Business Strategy or Business Tragedy?

How the overuse of the term “strategy” undermines its critical function

Let’s play a game: count how many times you hear the term ‘strategy’ used in your next workday. On a conference call, in a Teams chat, or at the coffee machine. Out of the mouth of a college intern, a recent MBA graduate, or even from veterans in the industry. “We need a customer strategy.” “A talent strategy.” “A pricing strategy.” “A social media strategy.”

Everyone wants to “do strategy work.” It elevates the mundane. It signals intelligence. It makes the work mysterious and important. But what does strategy actually mean in a business context?

In overusing — and misusing — the word, we’ve lost the plot. We’ve turned “strategy” into a hollow badge of importance. We’ve rebranded operational tasks with an adjective to make everyone feel included. We’ve made “strategy” all encompassing — everything and nothing at all. And this blurring of the definition between the general use of the noun and the academic theory and practical application of business strategy is dangerous.

Because this lexical inflation isn’t harmless semantics — it signals rot in the organization. It signals that the organization is either bad at communicating their strategy to their own workforce or — worse — that they may not even be having the critical conversations about the unique choices that the business must make to maintain or attain a competitive advantage. It signals that the organization would rather not deal with the angst that is inherent to the process of defining and communicating their business strategy. It signals that the company does not have a robustly defined, deeply held, and unwavering opinion about the industry’s structure or its own strategy within it. Or it signals that the company does not believe in its ability to actually execute that position better than its competitors. It signals weakness. Decline. Disruption. Death.

What follows is a perspective on defining some of the fundamentals of business strategy.

What strategy is NOT

Business strategy is not synonymous with a bravado-laden statement to be the best. It’s not a buzzword, a pithy slogan, or marketing pitch. In fact, seeing this defined as a company’s strategy should set off the alarms. If your strategy is to “be the best,” what is the unique choice that your company has made? Is there a world where your unique choice is to not be the best? If your strategy is to “deliver accurate and impactful results with speed,” what is the trade-off you’ve made? Would you ever consider delivering inaccurate results, ones that have little impact, or that are delivered slowly? These types of slogans should indicate that your company is developing marketing materials — not strategy. And if you keep encountering these or if the company is bouncing from one slogan to the next because nothing is sticking, it’s because your company is not clear on its competitive strategy.

Business strategy is also not a decision to do all of the things — in fact, as Michael Porter says, “the essence of strategy is choosing what not to do.” Jim Collins illustrates this with the Hedgehog Concept: proclaiming “we will be the best” is not a strategy — understanding what you can be the best at (and, equally, what you cannot be the best at) is the key. In his book ‘Good to Great’ (2001), Collins studies the characteristics of companies that made the leap and finds an application of the Greek parable of the fox and the hedgehog. Those companies that became great had a deep understanding of who they are — the overlap between what they are deeply passionate about, what drives their economic engine, and what they can be the best in the world at — and the discipline and consistency to stay on track. “Anything that does not fit with our Hedgehog Concept, we will not do. We will not launch unrelated businesses. We will not make unrelated acquisitions. We will not do unrelated joint ventures. If it doesn’t fit, we don’t do it.” The alternative, the fox, represents companies that never asked these questions or debated them thoroughly enough. These companies became scattered, diffused, and inconsistent. And frequently, these companies fell into decline and faded from existence.

Further, it bears repeating: a strategy is not a plan. A “strategic plan” is still just a (thoughtful) plan. Drafting a comprehensive set of goals, targets, and initiatives and calling it “our strategy” is a mistake — this is just a to-do list for the next quarter! This is a common trap that is most frequented by leaders who have been promoted for their operational effectiveness but then struggle to recognize the needs of their new role. Further, these traps become commonplace whenever organizations neglect to challenge, empower, and coach their leaders to build these new skills — or when organizations simply enable leaders to spend their time doing the work for which they had previously received accolades. One might argue that these organizations face more pervasive cultural rot, as an unwillingness or inability to mentor and share blunt truths stunts growth and transformation. Optimizing the status quo of the business’s operations is fine for a time — but eventually a competitor will recognize and pounce on the opportunity resulting from a motionless strategy in a market that has naturally shifted given new context.

