Strategy Insight
What Is Business Strategy, and Why Does It Matter?
Every business has a plan. Far fewer have a strategy. The difference often decides which ones are still standing five years from now.
What business strategy is
Business strategy is the set of choices an organisation makes about where to compete, how to win there, and what it will not do. It answers a simple question: given our situation, what is the best use of our limited money, time and people?
Strategy professor Richard Rumelt describes good strategy as having three parts, which he calls its kernel:
- A diagnosis - An honest explanation of what is really going on: the challenge, the competition, the constraints.
- A guiding policy - The overall approach chosen to deal with that challenge.
- Coherent actions - Concrete steps that support each other and put the policy into practice.
What strategy is not
A lot of what gets called strategy is something else. Four common mix-ups:
- A goal is not a strategy. "Double revenue by 2028" says where you want to end up, not how you will get there.
- A budget or annual plan is not a strategy. It lists activities and costs; strategy explains why those activities, and not others.
- Working harder is not a strategy. Being more efficient than competitors helps, but they can copy it. Michael Porter calls this operational effectiveness and argues it is necessary but not sufficient.
- Doing everything is not a strategy. Porter's line is worth remembering: "the essence of strategy is choosing what not to do." A business that chases every customer and every opportunity usually ends up excellent at nothing.
Why it matters
Strategy matters because resources are always limited and the environment keeps moving. Without clear choices, money and effort get spread thin, teams pull in different directions, and decisions are made one crisis at a time. With them, an organisation knows what to say yes to, what to turn down, and how to judge whether it is working.
For small and growing businesses, the stakes are higher, not lower. A large corporate can survive a wrong bet. A young company often gets one or two.
Why it matters even more in Africa
In Kenya and the wider region, many of the biggest shifts a business faces come from law and regulation, not only from competitors. A new tax measure in the annual Finance Act, a licensing requirement, a change in how a regulator views a market: each can change the economics of a business overnight.
The Competition Authority of Kenya's inquiry into digital credit is one example of how regulatory scrutiny can reshape a whole market.
Most businesses treat these changes as compliance problems: something for the lawyer or the tax adviser to handle once the decision is made. In practice they are strategy questions. Should we enter this market under the new rules? Does this tax change make our pricing unworkable? Does it open a gap a competitor cannot fill? The businesses that read regulation as part of their strategy move first.