What Is Strategy? It’s a Lot Simpler Than You Think
Harvard Business Review・7 minutes read
Strategy involves creating value for a company by planning for the future, with value being the difference between willingness to pay and sell. Ways to increase value include improving product quality, complements, and network effects, while attracting talent can be achieved by making jobs more attractive to lower willingness to sell.
Insights
- Strategy is a simple plan to create value for a company by looking forward and planning for the future, involving understanding and optimizing the difference between willingness to pay and willingness to sell.
- Best Buy's successful turnaround focused on increasing customers' willingness to pay through improvements like better shipping times and lowering vendors' willingness to sell by enhancing employee engagement and knowledge, showcasing the importance of balancing these factors for overall value creation.
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Recent questions
What is the essence of strategy?
A plan to create value for a company.
How is value defined?
The difference between willingness to pay and sell.
What factors influence willingness to pay?
Product quality, complements, and network effects.
How can companies attract talent?
By offering competitive pay or making the job more attractive.
What was Best Buy's successful strategy?
Increasing customers' willingness to pay and lowering vendors' willingness to sell.
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Summary
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Creating Value Through Strategy and Innovation
- Strategy is not as complicated as it seems; it is simply a plan to create value for a company by looking forward and planning for the future.
- Value is the difference between willingness to pay and willingness to sell, with a value stick figure illustrating this concept.
- Willingness to pay is the most a customer would pay for a product or service, while willingness to sell is the least amount of compensation an employee would accept to work for a company.
- Total value created is split between customers, employees, and the company's margin, with ways to increase willingness to pay including product quality, complements, and network effects.
- To attract talent, a company can either pay more or make the job more attractive, with the latter creating actual value by lowering willingness to sell.
- Best Buy's successful turnaround involved increasing customers' willingness to pay through better shipping times and creating a store-in-a-store concept, while also lowering willingness to sell for vendors by improving employee engagement and knowledge.
