In my strategic planning consulting with B2B companies, I often see management teams struggling with the difference between strategy and tactics.
Let’s take a look at what strategy is and how it’s different from tactics.
What Is Business Strategy About?
Taking the initiative
Good business strategy is about taking the initiative, being proactive, and setting a clear longer-term direction for the firm and how it will achieve growth.
Management that has not adopted a strategic mindset is usually focused on short-term, day-to-day activities. They are reactive, putting out fires.
Their comfort zone is operational thinking, rather than addressing the high-level issues and longer-term direction of the firm.
No organization, not even a Fortune 500 company, has the unlimited resources to go after each and every opportunity that looks attractive. In particular, smaller businesses need to be smart about how and where to deploy their limited resources to achieve growth. They can’t afford to waste time and money.
A good business strategy involves focusing on the right markets and the right products and services to sell. Resisting the temptation to go after every ‘shiny object’ is a key element of strategic focus.
It is just as important to decide when to say “No” to an opportunity as it is when to say “Yes”, perhaps even more so. Pursuing too many opportunities leads to dilution of management’s attention and company resources, increasing the risk that none of the goals will be achieved.
Strategic planning should involve making decisions about new activities, new markets, and new products, or an M&A initiative, among others. But it should also deal with which activities the organization should discontinue. This could include exiting a market, discontinuing a product line, international expansion, etc.
Beating (or avoiding) the competition
Another objective of business strategy is to create a sustainable competitive advantage that can be leveraged to beat (or avoid) the competition.
However, keep in mind that this advantage does not last forever. If you’re successful, a competitor is bound to move in, copying your business model, products, and services, and probably at lower prices. You can never rest, you need to keep innovating and find new ways to stay ahead of the competition.
Outperforming the market
A well-thought-out business strategy involves smart decision-making to outperform the overall market. Simply coasting along and moving up and down with the market is not an option if you want to be in control of your future.
Doing the right things vs. doing things right
How do you know if you’re dealing with a strategic or tactical issue? To make that distinction, you should ask two questions:
- “Are we doing the right things?” – This is question relates to strategy.
- “Are we doing things right?” – This question deals with tactical issues.
A company’s strategy spells out longer-term objectives and WHAT needs to be done. Strategy provides a high-level perspective, not any detailed operational specifics. In addition, as part of developing a business strategy the rationale, the WHY of what the organization is going to do, needs to be formulated.
Operational decision-making involves the detailed steps of implementing the strategy. This is the HOW that brings the strategy to life.
Elements of Good Strategy
A carefully thought-out business strategy is proactive and competitive. A smart business strategy involves activities that:
- A competitor cannot do – The competitor may lack the resources, knowledge, and skills to execute the strategy you have chosen to pursue.
- A competitor will choose not to do – Because it does not meet their long-term objectives or, given their strengths and resources, the competitor may see better opportunities elsewhere or it is in conflict with a prior strategic decision.
- Puts a competitor at a disadvantage – If a competitor adopts that same business strategy their competitive position may weaken or limit their ability to pursue future options. Perhaps they lack the resources to execute and acquiring these resources would take a major investment.
- Grow the market overall – This is a situation where everyone gains, the idea being that a “rising tide lifts all boats”.
The Difference Between Strategy and Tactics
Decisions about “WHAT” the firm is going to do
Strategic thinking requires an open-minded thought process for exploring and evaluating options, free of bias and prejudice. A “Not Invented Here” attitude is detrimental to good and productive strategic thinking. You need to be able to challenge assumptions, ask tough questions, be innovative, and explore ‘what-if’ scenarios to create a sound strategic plan.
Developing a strategic plan is a creative, iterative process that requires an innovative look at the company and the business environment. Without the right mindset strategic planning is not going to be successful. Keep in mind that strategy development is about addressing the WHAT and WHY of the business.
Operational decision-making and problem-solving follow more of a linear, step-by-step process that could be described as somewhat mechanical. An operational mindset is geared towards dealing with the HOW: creating and improving processes.
Strategy development is a continuous process, not an event
A company’s strategy always needs to be evolving and adapting to changes in market conditions, technology, customers’ preferences, and so on. A strategic plan is a living, dynamic document that needs to be reviewed and updated on a regular basis.
As a result, strategic planning should be an ongoing activity, high on the agenda of executive management. That two-day retreat at the country club is a great kick-off for a formal strategic planning process, but it’s only a start. It’s not a substitute for a comprehensive strategic planning effort.
