The funadmental dimensions of strategy

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Frédéric Fréry

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The Fundamental Dimensions of Strategy

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apoleon Bonaparte once wrote: “Always ask your generals about your strategy, but never assemble them in the same war room.” That statement sheds light on a paradox: Whereas most strategists are assertive people, corporate strategy is a fuzzy discipline. Almost half a century after seminal works in the field, corporate strategy literature boasts at least 10separate schools of thought1 and more than a dozen definitions that focus on rather divergent perspectives: planning resource allocation or satisfying stakeholders, stretching unique competencies or adapting to the environment, programming sophisticated management systems or muddling through emerging ideas — even sticking to simple rules. Strategy is often confused with microeconomics (“Strategy isbuilding rent”), with finance (“Strategy is creating shareholder value”), with marketing (“Strategy is finding optimal positioning on the marketplace”) or with organizational design “Strategy is enabling emergent processes”). There are even some bizarre hybrids, such as “strategic finance” or “strategic marketing,” as if strategy were only defined visà-vis other disciplines. Strategic innovationoften consists of importing concepts and methods from other disciplines, sometimes as distant as physics (chaos theory) or biology (organizational ecology). Scholars, executives and consultants alike know that it is problematic to explain to their students, employees or clients which decisions are strategic choices and which are just operational options. To clarify and deepen our understanding ofcorporate strategy, we need general guidelines that set the boundaries of the discipline, highlight its specifics and facilitate executive decisions. (See “About the Research,” p. 72.) On a general level, strategy comprises three objectives: creating value, handling imitation and shaping a perimeter. (See “The Dynamics of Strategy,” p. 73.)

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A truly strategic decision occurs only at thenexus of three organizational considerations — where it adds value, how it handles and employs imitation and how it defines its perimeter.
Frédéric Fréry
FALL 2006 MIT SLOAN MANAGEMENT REVIEW

The Why of Strategy: Value
The ability to sustain value creation, whether from the customer’s or the shareholder’s perspective, is the ultimate goal of any strategy. The essential

Frédéric Fréry isa professor at ESCP-EAP European School of Management in Paris. Contact him at frery@escp-eap.net.

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challenge consists of defining the type of value we expect and the way weintend to share it. Focusing corporate strategy on In addition to the examples used in this article, over the past six years, I have conducted invalue creation relates to key dedepth case study research on Benetton, Dell, LVMH, Electrolux, Virgin, Smoby, Alcatel, Renault, Canal+, Axa, Valeo, MMS, easyJet, Ryanair, Danone, BMW, PPR, Hennessy, MCC Smart, bates on managerial ethics, agency Apple, Palm,Zodiac, Bolloré, France Telecom, Carrefour and Zara. My goal was to identify in theory and corporate social rethe fundamental dimensions of strategy an encapsulating concept equivalent to the famous sponsibility: How do you 4Ps of the marketing mix — product, price, place (or distribution) and promotion. To do so, I distinguish between pure financial used both primary and secondary sources and I...