Finally, identifying a broken operational process and calling it a “strategic issue” is a similar linguistic — and mental — trap. Calling anything “strategic” or “part of our strategy” when one means to say “let’s fix this process” dilutes the organization’s understanding of what strategy actually is. To be clear: operational excellence is essential — but it is not strategy. Insights about one’s customers, products, competitors, and the market more broadly often come from the frontline — but these insights inform strategy; they do not make or communicate the company’s unique choices. Aligning operations to reinforce a unique value proposition is critical to achieving fit — but the work of aligning those operations is execution, not strategy. Fixing broken pipes does not explain where the water should flow. Improving customer experience is not the same as redefining customer value. Buying a new tech platform is not a digital strategy. Operations are how you run the engine; strategy is why you built it in the first place and where you believe it will take you. When strategy and operations are not clearly delineated, organizations can succumb to “strategic overload” — pursuing a long list of initiatives under the banner of “strategy” without any true direction; running 10,000 miles a minute and getting nowhere. These organizations feel productive for a time, but eventually succumb to internal burnout and external disruption — all because they simply do not understand their north star.

What strategy IS

So, what is genuine business strategy? In a word: choice.

To be clear: choice is present in everything we do — but this does not mean that any or every choice one makes is suddenly “business strategy.”

Strategy, at its core, is about understanding the broader market context, a company’s own strengths, and the integrated set of choices that define the company’s unique positioning in the market to achieve and sustain a competitive advantage in the long-term. It demands informed opinions about the future, a willingness to debate hypotheses and then test them, and the conviction and courage to bet on a prediction. Operations is about the present — executing all of the activities to deliver value to the customer today and identify critical signals from the frontline as inputs to the business’s strategy. But business strategy is all about tomorrow — proactively researching, testing, and deciding the future of the business based on:

• Market context & hypotheses
• Industry structure
• Value, positioning & fit
• Achieving & sustaining competitive advantage

Market context and hypotheses

Peter Drucker famously stated that “the greatest danger in times of turbulence is not the turbulence — it’s acting with yesterday’s logic.” In 2025, yesterday’s logic is suddenly being questioned by the promise of emerging technologies which are advancing faster than ever before. Knowledge workers — from entry-level employees to white-collar workers to academics and even to “strategy & operations” tech bros — are suddenly panicked by the prospect of AI agents and artificial general intelligence (AGI) erasing their job. Academics and authors — from Ray Kurzweil to Yuval Noah Harari, Michael Sandel to Anton Korinek — have been asking these important questions for years. How does humanity respond when we face actual competition with another, smarter species? Given the significant time lag between the invention of a technology and the full realization of its social and political consequences, will humanity even be able to respond? In a less dystopian view, what happens to humanity when foundational structures of our society are fundamentally disrupted?

While these questions may seem like liberal academics waxing poetic, business leaders must understand and engage in these discussions because they are essentially about the economic system on which all businesses operate. What does capitalism look like when a significant amount of jobs are automated and unemployment runs rampant? When a handful of companies hold all of the power in society? When the number of people facing inequality and resource scarcity reaches a tipping point and demands change? What happens when it sparks conflict and anarchy — and burns the entire system down? Most business leaders aren’t compelled — or required — to solve this overwhelming societal issue around the future of capitalism. But that doesn’t mean they shouldn’t be thinking about it. Business leaders should be in the business of predicting the future — ‘skating to the puck,’ obtaining first mover advantage, seizing the opportunities inherent in supercycles.

Treating business strategy as a set of living hypotheses about the future is essential to great businesses. These hypotheses should be continually debated, tested, and refined rather than as a fixed five-year plan to be rigidly executed. One of the primary challenges that today’s organizations face here is the angst and conflict inherent in intellectual debate. It’s much easier to just encourage everyone to get along and keep pushing forward. However, in avoiding these critical conversations, it weakens the very muscle that organizations need most: the capacity to reflect on historical context and academic theory, to understand the emerging trends in the broader market, to think about the company’s place among its peers, to think long-term, and the recognize what the business needs to compete moving forward.

