I’ve been thinking a lot lately about this line from the beginning of my strategy textbook:
Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.
I remember when I first read that passage, the word “relative” jumped off the page at me. Strategy isn’t a solo sport. It must be formulated relative to competitors.
Strategy is relative
When I think about strategy, there’s a version in my head that has me playing a one-player game: I’ll figure out the moves I should make and come up with the best way to execute them. If I do a good job, I’ll get a high score. Maybe I’ll attempt to design the perfect product or even a craft the perfect customer experience. But by itself, that’s not strategy.
Strategy must be relative. But why?
Strategy is relative because your customers have choices. They have a choice between your offering and your competitor’s. They have a choice between your offering and continuing to do whatever they’re already doing. Saying strategy is relative means you must focus on your customers and how other available solutions are positioned to meet your customer’s needs.
Taking your competitors into account doesn’t mean you have to copy them. But it does give you the opportunity to identify your customer’s unmet needs. Perhaps you can meet your customer’s needs and deliver more value relative to your competitors. Or maybe you can provide the same level of value as a competitor but do so at a lower cost. Either strategy can gain you a competitive advantage.
Strategy means thinking not just about yourself and what you’re doing. It means thinking about your customers and how your offering meets their needs and delivers more value relative to competitors.