Strategic choices: where you compete, how you win and how you grow
The models for competitive, growth, portfolio and business model choices, with a test of whether they form one strategy.
In this topic: Strategy 7
Where you compete, how you win and what you leave alone
The models for competitive, growth, portfolio and business model choices, and a test of whether your choices add up to one strategy.
Most strategic plans are full of goals: more revenue, a better margin. Goals say where you want to end up, not what you will do differently or stop doing. That is the job of strategic choices: which customers you serve, why they pick you, how you grow and how you earn, and which tempting options you rule out.
Michael Porter put it sharply in Harvard Business Review in 1996: strategy means trade-offs, and deciding what not to do is at its core. A.G. Lafley and Roger Martin turned this into a chain of questions in Playing to Win (Harvard Business Review Press, 2013), with two at the centre: where will we play, and how will we win? This section gives you a model for each question and a test for the whole.
What are strategic choices?
A strategic choice commits money and people for years and is hard to reverse, such as entering a country or buying a competitor. Four kinds recur in almost every strategy.
- Where to compete: which customers, regions, products and channels you serve, and which you leave to others.
- How to win: why customers choose you, for instance because you are cheaper, better or closer to them.
- How to grow: in which direction you expand, and whether you build, partner or buy.
- How to earn: the business model that turns the value you create into revenue and margin.
A choice only counts when it has a price. "We want satisfied customers" rules nothing out. "We serve family businesses in our region and stop doing one-off tax returns" does.
Which model helps with which strategic choice?
| Choice | The question you answer | Model |
|---|---|---|
| How to win | Do we compete on lower cost, on differentiation or by focusing on one segment? | Porter's generic strategies |
| How to win | In which kind of customer value do we excel, and what does that ask of our organisation? | Value disciplines |
| How to win | Which job does the customer want done, and why would they choose us to do it? | Value proposition and jobs to be done |
| How to win | Can we step out of head-on competition with a different offer? | Blue Ocean Strategy |
| Where to grow | Do we grow with existing or new products, in existing or new markets? | Ansoff matrix |
| Where to invest | Which units generate cash, which consume it, and where does the next euro go? | BCG matrix and portfolio |
| How to grow | Do we build it ourselves, work with a partner or buy? | Acquisitions and alliances |
| How to earn | Which business model fits these choices, and how does it make money? | Business Model Canvas |
| The whole | Do our choices form one coherent strategy, or a list of wishes? | What good strategy is |
The models overlap usefully. Porter and the value disciplines look at one question from two sides: your position against rivals, and the organisation behind it. Ansoff shows where to grow; BCG shows which units can pay for it.
Start with the test: what good strategy is
Check what a strategy must contain before you pick a model. Richard Rumelt's kernel has three parts: a diagnosis of the challenge, a guiding policy and coherent actions. The page combines that kernel with ideas from Porter, Lafley and Martin and McKinsey into questions you can put to any plan.
How to win: competitive choices
Porter's generic strategies
Cost leadership, differentiation or focus, and how to recognise that you are stuck in the middle.
Value disciplines
Operational excellence, customer intimacy or product leadership, and what each demands of your organisation.
Value proposition and jobs to be done
Build your offer around the job the customer wants done, with the Value Proposition Canvas.
Blue Ocean Strategy
Create new demand with the strategy canvas and the four actions, and know where the model stops working.
Where to grow and where to invest
Ansoff matrix
Four growth directions with rising risk, and how to spread growth over time.
BCG matrix and portfolio
Which units earn cash and which use it, and how to let the budget follow.
Acquisitions and alliances
When buying or partnering is faster than building, and why integration is the biggest risk.
How to earn: the business model
Business Model Canvas
Osterwalder and Pigneur's nine building blocks, used to compare ways of earning money, such as moving from projects to subscriptions.
From model to choice in four steps
- 01
Write every option in the same format
For each option: customer, offer, source of advantage, investment and what you stop doing, so you compare like with like.
- 02
Test suitability, acceptability and feasibility
Does it answer your analysis, are risk and return acceptable to owners and lenders, and can you deliver it? See evaluate and choose.
- 03
Choose one main route
One main route with a few supporting choices, plus a list of what you will no longer do.
- 04
Put it on one page
Capture the choices in a one-page strategic plan that everyone reads the same way.
Strategic choices in a small business and a larger organisation
Small business
The decisive choice is usually how to win, often through a sharp focus on one customer group, region or specialism. Growth choices follow the owner's ambition, including a future sale or handover (see succession and exit). Check yearly whether the choice shows in your margin with the profit and cost benchmark.
Larger organisation
Choices are made at two levels: the group decides on portfolio, capital and acquisitions; each business unit on its markets and how it competes. Keep the levels apart and check that the choices show up in budgets and headcount. See strategic planning in large organisations.
Strategic choices sit between analysis and execution. Not yet mapped your market and strengths? Start with strategic analysis or the strategy in five steps. Afterwards, execution and control turns choices into goals, budgets and measures. Every topic is in the strategy overview.
What are strategic choices?
What is the difference between Porter's generic strategies and the value disciplines?
How many strategic choices can a company make at once?
Sources
- Harvard Business Review: Porter, What Is Strategy? (November 1996)
- Harvard Business Review Press: Lafley and Martin, Playing to Win: How Strategy Really Works (February 2013)
- McKinsey Quarterly: Rumelt, The perils of bad strategy (June 2011)
- McKinsey Quarterly: Bradley, Hirt and Smit, Have you tested your strategy lately? (January 2011)
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