In effect, these business strategy discussions become an exercise in the scientific method: propose a hypothesis, define a null hypothesis, and then test it against real-world data over time. For example:

• Observation: Generative AI increasingly mimics jobs to be done by customer support representatives.
• Hypothesis: A technology solution or product leveraging Generative AI will reduce customer support headcount by 40% in our industry within 24 months.
• Null: No statistically meaningful change in headcount over the same period.
• Tactic: Hire a forward-deployed engineer to shadow a customer support representative and evaluate the tasks a customer support representative completes which may be more efficiently completed by technology. Prototype a technology solution on test and then live calls with customers. Evaluate support provided to customers and capture resources used to accomplish each task.
• Data sources: employee headcount, customer support hours logged, customer support ticket status, tickets solved by both customer support representatives and technology solution.

It’s a structured debate that requires conversation, disagreement, conflict, resolution, and evolution. It’s a sanctioned experiment on the everyday operations of the business which may result in short-term performance outliers, may produce no conclusions, or could fundamentally reinvent a part of the business. The goal is not to improve performance in the established model — it’s to explore what might be possible with a novel model.

Naturally, these structured debates also require a culture of trust, curiosity, and a willingness to be wrong. Leaders must create a climate where presenting a dissenting view or a negative data point is welcomed as healthy skepticism — not seen as disloyalty, pessimism, or politically incorrect. People should want to be stimulated by thoughts that are logical but completely at odds with their own views; people should crave viewpoints from different paradigms as a necessary means of internal disruption. Moreover, they should seek out disconfirming evidence — to prove themselves wrong as much as right. By defining in advance the signs that a hypothesis isn’t working, we avoid the all-too-human tendency to rationalize problems away due to ego, sunk costs, and other fallacies. Instead, we can preserve the agility to pivot or tweak the strategy in time.

Structured debates around the business’s strategy typically explore multiple time horizons. Some hypotheses can be tested in the short term (e.g., next quarter’s metrics may confirm if a new pricing strategy is gaining traction), while others play out over many years (e.g., will a major bet on an emerging capability lead to sustained competitive advantage?). By scheduling regular strategy review sessions, organizations institutionalize this forward-looking debate. They revisit each hypothesis: are we seeing the expected signals, or are we encountering disconfirming evidence? Crucially, these debates must be informed by insights from the frontline; what early signals about our customers, our products, or competitive threats in the market as worth monitoring, examining, or actioning? Further, these debates ask both “why?” and “what have we learned?” — but also “how does this affect our original hypothesis and null hypothesis?” and “how were our original assumptions or tactics to test our hypotheses wrong?”

A hypothesis-driven strategy process has a critical benefit: it forces companies to look outward and ahead, not just inward. By its nature, business strategy hypothesis testing is anticipatory. It encourages teams to gather weak signals from the periphery, to discuss “what if” scenarios, and to essentially scenario-plan on the fly. Businesses that foster open dialogue about the future — that encourage managers to surface nascent trends or technologies and debate their potential impact — are far less likely to be blindsided. Organizations which systematically scan for ambiguous threats and debate them are much better at avoiding severe problems than those that ignore weak signals. Spending time and energy on these proactive measures is costly, but neglecting to position the company ahead of change is far more dangerous than reacting late. Instead of being overcome by events, organizations that dedicate time to these efforts “skate” ahead while their competitors are still coping with yesterday’s news. Strategy stops being a PowerPoint reviewed once at the start of the fiscal year, and it becomes a living conversation that engages employees at all levels. This anticipation and agility can spell the difference between leading change and falling victim to it.

Industry structure

Industry structure analysis is a method for understanding the competitive forces that shape profitability within an industry. It helps businesses assess whether a particular market is attractive (i.e., likely to generate above-average profits) and where opportunities and threats exist. Michael Porter’s Five Forces framework is the cornerstone of industry structure analysis. This framework identifies five forces that determine the intensity of competition and thus industry profitability.