Solving a tactical issue is typically more narrow, both in scope and in time, allowing for quicker evaluation of options and faster decision making.
Business strategy impacts all aspects of the organization
Strategic decisions have an impact on the entire organization. For instance, the decision to enter a new market involves all departments and functions. Similarly, M&A initiatives impact everyone in the firm. For a business strategy to be successful, the entire organization needs to be on-board.
Operational issues are typically limited in scope and in their reach across the organization. The scope of operational problem solving is more narrowly defined.
Strategy is long-term, tactics is short-term
Business strategy deals with setting a direction for the organization for a longer period of time, usually 2 to 3 years, sometimes longer. As a manager, you need to be comfortable taking that long-term perspective and the commitment to seeing the strategy through. You need to give the strategy time to pan out and produce results.
On the other hand, the time span for operational thinking is much shorter. Decisions are made much faster and their outcomes can usually be observed much more quickly than strategic decisions.
High risk vs low risk
Strategic decisions are often made on the basis of incomplete, ambiguous information. There is just no time for perfection – if this were possible to achieve in the first place.
It takes time to find out if a chosen strategy is successful and produces the expected outcomes. Reviewing and adjusting a strategy takes time as well. As a result, the risks of a poorly thought-out strategy can be rather high because of the time, cost, and effort of making course corrections. Quick, on-a-dime, strategy changes are just not very realistic, especially if you keep in mind the impact on the entire organization.
Now, on the other hand, tactics/operations deal with shorter-term issues of a well-defined scope. The results of a particular decision become visible quickly. Fine-tuning a particular solution is quicker. Combined with the information that is typically available, the risk associated with tactical decisions is much more manageable.
External vs internal focus
Strategic planning, by definition, requires an external focus, a comprehensive and candid look at the organization in relation to its environment. Strategic decision making involves gathering information about markets, customers, competitors, suppliers, and trends that may impact the business. You need a solid understanding of the business environment in which you’re operating to make smart decisions about the company’s long-term direction.
Tactics deals with implementing the strategy. Decisions about operational issues, such as manufacturing, finance, or HR, have more of an internal focus.
Strategic options are hard to quantify
In strategic planning, we use both quantitative and qualitative information. As a result, it is difficult to reduce everything down to mere hard numbers. This adds a level of subjectivity that makes it more difficult to determine which option to pursue. It then becomes a matter of personal preference, risk tolerance, experience, and, yes, your ‘gut feel’ as a manager to decide which strategic direction to take.
In operational decision-making, the problems are typically much more quantifiable. This allows for a careful analysis of the operational options, weighing the pros and cons, and deciding on the optimum solution.
Making strategic trade-offs is difficult
By its very nature, strategic decision-making is difficult, risky, and complex. Market intelligence is often incomplete, may lack detail, and is ambiguous. Assumptions about markets and competitors may or may not be valid. As a result, it is difficult to evaluate strategic options quantitatively and with a high degree of confidence. This makes trade-off decisions rather difficult.
Tactical or operational problems are, for the most part, easier to solve. The pros and cons of each solution can be evaluated with more confidence. Identifying the ‘best’ solution is easier, relatively speaking, with less uncertainty and less risk involved. The impact of a trade-off, or choosing one solution over another, can be more easily evaluated.
“What-If” scenarios can’t be proven correct
Because strategic alternatives are hard to quantify and making trade-offs is difficult, determining the best path forward for the firm is not that easy. You cannot reduce strategic decision-making to spreadsheet analysis. Being able to make decisions in an environment of ambiguity, risk, and uncertainty is part of the strategic mindset. This does not remove the fact, however, that it is difficult to prove a particular strategic scenario to be ‘correct’ or ‘better’ than another. You may end up with several strategic options that appear equally attractive for the firm to pursue. As mentioned above, this is where experience and risk tolerance come into play in the decision-making process.
However, this does not mean that we should not be doing strategic planning. Despite the ‘fuzziness’, following a structured strategic planning process, careful evaluation of the available strategic options still leads to better, smarter decision making and preparedness for the future.
In operational decision-making, issues are much more quantifiable. The available options can be assessed carefully in detail to find the best solution.
Next time you’re dealing with an important business issue, try to identify whether it’s strategic or tactical/operational.
A better understanding of what strategy is and when you’re dealing with tactical issues helps you to take the appropriate approach to address business problems and develop solutions.
Strategy without tactics is the longest route to victory.
Tactics without strategy is the noise before defeat.