What is Strategy? It’s a Lot Simpler Than You Think

A strategy is a plan to create value. Value for customers, value for employees, value for suppliers. It is planning for the future.

Strategy doesn't begin with a focus on profit. Financials, profitability, return on investor capital is the result of strategy. It is not the starting point.

Value is the difference between a willingness to pay and a willingness to sell. This can be shown with a value stick.

• At the top, we have a willingness to pay.
• At the bottom,  we have a willingness to sell.

The difference between the two is the value the company creates.

The value is split in three ways:

• Some go to customers. (The difference between willingness to pay and price.)
• Some go to employees (the difference between willingness to sell and compensation.)
• The middle wedge is the margin of the company.

We can create more value in two ways.

1. By increasing the willingness to pay. It describes the customers. It's the most a customer would ever pay for a product or service. Value can be created by focusing on "customer delight".
2. By decreasing the willingness to sell. It is the least amount of compensation an employee would accept and still work for this particular company. ]t is a measure of the quality between what someone is looking for in work and what a company can offer.

• Product quality. The higher the quality, the more appealing the service, the higher the willingness to pay.
• Product complements. A compliment is a product or service that supports willingness to pay. For example, razor and razor blades, or printer and printer cartridges.
• Network effects. The more popular the product, the more widespread its adoption, the greater my willingness to pay.

Two ways to be more attractive in the market for talent:

1. Pay more money. When you pay more money, you will be more competitive in the marketplace for talent.
2. Make the job a better job. Create more attractive working conditions, for example, better training plan, more generous promotion rules, working some days from home.