In many large organizations, the challenge is often diagnosed as internal. That is, the organization’s competitive problems may be much lighter than the obstacles imposed by its own outdated routines, bureaucracy, pools of entrenched interests, lack of cooperation across units, and plain-old bad management. Thus, the guiding policy lies in the realm of reorganization and renewal. And the set of coherent actions are changes in people, power, and procedures. In other cases the challenge may be building or deepening competitive advantage by pushing the frontiers of organizational capability.

Coherence

The actions within the kernel of strategy should be coherent. That is, the resource deployments, policies, and maneuvers that are undertaken should be consistent and coordinated.

Another firm may more easily meet her demands, so a critical issue becomes the identification of the particular set of buyers—our target market—where we have a differential advantage. Competitive strategy is still design, but there are now more parameters—more interactions—to worry about. The new interactions are the offerings and strategies of rivals. Very quickly, you are going to focus on what you, or your company, can do more effectively than others. It will normally turn out that competition makes you focus on a much smaller subset of car models, manufacturing setups, and customers.

I am describing a strategy as a design rather than as a plan or as a choice because I want to emphasize the issue of mutual adjustment. In design problems, where various elements must be arranged, adjusted, and coordinated, there can be sharply peaked gains to getting combinations right and sharp costs to getting them wrong. A good strategy coordinates policies across activities to focus the competitive punch.

Good strategy is design, and design is about fitting various pieces together so they work as a coherent whole.

If we are not going to automatically accept the opinions of others, how can we independently identify a company’s strategy? We do this by looking at each policy of the company and noticing those that are different from the norm in the industry. We then try to figure out the common target of such distinctive policies—what they are coordinated on accomplishing.