I’ve seen many strategy statements that were excellent business development, marketing, or sales plans. But they were plans, not strategies. It’s useful to clearly define both terms and to keep them separate but connected. In my opinion, a plan is a set of specific activities with owners, budgets, timescales, and desired measurable outcomes. Plans drive the execution of a strategy. So, what is a strategy?

Harvard Business School’s Professor Michael Porter (of Five Forces fame) is the world’s leading authority on strategy. He argues that a firm has a good strategy if it passes five tests.

First, the firm should define a distinctive value proposition. Please see my separate article on this topic. A value proposition defines the target market, the needs of that market, and how the firm will profitably serve those needs with a unique solution. Dell’s early value proposition was to target ‘technically minded’ buyers who needed a specific PC configuration. Dell drove profitability by cutting out reseller margins and stock inventories by selling directly and by building to order.

Second, the firm should build a unique value chain that aligns to the value proposition. The value chain describes a firm’s processes that design, build, sell, deliver, and support products. Dell built technically trained sales teams and efficient manufacturing to align to the value proposition.

Third, a firm must make trade-offs. It has no strategy if it tries to serve everybody. Choices must be made. (Please see my separate articles on choices and choosing what not to do). Dell accepted that it would miss some markets by only selling directly.

Fourth, the value chain processes should all fit together and amplify each other. This will lock out competitors because the value chain will be difficult to imitate. Dell’s direct sales model and build-to-order manufacturing achieve this. It would be difficult and costly for a rival to copy this.

Finally, a strategy should be continuously reviewed and developed but there must be continuity and alignment to the strategy between revisions. The strategy should guide all decisions regarding problems and market opportunities. Dell’s strategy has evolved, as strategies should, over the years. But it has remained almost entirely direct in its market engagement.

So, please use these definitions and tests if they are useful. And please use the opportunity to keep your strategy and your plan separate but tightly connected.