. strategy sorts out which sentence belongs in which statement.

The test: put your vision on a slide, cover the company name and show it to someone who works at a competitor. If they would sign it, it is not doing strategic work.

Impostor 4: operational effectiveness

This is the most expensive confusion, because the work is real and the results are measurable. Porter defines operational effectiveness as performing similar activities better than rivals perform them, and contrasts it with strategy: "the creation of a unique and valuable position, involving a different set of activities" ¹. He is explicit that constant improvement in operational effectiveness is necessary to achieve superior profitability, and equally explicit that it is not usually sufficient ¹.

The mechanism is convergence. Best practices spread. In Porter's words, "The more benchmarking companies do, the more they look alike" ¹. A lean program, a procurement reset or a systems upgrade can be well worth doing. If every serious competitor is running the same program, though, the gain is real and the advantage is temporary, because the thing that made you better is the thing everyone else can buy.

Positions show up as deliberate omissions. In Porter's 1996 account, Southwest did not offer meals, assigned seats, interline baggage checking or premium classes of service ¹. No efficiency program would recommend that set of gaps on its own. Each one only makes sense as part of a chosen position, and together they reinforce each other, which Porter calls fit ¹.

A practical check: if a good benchmarking study would close the gap between you and a rival, the gap is operational. Keep the program. Stop calling it strategy.

Impostor 5: the list of initiatives

The most common artifact labeled strategy is a page of priorities, each with an owner and a traffic-light color. Rumelt's test is coherence: the actions in a good strategy are coordinated, follow from the diagnosis and guiding policy, and reinforce one another ². A list fails that test when its items compete for the same money and people and nothing says which one wins.

The survey evidence shows the cost. In a study covering nearly 8,000 managers in more than 250 companies, Sull, Homkes and Sull found that only 11% believed all of their company's strategic priorities had the financial and human resources needed for success ⁶. Middle managers were four times more likely to cite a large number of corporate priorities and strategic initiatives as an obstacle to understanding the strategy than to cite unclear communication ⁶. The managers were not confused by bad slides. They were confused by too many promises.

Read a long priority list as what it usually is: a peace treaty. Each line exists because someone with power needed it there. That is why the list grows every year and almost never shrinks. Removing an item means telling its sponsor no, which is the choice the list was built to avoid. The strategy execution page picks up what happens when a treaty like this meets the operating calendar.

The test: take any initiative off the list. If no other initiative is weakened, you are looking at a portfolio rather than a strategy. In a real strategy the pieces lean on each other.

Worked example: rewriting a distributor's strategy

Notice what the rewrite costs. Four branch managers lose their branches. The e-commerce team loses its general web store. Walk-in customers get worse service on purpose. The first draft cost nobody anything, which is exactly why it decided nothing. Notice too that every action now leans on another: the managed inventory makes the contract reorders sticky, and the acquisition rule only makes sense because of the 90-minute radius.

The fair objection, and the politics underneath

The strongest objection to all this runs as follows. Markets move. Committing in writing to what you will not do is reckless when you cannot see three years out. Better to keep options open and decide as the evidence arrives.

Part of that is right. A strategy can be staged, and Hambrick and Fredrickson list staging, the speed and sequence of moves, as one of the five elements of a complete strategy ⁵. You can make a choice for 18 months, name the evidence that would reverse it and set kill criteria in advance. Some strategy also forms from what works rather than from what was planned, which the Lexicon covers under emergent strategy.

What the objection gets wrong is the idea that leaving the no unspoken keeps the options open. It does not. Money, people and leadership attention are finite, so the choices still get made. They get made by the budget, by whichever executive argues hardest, by default. Flexibility that nobody wrote down is a strategy chosen by accident.

For heads of strategy, the harder problem is political. The impostors are not mistakes made by people who skipped the reading. They are stable arrangements. A vague vision keeps a coalition together. A long list keeps every business unit funded. Pushing for a real choice threatens that settlement, and the person pushing is usually less senior than the people it threatens. Three things help. Frame the choice as a diagnosis first, because people argue with conclusions far more readily than with evidence about the obstacle. Make the CEO, not the strategy team, own the no. And put the stop list in writing at the same meeting as the start list, before the room disperses and the treaty quietly reforms.

The Monday-morning test

Take the document your company currently calls its strategy and run these five checks. It takes about an hour. The gaps it finds are the agenda for your next strategy discussion.

1. Find the obstacleUnderline the sentence that names the main challenge the company faces. If there is none, the document starts from goals rather than a diagnosis, and everything below it is guesswork.
2. Find the noList what the company will stop doing, decline or stay out of. If the list is empty, no choice has been made yet.
3. Cover the nameRemove your company name and ask whether your strongest competitor could publish the same text. If it could, the content is aspiration or hygiene.
4. Separate better from differentMark each initiative as "better at the same thing" or "different from rivals." If everything lands in the first column, you have an operational program.
5. Pull one threadRemove one initiative and ask what else weakens. If nothing does, the initiatives are a list and need a guiding policy that connects them.

Passing all five tests does not make a strategy good. It makes it a strategy, which is a different and more useful thing: something that can be argued with, tested against evidence and executed. The off-site with 11 priorities and 21 new terms could not be argued with. There was nothing in it to disagree about. A real strategy always gives somebody something to disagree about, and that is how you know it chose.

Questions

What is strategy in simple terms?

Strategy is a set of linked choices about where an organization will compete and how it will win there, made in response to a specific challenge. Porter describes it as a unique and valuable position built on a different set of activities, and stresses that it requires choosing what not to do. If a statement rules nothing out, it is probably a goal, a vision or a plan rather than a strategy.

Is a goal the same as a strategy?

No. A goal states an outcome, such as a revenue or margin target. A strategy explains how you will reach it given the obstacles and competitors you face. Rumelt treats confusing the two as a hallmark of bad strategy. Keep the goal, but put it next to a diagnosis of the challenge and a guiding policy for meeting it, so the goal becomes a test of the strategy.

Why isn't operational effectiveness a strategy?

Because rivals can copy it. Porter defines operational effectiveness as performing similar activities better than rivals, and strategy as a unique and valuable position involving a different set of activities. Improvement is necessary for profitability but rarely sufficient, because best practices spread and companies that benchmark each other converge. Lasting advantage comes from a distinct position and the fit among the activities that support it.

What is the difference between a strategy and a strategic plan?

The strategy is the set of choices: where to play, how to win and what not to do. The strategic plan turns those choices into initiatives, owners, timelines and budgets. Martin warns that planning feels safer than choosing, so companies often produce a plan with no strategy behind it. Make the choices first, then build the plan to fund and sequence them.

Doesn't committing to a strategy reduce flexibility?

Less than it seems. A strategy can be staged: make a choice for a set period, name the evidence that would reverse it and agree kill criteria in advance. Leaving choices unstated does not preserve options, because money and people are still allocated. It only means the budget or the loudest voice makes the choice instead of the leadership team.

Where to go next

• Mission vs. Vision vs. Strategy: What Goes Where
• Strategy Execution: Where It Breaks Between the Offsite and Monday
• What Is Strategy? A Complete Guide
• Playing-to-Win Cascade
• Trade-off
• Competitive Advantage