The strategy logic flow:

The first component of the strategy logic flow is industry analysis. To determine where to play, you must assess the industry landscape. You must ask, what might be the distinct segments of the industry in question (geographically, by consumer preference, by distribution channel, etc.)? Which segmentation scheme makes the most sense for the given industry today, and what might make sense in the future? And what is the relative attractiveness of those segments, now and in the future?

This is the fourth and final element of the logic flow. The question to address is this: is there some competitive response that could undermine or trump the where-to-play and how-to-win choices?

Inevitably, this is guesswork to some degree; you can’t know for sure what a competitor will or won’t do in the face of your actions. But forming a thoughtful hypothesis is important. It is far better to ask what your competitors will likely do before you proceed than to simply wait and see what happens. Only strategies that provide a sustainable advantage—or a significant lead in developing future advantages—are worth investing in. You don’t want to design and build a strategy that a competitor can copy in a heartbeat, or one that will prove ineffective against a simple defensive maneuver on a competitor’s part.

A strategy that only works if competitors continue to do exactly what they are already doing

is a dangerous strategy indeed.

To make good choices, you need to make sense of the complexity of your environment. The strategy logic flow can point you to the key areas of analysis necessary to generate sustainable competitive advantage. First, look to understand the industry in which you play (or will play), its distinct segments and their relative attractiveness. Without this step, it is all too easy to assume that your map of the world is the only possible map, that the world is unchanging, and that no better possibilities exist. Next, turn to customers. What do channel and end consumers truly want, need, and value—and how do those needs fit with your current or potential offerings? To answer this question, you will have to dig deep— engaging in joint value creation with channel partners and seeking a new understanding of end consumers. After customers, the lens turns inward: what are your capabilities and costs relative to the competition? Can you be a differentiator or a cost leader? If not, you will need to rethink your choices. Finally, consider competition; what will your competitors do in the face of your actions? Throughout the thinking process, be open to recasting previous analyses in light of what you learn in a subsequent box. The basic direction of the process is from left to right, but it also has interdependencies that require a more flexible path through it.

STRATEGY LOGIC FLOW DOS AND DON’TS:

• Do explore all four critical dimensions of strategy choice: industry, customers, relative position, and competition.

• Do look beyond your current understanding of the industry, pushing to generate new ways of segmenting the market.

• Don’t accept that entire industries are or must be unattractive; explore the drivers of

different dynamics in different segments, and ask how the game could be changed.

• Do consider both channel and end consumer value equations; if only one of these constituents is happy, your strategy is a fragile one. A winning strategy is a win-win-win; it creates value for consumers, customers, and the company.

• Don’t expect either the channel or the end consumers to tell you what constitutes value;

that is your job to figure out.

• Don’t be blasé about your relative capabilities or costs; compare them with those of your

best competition, and really push to understand how you can win against them.

• Do explore a range of possible competitive reactions to your choices, and ask under what conditions competitors could block you from winning.