Strategic & Organizational Design
(2025/2026)
Charlie Carroll, Cleo Silvestri
Chapter 1 – Introduction to Strategic Management
Everything you do should stem from your mission and goals. Strategy is about
finding the fit. When the strategy is formulated it needs to be implemented and
monitored.
Strategy has a lot of different definitions, and not one is completely right.
Mintzberg’s Five P’s for strategy:
o Plan: Brainstorming options and planning how to deliver them.
o Ploy: Getting the better of competitors, by plotting to disrupt, dissuade,
discourage, or otherwise influence them. Can be part of a strategy.
o Pattern: When multiple people are doing something that creates a pattern
that makes an emergent strategy.
o Position: Niche in the environment. Based on the position is how
profitable it is.
o Perspective: Shared norms, values. In airlines, only rich people make use
of this industry.
Strategy should be means to an end. It implies a set of actions. It should be
intentional. If it is an emergent strategy, you can only act on it when it creates a
pattern.
How to evaluate strategy:
o Consistency: It’s good when it’s internally consistent. Elements do not
contradict each other.
o Consonance: An adaptive response to the environment. The organization
fitting in the environment (the industry).
o Advantage: Attempts to create a competitive advantage. Does it help you
to achieve the objectives?
o Feasibility: Does not overwhelm resources. Is it going to achieve the
strategy with the resources that you have?
Strategic Management tries to integrate all of the different levels of strategy.
,Porter, M.E., 1996 What is Strategy? 61-80.
Companies must be flexible to respond rapidly to competitive market changes.
They must benchmark continuously to achieve best practice, outsource
aggressively to gain efficiencies, plus they must nurture a few core
competencies in their race to stay ahead of rivals. Positioning is too static for
today’s dynamic markets and changing technologies.
According to new insights, market position can quickly be copied and competitive
advantage is temporary. These beliefs are dangerous half-truths and lead more
companies down a path of mutually destructive competition. Some barriers to
competition are falling as regulation eases and markets become global. The root
of the problem is the failure to distinguish between operational effectiveness
and strategy. Operational effectiveness and strategy are both essential to
superior performance, but they work in very different ways.
A company can outperform rivals only if it can establish a difference that it can
preserve. It must deliver greater value to customers or create comparable
value at a lower cost, or do both. Delivering greater value allows a company to
charge higher average unit prices: greater efficiency results in lower average unit
cost. Cost advantage arises from performing particular activities more
efficiently than competitors.
Operational effectiveness (OE): performing similar activities better than rivals
perform them. Strategic positioning: performing different activities from rivals
or performing similar activities in different ways.
Performing better is due to less wasted effort,
better technology and/or better motivation.
Reasons that operational effectiveness alone is
insufficient:
- The productivity frontier is the sum of
all existing best practices at any given
time -> maximum value a company can
deliver using the best technology, skills
and inputs. When a company improves its
operational effectiveness, it moves toward
the frontier. The productivity frontier is
constantly shifting outward as new
technologies and management approaches are developed and as new
inputs become available. OE competition shifts the productivity frontier
outward, effectively raising the bar for everyone.
- The more benchmarking companies do, the more they look alike. The
more that rivals outsource, the more generic activities become.
Competition based on operational effectiveness alone is mutually
destructive.
Competitive strategy is about being different. Strategic positions emerge from
three distinct sources (not mutually exclusive and often overlap):
, - Variety-based positioning; meeting just part of the customer’s needs.
Just doing a small part of work really good to reduce cost (Jiffy Lube only
doing lubricants, no car repairs to be faster and cheaper).
- Needs-based positioning: different customers have different needs
(information, price, support), you can’t help them all.
- Access-based positioning: geographically or customer scale to reach
customers in the best way possible (cinema in a small town; less access to
superior movies, but more locals that will only come for that theatre).
Positioning is not only about carving out a niche, it can be broad or narrow. It
requires a set of tailored activities because it’s always a function of differences in
activities. Strategy is the creation of a unique and valuable position, involving a
different set of activities.
Choosing a unique position, however, is not enough to guarantee a sustainable
advantage. A valuable position will attract imitation by incumbents, who are likely
to copy it in one of two ways;
- A competitor can reposition itself to match the superior performer.
- Stradling: seeks to match the benefits of a successful position while
maintaining its existing position.
A strategic position is not sustainable unless there are trade-offs with other
positions. You can’t be in two positions at the same time. Trade-offs protect for
straddlers and repositioners. These trade-offs arise for three reasons;
- Inconsistencies in image or reputation (company is known for one thing,
doing something else as well is inconsistent and confusing).
- Arise from activities themselves. Different positions means different
product configurations, equipment and skills.
- Arise from limits on internal coordination and control: by clearly
choosing to compete in one way and not another, senior management
makes organizational priorities clear.
False trade-offs between cost and quality occur when there is redundant or
wasted effort, poor control or accuracy or weak coordination. Simultaneous
improvement of cost and differentiation is possible when a company begins far
behind the productivity frontier or when the frontier shifts outward. At the
frontier, where companies have achieved current best practice, the trade-off
between cost and differentiation is very real indeed.
