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Strategy vs. Tactics » Strategy vs. Tactics
Strategy vs. Tactics
The difference between strategy and tactics is often poorly understood, and can be difficult terrain to navigate. If you have the right strategy and the wrong tactics, the tactics can be changed and you can still get where you want to go. The reverse is not true. If you cannot articulate your strategy in a couple of sentences, odds are that you do not have one. This can be a lethal headwind. Business is tough enough . . . you need a tailwind. If you master the difference between strategy and tactics, it won’t just change your business, it will change your life. One of the best explanations I have ever read on the difference between strategy and tactics is the book “Fiasco” by Thomas Ricks. It explains the struggle with this concept that the U.S. Army went through, the first few years in Iraq.
Here are a few examples:
The Wal-Mart Strategy. If you have a product-driven business, this one can work nicely. It is not a quick fix, but is deadly nonetheless. You gradually contact your distributors, (don’t be afraid to reach out to new ones), and relentlessly convince them that with your growing volume (and perhaps the ability to switch volume to them from another vendor), and in consideration of your future volume projections, you need, and are entitled to, better margins. The implied threat here is that you can also switch their volume to someone else (you do not have to say this, they are not stupid and understand where this is going). Of course, if you are dealing with a vendor who has an exclusive product that you can’t live without, this doesn’t work. Slowly, your distributors will yield, and your margins will start to improve. The key word here is relentless. This isn’t a hobby and can’t be dealt with when the mood strikes you. It must be a core effort that goes forward every day. The world is full of good ideas, but they are worthless without execution.
Here’s the key: As your margins improve, DO NOT just take them into income and go merrily on your way. Share them fifty-fifty with your customers. Reinvest your half in building out your company with better processes and products. Pass the customer’s half along to them in the form of better prices.
What’s happening here? Your company is getting bigger and stronger, and your improved prices gradually take market share from your competitors. You use your improved volume to negotiate even better margins from your distributors, and in turn, lower your prices more, and take more market share, slowly putting your competitors out of business. This strategy only worked well enough to make Wal-Mart the biggest company in the world (revenues). Works for me.
The General Motors/Ford (non) Strategy. This is a classic tale of the confusion between strategy and tactics. How long have the foreign car manufacturers been eating Detroit’s lunch? Decades. How much have the domestic manufacturers paid out, over that time period, in executive compensation? Billions and billions. Over much of this time, Detroit had a lucrative niche with great customer loyalty: pickup trucks. Until recently, foreign manufacturers were reluctant to attack this niche because Chevy and Ford truck owners were known for fanatical loyalty to their brands. So here’s the picture: cars are getting murdered and trucks are doing well. What accounted for this? It turns out, that the way Chevy and Ford competed in the truck market was to put very high levels of quality into the product. That is a strategy. In cars, what they thought was a strategy, was actually tactics: frequent redesign of models to encourage trading, a proliferation of models and endless sales and price cutting. Over the course of all of those decades and billions in executive compensation, someone needed to stand up and say: “Why don’t we take the quality that we build into our trucks, and do the same thing with our cars?” Now, brought to their knees, staring into the face of bankruptcy, these hapless morons claim to have seen the light. We’ll see.
Amazon. This one’s easy. Jeff Bezos expresses the strategy in three words: “the customer experience”. According to articles, this has been the strategy from the get go. Once this was in place, tactics, such as free shipping can be tinkered with to their heart’s content, because the umbrella of a wonderful strategy keeps the company on track.
Toyota. The truth, as he saw it at Toyota, was all about the customer—unlike at some other automakers that let executives dictate what cars to build. “One of the many things that Toyota does really, really well is that it can put the voice of the customer right there at the table in front of the chairman of the company, in a way that even he can’t change it”. This, friends, is a strategy.
Quote from James Farley, formerly Group Vice President for Lexus,
being interviewed by The New York Times, April 2008, after
accepting a senior position at Ford to help turn it around.