An Overview of Strategy Terms
Strategy isn't a science. There are frameworks, guides, and common semantics - but ultimately strategy is the art of creating a direction for your organization, then doing whatever it takes to get there.
Because of this reality, a huge body of work has arisen both online and offline that addresses the topic.
Writing on strategy is almost always subjective and often contradictory. The terminology that people use is often used interchangeably - meaning that strategy newcomers often get stuck in a mire of confusing research rather than getting on with the real job of making things happen.
With over 1,000,000 hits per year to this very blog, I'm sure that we're as guilty as anyone to contributing to the confusion around strategy terminology.
Let us know what terms you would add to our strategy dictionary in the comments below, or if you feel like our definitions are ever wide of the mark.
Strategy Dictionary - A
The action plan lists the specific actions that must be taken, by whom and by when in order to achieve an overall goal or implement a strategy.
Some people include the costs of each action in the action plans, resulting in budget information being included in the action plans, as well. Action plans together are sometimes referred to as the Implementation Plan.
When one company, the acquirer, purchases and absorbs the operations of another, the acquired.
Alignment model of strategic planning:
Focuses especially on aligning internal operations to most effectively and efficiently work toward the mission of the organization.
Strategy Dictionary - B
The Balanced Scorecard is a framework for categorizing your strategy into four interdependent balanced areas- financial, customer, internal business process, and employee learning & growth.
Base level of previous or current performance that can be used to set improvement goals and provide a basis for assessing future progress.
A process of compiling and comparing data on business performance of your organization with that of competitors or industry averages to understand where you sit in comparison, identify best practices, and measure progress.
A description of the monetary amount that will be allocated to a given project or action.
A formal guide outlining your business goals and plans to achieve the goals. It may also include background information on the organization attempting to achieve these goals.
Obtaining agreement from key stakeholders that the proposed plan is acceptable.
Strategy Dictionary - C
Capacity building is the process of creating, improving, and retaining core skills, knowledge, and capabilities of an organization's people and processes.
Capital refers to the assets that are owned by an entity and are available for use. Capital is usually described in terms of money, though can be an asset owned by an organization.
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The process of aligning the various KPIs, goals, and projects in an organization to the higher strategy. All actions taken should be contributing to a higher level goal or strategy.
A study containing qualitative data (such as observations and information drawn from interviews) about one subject. These studies are typically based on what is termed anecdotal evidence.
A series of case studies can provide useful information that something of significance is happening that may merit further study.
Cause and Effect:
The process of identifying the relationship between things or events. The purpose is to identify if one event or action caused another to occur.
Anyone whose interests are served by an organization, or who receives or uses an organization’s resources or services.
Clients can be internal to an organization, for example, one department may be the client of another department, or external to the organization.
To work together sharing ideas and resources, especially in a joint intellectual effort.
A group of individuals legally empowered to transact business as one body.
A management tool that involves calculating or estimating the monetary costs and potential benefits of a proposed course of action.
Cost leadership is one of the three competitive strategies an organization may choose to focus on to gain a competitive advantage over their competitors. It requires the organization to offer the lowest prices on goods/services in the marketplace.
Critical success factor:
The term used to describe an element that is required to achieve the business goals and vision.
A set of values, behaviors, attitudes, and practices which enable people to work effectively across racial/ethnic and cultural lines.
The external customer's point of view on an organization, and the value they place on the product/services offered by the organization.
Strategy Dictionary - D
A dashboard is a reporting tool used to consolidate important metrics and information to display in one concise layout to inform the viewer at a glance of current data.
The characteristics of human populations and population segments, especially when used to identify consumer markets.
Differentiation is a competitive strategy used by organizations to gain a competitive advantage over its competitors.
The organization using this strategy will focus on offering unique products/services to different customer segments.
The process of exploring more detailed information on a high-level goal, project, activity, or action.
Dynamic information is a type of information that is continuously changing, updating, or progressing. An example of dynamic information may be an organization's revenue, each day this figure may change.
Strategy Dictionary - E
Economic Value Added:
A measure of financial performance which assesses actions and activities of an organization as to whether they have created value and how much for shareholders.
An evaluation approach that aims to improve the organization's people to help them achieve their goals.
Empowerment evaluation requires organizations to provide the right tools to their employees so they are able to assess the planning, implementation, and self-assessment of their projects and initiatives.
Evaluation is an analysis of the extent to which an initiative or project reached its goals.
Experience Curve Analysis:
The experience curve analysis is a model which can be used to understand the trend between production output and production costs.
Strategy Dictionary - F
A focus on the bottom line performance of an organization or the financial accomplishments of the organization.