• Buyers: Buyers inevitably want to pay less and get more. Their bargaining power is stronger when buyers are concentrated, comparable offerings are essentially indistinguishable from one another in the eyes of the buyer, or there are low switching costs. The more bargaining power buyers have against businesses, the less likely there is to be attractive profitability.
• Suppliers: Suppliers inevitably want to be paid more to deliver less. Their bargaining power is stronger when there are fewer suppliers, unique inputs, or high switching costs. The more bargaining power suppliers have against businesses, the less likely there is to be attractive profitability.
• Substitutes: The threat of substitutes is high when alternative products meet the same need at a better price-performance ratio. Businesses are most frequently surprised by substitutes that originate outside of their traditional view of their industry; this means that a business’s strategy should constantly be watching the periphery to recognize potential substitutes and pivot to counter them becoming too much of a threat. The higher the threat of substitutes, the less likely there is to be attractive profitability.
• Existing rivals: A large number of competitors in an existing market creates more rivalry, which drives down prices and margins — meaning the industry is less likely to have attractive profitability.
• New entrants: The threat of new entrants is most present when barriers to entry (e.g., economies of scale, brand loyalty, regulation) are low. Again, more entrants mean more competition, which means lower profitability.

Unless a company has a wildly disruptive idea that can overtake all of these forces, it’s more likely that a company entering an unattractive market will gravitate to playing the old game and running into competitive convergence, which ends up being mutually destructive for all businesses in the industry.

On the other hand, companies can use industry analysis to find a new game to play. A company diversifies by entering new industries or markets that appear to be more attractive. Diversification efforts can be either related or entirely unrelated to its core business or its core competencies. The rationale can range from leveraging a core competency in a new area, to wanting to explore hypotheses around a new capability, to simply seeking to spread risk across different products or markets. When done poorly, diversification can destroy value and focus — and turn a company into a fox. However, when done right, diversification can fuel growth and reduce volatility. When done superbly, diversification based on the company’s hypotheses about the future enable it to understand a capability before that capability has a wide-ranging impact on the market. For example, when Google paid $1.65 billion for a one-year-old video platform startup in 2006, critics labeled it crazy and overpriced. But Google bet on the opportunity to generate more ad revenue from online videos — and went on to create the world’s most dominant video platform, YouTube.

Further, industry analysis can also be used to understand if there are opportunities for vertical integration — owning more activities along the supply chain. Vertical integration can reduce the power that buyers or suppliers have over a company, but it also comes with increased overhead and reduced flexibility. Forward integration pushes the company downstream — closer to the buyer — and empowers the company to, for example, more tightly control the customer experience and differentiate the value of their products against their competitors. Backward integration pushes the company upstream — closer to the suppliers — to, for example, secure supply, reduce bottlenecks, or control quality. Companies must weigh the benefits against the risks before bringing more of the value chain in-house.

Value, positioning, and fit

A business strategy aims to achieve competitive advantage via an integrated set of choices to be different — where to play, how to win, and which different set of activities will deliver a unique mix of value. A prominent example of choosing to be different is Southwest Airlines. In the late 1960s, Southwest disrupted the industry with their low-cost, high-efficiency model. Embedded in this model are integrated choices — short-haul, point-to-point flights on only one type of aircraft where passengers faced open seating and no-frills service (e.g., no meals) for low fares — all enabled each aircraft to be on the ground for as little time as possible and in the air transporting customers as much as possible. Importantly, Southwest’s leaders explicitly chose what not to do — no hub-and-spoke network, no variety of plane type, no first-class cabins, no interline baggage transfers — because this was not the value they were aiming to create.

