Learn about these five strategy definitions.
What's your approach to developing strategy?
Many of us brainstorm opportunities, and then plan how we'll take advantage of them.
Unfortunately, while this type of approach is important, we need to think about much more than this if we want to be successful.
After all, there's no point in developing a strategy that ignores competitors' reactions, or doesn't consider the culture and capabilities of your organization. And it would be wasteful not to make full use of your company's strengths – whether these are obvious or not.
Management expert, Henry Mintzberg, argued that it's really hard to get strategy right. To help us think about it in more depth, he developed his 5 Ps of Strategy – five different definitions of (or approaches to) developing strategy.
Mintzberg first wrote about the 5 Ps of Strategy in 1987. Each of the 5 Ps is a different approach to strategy. They are:
By understanding each P, you can develop a robust business strategy that takes full advantage of your organization's strengths and capabilities.
In this article, we'll explore the 5 Ps in more detail, and we'll look at tools that you can use in each area.
Planning is something that many managers are happy with, and it's something that comes naturally to us. As such, this is the default, automatic approach that we adopt – brainstorming options and planning how to deliver them.
This is fine, and planning is an essential part of the strategy formulation process.
Our articles on PEST Analysis , SWOT Analysis and Brainstorming help you think about and identify opportunities; the article on practical business planning looks at the planning process in more detail; and our sections on change management and project management teach the skills you need to deliver the strategic plan in detail.
The problem with planning, however, is that it's not enough on its own. This is where the other four Ps come into play.
Mintzberg says that getting the better of competitors, by plotting to disrupt, dissuade, discourage, or otherwise influence them, can be part of a strategy. This is where strategy can be a ploy, as well as a plan.
For example, a grocery chain might threaten to expand a store, so that a competitor doesn't move into the same area; or a telecommunications company might buy up patents that a competitor could potentially use to launch a rival product.
Here, techniques and tools such as the Futures Wheel , Impact Analysis and Scenario Analysis can help you explore the possible future scenarios in which competition will occur. Our article on Game Theory then gives you powerful tools for mapping out how the competitive "game" is likely to unfold, so that you can set yourself up to win it.
Strategic plans and ploys are both deliberate exercises. Sometimes, however, strategy emerges from past organizational behavior. Rather than being an intentional choice, a consistent and successful way of doing business can develop into a strategy.
For instance, imagine a manager who makes decisions that further enhance an already highly responsive customer support process. Despite not deliberately choosing to build a strategic advantage, his pattern of actions nevertheless creates one.
To use this element of the 5 Ps, take note of the patterns you see in your team and organization. Then, ask yourself whether these patterns have become an implicit part of your strategy; and think about the impact these patterns should have on how you approach strategic planning.
Tools such as USP Analysis and Core Competence Analysis can help you with this. A related tool, VRIO Analysis, can help you explore resources and assets (rather than patterns) that you should focus on when thinking about strategy.
"Position" is another way to define strategy – that is, how you decide to position yourself in the marketplace. In this way, strategy helps you explore the fit between your organization and your environment, and it helps you develop a sustainable competitive advantage .
For example, your strategy might include developing a niche product to avoid competition, or choosing to position yourself amongst a variety of competitors, while looking for ways to differentiate your services.
When you think about your strategic position, it helps to understand your organization's "bigger picture" in relation to external factors. To do this, use PEST Analysis , Porter's Diamond , and Porter's Five Forces to analyze your environment – these tools will show where you have a strong position, and where you may have issues.
As with "Strategy as a Pattern," Core Competence Analysis , USP Analysis , and VRIO Analysis can help you craft a successful competitive position. You can also use SWOT Analysis to identify what you do well, and to uncover opportunities.
There can be a lot of overlap between "Strategy as Position" and other elements of the 5 Ps. For instance, you can also achieve a desired position through planning, and by using a ploy. Don't worry about these overlaps – just get as much value as you can from the different approaches.
The choices an organization makes about its strategy rely heavily on its culture – just as patterns of behavior can emerge as strategy, patterns of thinking will shape an organization's perspective, and the things that it is able to do well.
For instance, an organization that encourages risk-taking and innovation from employees might focus on coming up with innovative products as the main thrust behind its strategy. By contrast, an organization that emphasizes the reliable processing of data may follow a strategy of offering these services to other organizations under outsourcing arrangements.
Instead of trying to use the 5 Ps as a process to follow while developing strategy, think of them as a variety of viewpoints that you should consider while developing a robust and successful strategy.
As such, there are three points in the strategic planning process where it's particularly helpful to use the 5 Ps:
Using Mintzberg's 5 Ps at these points will highlight problems that would otherwise undermine the implementation of your strategy.
After all, it's much better to identify these problems at the planning stage than it is to find out about them after you've spent several years – and millions of dollars – implementing a plan that was flawed from the start.
The 5 Ps of Strategy were created by Henry Mintzberg in 1987. Each of the 5 Ps stands for a different approach to strategy:
As a Plan, strategy needs to be developed in advance and with purpose. As a Ploy, strategy is a means of outsmarting the competition.
With strategy as a Pattern, we learn to appreciate that what was successful in the past can lead to success in the future.
With Position, strategy is about how the organization relates to its competitive environment, and what it can do to make its products unique in the marketplace.
Perspective emphasizes the substantial influence that organizational culture and collective thinking can have on strategic decision making within a company.
Understanding and using each element helps you develop a robust, practical and achievable business strategy.
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