Focus areas describe the things that you want to accomplish to deliver your vision - summarized into distinct themes. When all of your focus areas have been achieved you should also have achieved your vision. Focus areas tend to be short and contain no specific metrics or time-frames.
Commonly seen alternatives: focus, theme, strategic theme, strategic pillar, pillar, outcome
A form of qualitative research that engages a group of people (usually 3 or more) in an interview-like process in order to gauge their perceptions, opinions, beliefs, and attitudes to a particular product, service, or topic.
The estimated value of a metric at a future point in time. Different from the target amount of a metric, a forecast estimates what the metric will likely be based on historical data.
Strategy Dictionary - G
Gap analysis is a technique used by businesses to determine the difference between actual results and expected results. This analysis helps organizations determine what steps need to be taken in order to close the gap and improve performance.
A goal is a specific deliverable that forms part of an overarching organizational goal. Goals will ideally be SMART, which means that they will be owned by named individuals. A goal is an accomplishment or outcome of some sort.
Commonly seen alternatives: action item, deliverable
Goals types are essentially groups of labels that are defined and applied to elements of your plan.
Different organizations will use different goal types - for example, a hospital might create a goal type called 'School of Medicine' with options that include things like 'Oncology', 'Dermatology', etc.
Goal types can also be used to implement strategy frameworks such as the Balanced Scorecard.
Commonly seen alternatives: goal labels, goal categories, scorecards, tags
Goal units are the units of measurement by which you want to measure your various goals. This could include generic items such as '$' or more niche items such as 'papers' depending on your industry.
Having a controlled set of units promotes consistent management and use of your information in reporting.
Commonly seen alternatives: units of measure
Weighting a goal allows you to prioritize the elements of your strategic plans. Weighting can also help with resource allocation. Typical weighting systems include 'high / medium / low' type systems as well as those where goals are weighted with scores out of 100.
Commonly seen alternatives: priority
Strategy Dictionary - H
Describes the skills, knowledge, and output of employees as physical assets to the organization.
Hard data describes data in a numerical form that can be precisely measured and quantified. It represents objective measures of data such as revenue, costs, profit etc.
A hybrid strategy is a term used to describe an organization's application of a combination of two or more competitive strategies. An organization may choose to implement both cost leadership and focus strategy.
Strategy Dictionary - I
An evaluation method that looks into the final results of an initiative, project or goal and the intentional and unintentional impacts that were created.
An initiative is an effort created by an organization in order to improve its current state.
Inputs are the resources that are used to make the project happen, this may include people, raw materials, information, energy, or finance.
An issue is a risk that has materialized and is now harming your ability to deliver on a goal or project.
Commonly seen alternatives: problem
Strategy Dictionary - J
A joint venture is a form of strategic partnership formed between a foreign organization and a domestic organization.
The partnership is formed in order to achieve a certain goal and each company still operates independently.
Strategy Dictionary - K
Key Performance Indicator (KPI):
A KPI is a stable indicator that helps to determine whether a goal has been accomplished (KPIs can apply equally to your vision, focus areas, organizational goals or goals).
A KPI is almost always numerically quantifiable with little room for subjective input. A common test to apply to a set of KPIs would be: 'If all my KPIs are achieved, can my goal be considered complete?'
Commonly seen alternatives: performance measure
Strategy Dictionary - L
A test that is an effective and definitive way of proving something or measuring it. A litmus test is only determined by a single key factor.
A measurable fact that records the actual performance of an organization. A lagging indicator includes the following- annual sales, growth in annual sales, gross margin, annual net income and growth in annual net income- these all represent facts of the organization.
A measurable factor that changes before the company starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the company, but they are not always accurate.
Leading indicators can include- % growth in sales pipeline, % growth in new markets, number of new patents.
Strategy Dictionary - M
Market segmentation describes the process of breaking up a market into clearly distinguishable and relevant subgroups based on a common factor, such as interests, demographics, sociographics etc.
Megatrend is a term given to global economic transformations that are persistent and affect businesses, society, politics, technology, and the environment.
A mission statement describes an organization's core purpose for existing. A mission statement is not a goal and does not usually have a time frame attached to it.
Commonly seen alternatives: mission, purpose, core purpose
A milestone is a concrete step on the journey towards completing either a goal or a project. A milestone has a date associated with its delivery and a tangible outcome which could be numeric or stated as a deliverable.
Commonly seen alternatives: check point, sub goal
Strategy Dictionary - N
Near-shore outsourcing is the strategy of moving certain business operations or functions to low-cost countries that are close to the home country of the organization.