The creation of value inherently requires a deeper understanding of one’s audience; in other words, who are you creating value for? Harvard’s Felix Oberholzer-Gee proposes a ‘value stick’ framework for how companies create value for their customers, suppliers, and employees in his book ‘Better, Simpler Strategy’ (2021):

• Willingness-to-pay (WTP) sits at the top end of the value stick. It represents the customer’s point of view. More specifically, it is the most a customer would ever pay for a product or service. If companies find ways to improve their product, WTP will increase.
• Willingness-to-sell (WTS), at the bottom end of the value stick, refers to employees and suppliers. For employees, WTS is the minimum compensation they require to accept a job offer. If companies make work more attractive, WTS declines. If a job is particularly dangerous, WTS increases and workers require more compensation. In the case of suppliers, WTS is the lowest price at which they are willing to sell products and services. If companies make it easier for their suppliers to produce and ship products, supplier WTS will fall.
• The difference between WTP and WTS, the length of the stick, is the value that a company creates. Research shows that extraordinary financial performance (returns in excess of a company’s cost of capital) is rooted in greater value creation. And there are only two ways to create additional value: increase WTP, or lower WTS.

Organizations frequently focus on WTP — the customer side — and a good chunk of what follows does as well. However, Oberholzer-Gee’s framework here is particularly helpful because it emphasizes the other side — WTS, including both employees and suppliers. This may be revisited at a later time.

An organization can create value for customers in several ways. As customers perceive value differently, there is more than one way that an organization can win. A customer value leader[1] is an organization that outperforms its rivals by delivering superior value to a distinct customer segment. A common framework for customer value includes three distinct values — price, performance, and relational value.

1. Price value: Offerings are kept basic for the best price. This often attracts price-sensitive customers; however, other customers often anchor these offerings as a comparison. Example leaders: Walmart, Spirit Airlines.
2. Performance value: Offerings deliver superior service, more functionality, innovative features, and/or design or fashion leadership. Example leaders: Nike, Apple.
3. Relational value: Offerings are personalized to the customer based on a robust knowledge base about them often accrued over a long-lasting relationship. Example leaders: Netflix, Amazon.

Achieving customer value leadership in any one area requires being perceived by the customer as credible or competitive enough against comparable products with the other two areas. For example, Spirit Airlines may provide the best price for a standard plane ticket, but they cannot achieve customer value leadership if the offering dips below an acceptable quality — e.g., the plane does not fly (performance value), the airline cannot track customer tickets (relational value). Customers are constantly evaluating whether they have extracted the most value or benefit for the money they have spent on the product or service. A gap between what value a product or service objectively delivers and what value the customer perceives they have obtained through their purchase can significantly affect customer satisfaction and loyalty either negatively or positively.

Further, customer value leadership naturally requires trade-offs. Companies cannot be all things to all customers. Neither Southwest Airlines or Spirit Airlines can both provide the best price for a standard offering and simultaneously deliver superior service compared to American Airlines or a private chartered jet. Similarly, CVS Pharmacy could not rebrand as ‘CVS Health’ while still selling cigarettes to its customers. Companies often struggle with the decisions around these trade-offs either because they do not understand their competitive advantage, they are unwilling to accept the consequences of the trade-off, or — worst of all — they believe that they can straddle two segments at once.

Maintaining even one customer value leadership position is challenging as it is. As markets mature, more and different customers enter, creating new customer segments and viable niche positions. As this happens, new competitors enter, introducing new sources of value to test what customers want. Companies must constantly evaluate how the industry overall and the customers themselves are evolving — and predict how they might continue to evolve! Traditional brick-and-mortar movie theaters were disrupted by video rental retailer Blockbuster. Blockbuster was disrupted by mail-home video rental retailer Netflix. Netflix was disrupted by local automated video rental kiosk chain Redbox. Redbox was disrupted by online video streaming service Netflix. What’s next? As markets evolve, their boundaries are continuously morphing and substitutes from unexpected industries provide surprising new value.

