"Strategy" is a word that is often thrown around in the business world, but it can mean different things to different people. Some experts, such as Harvard Business School professor Michael Porter, define strategy as the science of creating and implementing a unique market position. Porter is famous for inventing the concept of the "five forces" that shape business strategy. Others, such as economist Vladimir Kvint, see strategy as the means of creating a long-term success plan for an organization.
The Three Main Types of Business Strategy
The one thing that all the various types of strategies have in common is that they are rooted in an understanding that people, processes, and technology are all integral to the success of an organization. It is possible, therefore, to think of strategic management in three main types: business strategy, operational strategy and transformational strategy.
The Goals of Business Strategy
Business strategy is primarily concerned with the way in which an organization will approach its consumers. Business strategists want to find out how to enter a market and how to penetrate it with a new or existing product or service. Fundamental questions that business strategists ask are which customers the organization should target, which geographical regions the product or service appeals to and how the company should go about advertising and promoting its offer.
Business strategy also involves getting managers to understand the organization's competition – how others are promoting similar products or ideas. Business strategists ask how the organization will position itself in respect to its competitors, which approaches it will take to make itself stand out and what resources and capabilities are required of staff to move the company forward.
Where Does Business Strategy Happen?
Business strategy is almost always formulated at the top of a company's hierarchy. But buy-in is important from all levels of the organization. Senior managers are just the first to bring the tools, techniques, and technology to an organization so the company can position itself for long-term sustainability. Mid-level managers and lower-level employees can all contribute ideas to the company's strategic vision.
Using Operational Strategy
Closely related to business strategy is operational strategy, which involves turning the business strategy into an action plan for the organization. This type of strategy is often used by mid-level managers, after they consult with senior leaders, to identify the technology, processes and tools needed to make the business strategy a reality. Operational strategy is so important that the vast majority of employees within an organization should be working at this level of strategy, because it concerns making the high-level strategic decisions work on a day-to-day basis.
Take a retailer, like Wal-Mart or Target, as an example. They would use operational strategy, in terms of lowering inventory levels and price points to generate more sales.
Using Transformational Strategy
Transformational strategy completely changes the way an organization does business. It involves more than setting a plan for the future or thinking through technological or people-based changes. Transformational strategy is about disrupting what the business normally does and radically instituting changes in the way people think, work and act. This is normally done only if the organization is seriously broken, beyond repair, as it requires starting from scratch and rethinking the way a company operates.
Transformational strategy means being responsive to changing business climates. A responsive senior management team will realize when a business model is beyond repair and then seek to radically change the operation. As such, transformational strategy is normally used by human resources professionals and organizational development specialists.