Part of the reason strategy can be scary, is the confusion between corporate and business strategy. The basic unit of competition is the ‘business unit’. You can define a business unit in a number of ways, but essentially it’s a revenue stream and a cost base attached to some physical assets in the form of machinery, real estate and people. In other words, it has a balance sheet and a profit and loss account and people working together towards a common goal. The big question for the business unit is ‘How do we win?’
Business strategy is the engine of competition and developing it should be participative, action-oriented and motivating. It may require some different ways of thinking about things, but it shouldn’t be complicated or exclusive. The clay for making strategy is what people do every day and the only way to change strategy is to change those actions. So strategy development should be relevant, practical and exciting.
Corporate strategy on the other hand, moves the business unit pieces about. It mixes and connects the business units to create a corporation of many business units that works better together than the sum of the separate parts. (Few organizations actually achieve this.) This is where the complex value equations can come into play and where the more difficult theories of portfolios, complementary cashflows and business interrelationships are developed.
The big question for corporate strategy is ‘Which businesses or industries should we be in?’ Of course, the answer to this question often depends on how well the managers in the business units perform or how well the corporate strategists judge the business unit potential. Corporate strategy is a more analytical, financially based activity than the development of business strategy. While it’s an important part of developing a complete strategy, it too often displaces the development of competitive business strategies and makes strategy seem inaccessible to most employees. It isn’t and it shouldn’t be especially at the business level. Corporate strategy is also largely a corporate office responsibility, although here too a more participative process can improve the outcome by forestalling the business unit/headquarters politics that emerge too often at the intersection of the two levels of strategy. We help companies with both business and corporate strategy, increasingly helping develop clients’ corporate strategy capabilities by successfully growing via merger and acquisition and other corporate moves.