Finally, companies that develop superb business strategies cut away the inessential and double down on a coherent path. They align the entire company around a clear value proposition, a distinctive way of competing, and a system of activities that all fit together. In fact, fit — the coherence among all the activities a company performs — is a critical but often overlooked element of strategy. Porter noted that “the success of a strategy depends on doing many things well — not just a few — and integrating among them.” When a company’s choices mutually reinforce each other, the whole becomes greater than the sum of parts, and the strategy becomes difficult to copy. If your operations, value chain, and go-to-market approach all cohere around a unique way of delivering value, a rival can’t imitate one piece without having to rebuild their whole system. Porter outlined three types of fit in ‘What is Strategy?’ (1996), including:

• Simple consistency is the most basic form of fit — ensuring that each individual activity aligns clearly and logically with the company’s strategic position and goals. “Consistency ensures that the competitive advantages [stemming from] activities cumulate and do not erode or cancel themselves out. It makes the strategy easier to communicate to customers, employees, and shareholders, and improves implementation through single-mindedness in the corporation.”
• Reinforcing activities amplify and enhance the impact of each other, creating complementary or network effects that competitors find difficult to replicate. This is a deeper and more powerful form of strategic fit than simple consistency.
• Optimization of effort refers to coordinating activities in ways that eliminate redundancies and wasted effort, achieving greater efficiency and effectiveness. It’s about making choices that leverage shared resources or activities across different products, markets, or business units.

These three types of fit are not mutually exclusive and true competitive advantage stems from the entire system of activities all working together. Every employee in a company must feel empowered to regularly ask if the activities they drive continue to cultivate the desired competitive advantages — and how this can be sustained in the long-term.

Achieving and sustaining competitive advantage

While achieving competitive advantage in a market is a milestone, it is extraordinarily rare to see a clearly defined finish line where the company can take a break. This is a marathon — or even a transcontinental march. The best companies prioritize sustainable, cumulative growth over volatile success. They cultivate the resoluteness to consistently meet specified performance markers, the discipline to avoid overexertion or reactionary decisions, and the singular focus on the long-term outcome. It requires protecting what makes the company unique while constantly listening for inklings of demand signals across the market, evolving ahead of competitors, and sometime boldly disrupting past successes to leapfrog to new ones. This is a critical reason why “business strategy” should not and cannot be done by executives in a boardroom alone; the employees who know what customers want, what value competitors are introducing, and what the latest and next technologies allow are those with the most important data a company has at their fingertips. Ensuring that multiple feedback channels are open and regularly communicating these demand signals throughout the business is a foundational pillar to sustaining competitive advantage.

Conclusion

To summarize, real strategy sharpens an organization’s focus. It defines unique choices about who you will serve, what you will offer, and how you will deliver it differently from anyone else — all grounded in a long-term vision of competitive advantage. It is rooted in foresight (seeing where the puck is going), requires trade-offs (choosing what not to do), and demands internal coherence (aligning activities and resources to reinforce the chosen path). With these elements in place, strategy regains its potency. It’s no longer a buzzword or a bland statement, but a “sharp edge” that cuts through the noise and positions a business to win.

Footnotes:

• This parable is often attributed to Archilochus, iambic poet of the Archaic period. Isaiah Berlin also famously wrote on this parable in ‘The Hedgehog and the Fox: An Essay on Tolstoy’s View of History’ (1953).
• Ray Kurzweil, author of ‘The Singularity Is Near’ (link). Yuval Noah Harari, professor of history at the Hebrew University of Jerusalem (link). Anton Korinek, professor of economics at the University of Virginia and a leading AI economist (link). Michael Sandel, professor of government at Harvard University (link).
• There are many critiques of and proposed additions to Porter’s Five Forces framework; this is natural as time goes on and academics and practitioners alike think about the framework with new context. We welcome the discussion — and see value in a widely-accepted framework.
• It is necessary to emphasize that the act of choosing the set of activities that deliver a unique mix of value is different from actually executing these activities. Executing these activities inevitably comes with choices, these choices result in operational performance, and insights on these choices, the activity more broadly, and the operational performance may be helpful to the company’s decisions around the set of activities — but this is the difference between strategy and operations.
• Note that this is different than Customer Lifetime Value (CLV) — an entirely different concept!