Lean Strategy

David  Collis

Article | Harvard Business Review

Lean Strategy

Abstract

Strategy and entrepreneurship are often seen as polar opposites. Yet the two desperately need each other: strategy without entrepreneurship is central planning; entrepreneurship without strategy leads to chaos. The two approaches can be reconciled through the Lean Strategy process which ensures that startups innovate in a disciplined fashion and make the most of their limited resources by knowing "what not to do". Deliberate strategy sets the bounds within which entrepreneurial experimentation takes place, while the results of that innovation leads to learning that reshapes the strategy. Lean Strategy enables company builders to pursue viable opportunities, stay focused, and align the entire organisation while supporting front-line entrepreneurial activities.

Keywords: strategy; strategy implementation; entrepreneurship; strategy alignment; Strategy; Entrepreneurship;

Format: Print

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Citation:

Collis, David. "Lean Strategy." Harvard Business Review 94, no. 3 (March 2016): 62–68.

The concept of dynamic capabilities draws its theoretical basis from two classic traditions within the strategy field—the resource-based view of the firm (RBV) (Wernerfelt, 1984) and market positioning (Porter, 1996). A dynamic capability qualifies as a source of sustained heterogeneous firm performance within the RBV framework because it arises from embedded organizational routines that accumulate in a path dependent process—the “stock” explanation of durable advantage (Barney, 1991). Because such a dynamic capability allows a firm to continually reposition itself in product market space, it satisfies the “flow” explanation of current competitive advantage by ensuring that the firm always maintains a wider gap between willingness to pay and cost than competitors (Brandenburger and Stuart, 1996). Indeed, dynamic capabilities seem to give rise to the enviable ability to “always have a competitive advantage in an attractive industry” and so continually deliver superior financial performance regardless of external circumstances.

“Tell me David, is it better to have a great strategy poorly executed or a so-so strategy really well executed?” The age-old question suggests there is a fundamental tradeoff between strategy and execution. The tone in which it is asked typically flags that the questioner already knows the answer—the superiority of execution over strategy. But is this really true? Does, to borrow a phrase, execution eat strategy for lunch?

One attempt to regain the ground that strategy has recently lost, which was described in the first article, has been the introduction of “business models” as the precursor to competitive positioning within an industry. Understanding a business model provides a shorthand description of how value is created—although the business model, by itself, does not determine how profitable it will be for any firm: for that we need to examine the complete strategy landscape.

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Lean Strategy

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