All Business Strategies Fall into 4 Categories

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Strategy & Business Model Section | 1

All Business Strategies Fall into 4 Categories

By Jerome Barthelemy | Harvard Business Review | May 23, 2024

Extractive Summary of the Article | Read and/or Listen

The problem with strategy frameworks is that although they can help you determine whether a given opportunity is attractive or whether a particular strategy is likely to work, they generally don’t help you in the task of identifying the opportunity or crafting the strategy in the first place. As the legendary strategy expert Gary Hamel put it: “The dirty little secret of the strategy industry is that it doesn’t have any theory of strategy creation.”

To help fill the gap, this article introduces a categorization of potential strategies, based on an in-depth analysis of the strategy/creativity literature. In essence, all strategies fall into four groups, ordered here from the least to the most creative.

1. Adaptations of successful strategies from your industry.  A standout example of this approach is Shein, a Chinese company that has pushed the fast fashion concept to its limit. While traditional fast fashion companies such as Zara and H&M launch about 500 new items every week, Shein introduces 1,000 new items every day. Shein’s items are also 30–50% cheaper than the ones offered by its competitors.  The formula has been extremely successful: between 2020 and 2022, Shein’s share of the U.S. fast fashion market went from 18% to 40%.
2. Importing strategies from other industries.  Executives and entrepreneurs rarely look beyond the confines of their industry. This is a pity because a strategy that has helped exploit an opportunity or neutralize a threat in another industry can often be a source of inspiration. Analogies are easy to make when there are strong similarities between two industries.  Analogies are more difficult to make when two industries are very different. 
3. Combining strategies from multiple different industries.  In many cases, new strategies can also be created by grafting additional features drawn from other strategies onto the existing strategy. A good example is Spotify. Launched in 2008, it has grown to number over 500 million users in 2023, outperforming Apple Music by a factor of five. In addition to providing on-demand music, the Swedish streaming company enables users to connect with other users and artists. They can view the music their friends are listening to. They can share playlists and follow artists. In other words, Spotify has simply combined conventional music streaming and social networking in a single service. While it is first and foremost a music streaming service, the social network dimension fosters a sense of community that keeps users engaged beyond simply listening to music.  In other instances, entrepreneurs select features from two or more existing strategies, while dropping other features, to create something new. 
4. Strategies created from scratch.  It consists of novel strategies developed from first principles. As Elon Musk said, “boil things down to their fundamental truths and reason up from there as opposed to reasoning by analogy.”  This involves a three-step process: (1) challenging conventional thinking, (2) breaking problems into their fundamental principles (i.e., their most basic elements or truths) and (3) creating new solutions from scratch. 

2 key takeaways from the article

1. The problem with strategy frameworks is that although they can help you determine whether a given opportunity is attractive or whether a particular strategy is likely to work, they generally don’t help you in the task of identifying the opportunity or crafting the strategy in the first place. As the legendary strategy expert Gary Hamel put it: “The dirty little secret of the strategy industry is that it doesn’t have any theory of strategy creation.”
2. In essence, all strategies fall into four groups, ordered here from the least to the most creative:  adaptations of successful strategies from your industry, importing strategies from other industries, combining strategies from multiple different industries, and strategies created from scratch.  Last strategy involves a three-step process: (1) challenging conventional thinking, (2) breaking problems into their fundamental principles (i.e., their most basic elements or truths) and (3) creating new solutions from scratch. 

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Topics:  Strategy, Business Model, Decision-making, Creativity, Analogy, Thinking