Strategy vs tactics – why do we get it wrong most of the time?

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The difference between strategy and tactics is the most misunderstood phenomenon. 90% of the time the two are conflated. I recently read (twice, its that good!) the book 7 Powers: The foundation of business strategy by Hamilton Helmer. I highly recommend getting the paper copy of the book to make notes on and see the visuals. I plan to write some posts applying some of the concepts to industries I’m familiar with, but for today I’d like to talk about a basic framework, two sentences that illuminate the difference between strategy and tactics

Hamilton defines,

Power is the set of conditions creating the potential for persistent differential returns and Strategy is the route to continuing power in significant markets

These two sentences are simple and profound! A common question nowadays post we-work debacle and oft-asked in a startup is “What should our strategy be: should we go for growth or focus on profitability/margin”

This question drives me up the wall. Growth vs margin is not a strategy its a tactic! The above definitions provide a useful lens to clarify. Can growth (or margin) give you power? is it the set of conditions that will give you differential returns? Will growth (or margin) give you a route to continuing power?

The answer is obvious – growth by itself does not give you power. Just because you grow exponentially and to the right forever gives you differential returns. Growth has to be driven by something – that something is the strategy – not growth in itself. You can grow by selling a dollar for fifty cents! – persistent differential returns will not be provided by that route! Similarly, just focusing on margin isn’t going to give you power. What is the thing in your business that is giving you the margin? That is power.

Phrasing the question of margin vs growth as a strategy question is just plain wrong!

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