Strategy Dictionary - O
Offshoring is the term given to the process of moving business operations or functions of an organization to a low-cost country in order to reduce costs.
Operating costs are the expenses incurred on a day to day basis when running an organization or project, as opposed to costs associated with production.
Organizational values are statements about the principles or ethics that your organization applies to its daily operation. They are inward-facing and in many cases are not communicated outside of the organization.
They differ from the outwardly facing values you may see on company websites which form part of the organization's brand position (and are usually intended for marketing).
Commonly seen alternatives: value, core value, company value, value statement, principle
An organizational goal is a specific goal that you want your organization to achieve, with a clearly stated outcome and a deadline.
It differs from a focus area – in that it is specific and measurable, and once completed will be replaced by another, different goal.
Commonly seen alternatives: strategic initiative, objective, strategic objective, strategic goal
Outsourcing is the process of handing over certain business operations for another organization to take care of on a contractual basis.
This generally occurs when businesses make the decision that contracting out a specific function to another company would be more cost-effective than carrying it out internally.
Strategy Dictionary - P
A performance driver is a metric used generally as a key indicator or early warning that an issue is present.
A project is similar to a goal in that it should be owned by an individual and contain a defined end date and scope. Projects, however, are not something to accomplish, they are something to do.
Completing a project does not mean that you have necessarily achieved a goal - merely that you have done the thing that you needed to do.
Commonly seen alternatives: action item, deliverable
Strategy Dictionary - Q
A subjective form of measurement. Examples of qualitative measurement are surveys and customer feedback forms.
An objective form of measurement, where a numerical value can be assigned to the measurement. Quantitative measures include things like measuring dollar amounts of revenue, profits, or costs.
Strategy Dictionary - R
A risk is a threat that could potentially harm your ability to deliver on a goal or project. A risk is not yet causing issues, but rather has the potential to escalate into an issue in the future.
Commonly seen alternatives: threat
Strategy Dictionary - S
Strategy in the context of organizations is a summary of how you plan to achieve goals that will ultimately move you to your desired position in the world/industry.
A strategy may comprise several elements including a review of your current strengths and weaknesses, a statement of your objectives, a detailed plan for what needs to be done to get there, and a summation of your external environment.
Commonly seen alternatives: business strategy, corporate strategy
A strategic plan is one of the core elements of your strategy. It comprises statements about where you want to be as an organization and a detailed plan of how you will get there in an ever-increasing level of detail.
A strategic plan includes at a minimum a vision statement, values, focus areas, organizational goals, and other goals.
Commonly seen alternatives: corporate plan, strategic planning document
A strategy framework is a loose term for the different components that combine to make up a strategy. When we talk about a strategy framework we are essentially talking about two components:
1) the underlying building blocks of the strategic plan (vision, values, focus areas, organizational goals and goals) and
2) the scorecards and frameworks that you use alongside this (for example the Balanced Scorecard, McKinsey's Strategic Horizons, etc). These two elements combine together as a strategic framework.
Commonly seen alternatives: strategy toolkit, strategy house, strategic methodology
SMART is an acronym for a type of goal that includes the 5 elements of specific, measurable, achievable, relevant, and time-based. It helps goals go beyond the realm of 'fuzziness' into an actionable plan that will deliver results.
For example: “Obtain two new billion-dollar corporate clients in the New York property insurance market by the end of this calendar year through networking and marketing activities.”
Strategy Dictionary - T
A task is the smallest identifiable yet essential piece of a goal that serves as a unit of work, and as a means of differentiating between the various components of a goal or project. Tasks tend to be binary in that they are either done or not done.
If additional tracking detail (such as '30% done') is required then typically this should be phrased as a goal and not as a task.
Commonly seen alternatives: checklist item, milestone
An analytical technique used to monitor, track and analyze important trends in the business environment in order to capitalize on opportunities identified and minimize risks.
Strategy Dictionary - U
Unique Selling Proposition:
A unique selling proposition is a marketing technique used to highlight how a business's products/services are unique from competitors.
Strategy Dictionary - V
The overall process or actions that an organization completes in order to add value to an item. This may include marketing, promotion, and after-sales support.
A statement that outlines how an organization intends to differentiate itself from its competition and provide value to its customers.
Vision statement is an aspirational description of what an organization wants to achieve or accomplish in the mid to long term.
It is intended to guide in the creation of the strategic plan to help ensure that your strategy is clearly focused on a given outcome.
Strategy Dictionary - W
A work plan is an outline of the actions to be taken by upper management or board committees in order to achieve strategies or goals.