What is a Business Strategy? (in the words of David Aakar)

The first dimension concerns the product-market investment strategy, the scope of the business and the dynamics and resource priorities within that scope. Which products should be offered, and which segments should be targeted? Which should get aggressive investment to enter or grow, which should get minimal investment, and which should be milked, exited or avoided? Where should growth come from? Options include bringing existing products to new markets (market expansion), bringing new products to existing markets (product expansion), or entering new product markets (diversification).

The second dimension concerns the customer value proposition, which needs to be relevant and meaningful to the customer, reflected in the positioning of the product or service, sustainable over time and differentiated from competitors. In can involve elements such as providing good value (Wal-Mart), excellence on an attribute such as getting clothes clean (Tide), quality (Lexus), product line breadth (Amazon), innovative offerings (3M), personality that connects (Harley-Davidson), organizational values (saleforce.com), or a shared interest (Pampers and baby care).

The third dimension concerns strategic assets or competencies that provide a sustainable competitive advantage. A strategic competency is what a business unit does exceptionally well—such as a customer relationship program, manufacturing or promotion—that has strategic importance to that business. It is usually based on knowledge or a process. A strategic asset is a resource, such as a brand name or installed customer base that is strong relative to competitors. Strategy formulation must consider the cost and feasibility of generating or maintaining assets or competencies.

The fourth dimension concerns a supportive set of functional strategies or programs and the executional elements needed to deliver on the value proposition. Creative excellence in conceptualizing and implementing these strategies will be critical to success. They could be around offering development, new product introduction, customer relationships, brand building, communication, social technology, distribution, coordinating global markets, quality, logistics and more.

The concept of a business strategy is central to most businesses, but, strangely, there is no accepted definition. As a result, the process and its output can be all over the map.


What are the 10 Steps in Building One?

1. Make sure that each brand has a well-defined role or set of roles to play in each product-market context that it is expected to contribute.Each brand needs to be actively managed in order to be successful within that role. In particular, brand building resources should be allocated on the basis of these roles and not based on the sales and profits they are currently generating. For example, future master brands, emerging brand platforms, endorser brands, and lynchpin brands (brands like GM’s “On-Star” that provide differentiation to other brands), for example, should receive adequate funding so that they can fulfill their role.

2. Identify the strategic brands that will play a driver role in supporting major businesses or product platforms in the future. A brand is said to have “a driver role” when it drives the purchase decision and defines the use experience. A brand with a driver role will represent the offering and summarize its value proposition and lead the charge against competitors into the product market. A strategic brand is the present or future star player, a brand that the future success of the business will hinge on.

3. Understand the roles of sub-brands and endorsed brands when deciding how to brand a new offering. A sub-brand will allow some distance from a master brand, an endorsed brand more, and a new brand the most. How much distance is needed? Three questions are involved in branding new offerings and deciding whether a new brand is needed. Will existing brands enhance the new offering? Will the new offering enhance an existing brand? Is there a compelling reason to generate a new brand?

4. Brand portfolio strategy is intimately connected to the business strategy, which specifies the product-market growth directions and the associated value propositions. So you need to articulate the business strategy. A brand needs to be in place to support those growth directions. In particular, brands are needed to provide visibility and credibility to new offerings in priority product-markets.

5. Find or create branded differentiators. Actively managed branded features, ingredients, technologies, services or programs create a meaningful impactful point of differentiation for a branded offering over an extended time period. The Heavenly Bed, for example, is a branded differentiator for Westin Hotels.

6. Almost all brands could use more energy. Some brands, especially established brands, may be noticeably bland and tired. A solution is to create or exploit branded energizers, a branded product, promotion, sponsorship, symbol, program, or other entity that by association significantly enhances and energizes a target brand. The branded energizer can be controlled by the firm (e.g., the Avon Walk for Breast Cancer) or by another firm (Home Depot’s connection to Habitat for Humanity).

7. Leverage strong brands through brand extensions. Extension opportunities that will fit and add value to a brand through its associations and customer base should be sought out. The extension should also enhance the brand by providing visibility, associations, energy, access to growth arenas, and communication efficiencies. Rather than conducting ad hoc brand extensions, it’s strategically better to develop brand platforms with a vision for the ultimate future of the brand.

8. Vertical extensions are risky, but sometimes necessary when creating a new brand is simply not feasible. However, when moving into a value market sometimes a sub-brand or endorsed brand strategy will reduce the risks of extending a brand. The same is true when it is necessary to enter a super-premium market. In any case, implementation needs to address delicate issues.

9. A corporate brand can be a powerful master brand or endorserbecause it is uniquely suited to capture the organization’s heritage, assets and skills, people, values, citizenship, and performance. While competitive products may be similar, organizations rarely are. A Corporate brand is thus a potential source of differentiation as long as it stands for something meaningful and positive.

10. Reduce the size of the portfolio when possible. Resist adding brands that are not needed. Eliminate brands that have no role and relegate a brand to descriptor status if it is not getting traction or failing to play a driver role.

A brand portfolio strategy is about a family of brands, their roles and their relationship with each other. It should deliver synergy, leverage, clarity, relevance, differentiation, and energy. To achieve this goal, an ongoing effort to review and refine is usually needed.