Strategy is making trade-offs in competing. It’s about what not to do. Without
trade-offs, there would be no need for choice and thus no need for strategy. While
operational effectiveness is about achieving excellence in activities or functions;
strategy is about combining activities.
Fit locks out imitators by creating a chain that is as strong as its strongest link.
There are three types of fit, although they are not mutually exclusive;
- First order: Simple consistency between activities and overall strategy
(all activities focus low cost)
- Second order: occurs when activities are reinforcing. (putting soap at
hotels to be recognized and buy later)
, - Third order: optimization of effort (keeping store stocked by having large
warehouses and minimum stock, but high turnarounds by regularly
restocking)
Coordination and information exchange across activities to eliminate redundancy
and minimize wasted effort are the most basic types of effort optimization. In all
three types of fit, the whole matters more than any individual part. Strategic fit
among many activities is fundamental not only to competitive advantage, but
also to the sustainability of that advantage.
When activities complement one another, rivals will get little benefit from
imitation unless they successfully match the whole system. Such situations tend
to promote winner-take-all competition.
Strategy is creating fit among a company’s activities. The success will depend on
doing many things well and integrating them. No fit means no distinctive strategy
and sustainability.
The desire to grow has perhaps the most perverse effect on strategy. Trade-offs
and limits appear to constrain growth. Managers are tempted to take incremental
steps that surpass those limits but blur a company’s strategic position.
Compromises and inconsistencies in pursuit of growth will erode competitive
advantage, competing in several ways will create confusion and loss of focus.
For reinforcing and preserving strategy with growth is to concentrate on
deepening strategic positions rather than broadening. Deepening means better
fit and communicating strategy to customers who should value it. Companies
grow faster by better penetrating needs and varieties where it’s distinctive.
Strong leaders willing to make choices are essential. Core of managers is
strategy (defining and communicating, trade-offs, forging fit), not operational
improvements. Leaders teach others about strategy and are willing to say no
(what to do and what not), it’s about setting limits. Improving OE (operational
effectiveness) is a necessary part of management, but it is not strategy.
(2025/2026)
Charlie Carroll, Cleo Silvestri
Chapter 1 – Introduction to Strategic Management
Everything you do should stem from your mission and goals. Strategy is about
finding the fit. When the strategy is formulated it needs to be implemented and
monitored.
Strategy has a lot of different definitions, and not one is completely right.
Mintzberg’s Five P’s for strategy:
o Plan: Brainstorming options and planning how to deliver them.
o Ploy: Getting the better of competitors, by plotting to disrupt, dissuade,
discourage, or otherwise influence them. Can be part of a strategy.
o Pattern: When multiple people are doing something that creates a pattern
that makes an emergent strategy.
o Position: Niche in the environment. Based on the position is how
profitable it is.
o Perspective: Shared norms, values. In airlines, only rich people make use
of this industry.
Strategy should be means to an end. It implies a set of actions. It should be
intentional. If it is an emergent strategy, you can only act on it when it creates a
pattern.
How to evaluate strategy:
o Consistency: It’s good when it’s internally consistent. Elements do not
contradict each other.
o Consonance: An adaptive response to the environment. The organization
fitting in the environment (the industry).
o Advantage: Attempts to create a competitive advantage. Does it help you
to achieve the objectives?
o Feasibility: Does not overwhelm resources. Is it going to achieve the
strategy with the resources that you have?
Strategic Management tries to integrate all of the different levels of strategy.
,Porter, M.E., 1996 What is Strategy? 61-80.
Companies must be flexible to respond rapidly to competitive market changes.
They must benchmark continuously to achieve best practice, outsource
aggressively to gain efficiencies, plus they must nurture a few core
competencies in their race to stay ahead of rivals. Positioning is too static for
today’s dynamic markets and changing technologies.
According to new insights, market position can quickly be copied and competitive
advantage is temporary. These beliefs are dangerous half-truths and lead more
companies down a path of mutually destructive competition. Some barriers to
competition are falling as regulation eases and markets become global. The root
of the problem is the failure to distinguish between operational effectiveness
and strategy. Operational effectiveness and strategy are both essential to
superior performance, but they work in very different ways.
A company can outperform rivals only if it can establish a difference that it can
preserve. It must deliver greater value to customers or create comparable
value at a lower cost, or do both. Delivering greater value allows a company to
charge higher average unit prices: greater efficiency results in lower average unit
cost. Cost advantage arises from performing particular activities more
efficiently than competitors.
Operational effectiveness (OE): performing similar activities better than rivals
perform them. Strategic positioning: performing different activities from rivals
or performing similar activities in different ways.
Performing better is due to less wasted effort,
better technology and/or better motivation.
Reasons that operational effectiveness alone is
insufficient:
- The productivity frontier is the sum of
all existing best practices at any given
time -> maximum value a company can
deliver using the best technology, skills
and inputs. When a company improves its
operational effectiveness, it moves toward
the frontier. The productivity frontier is
constantly shifting outward as new
technologies and management approaches are developed and as new
inputs become available. OE competition shifts the productivity frontier
outward, effectively raising the bar for everyone.
- The more benchmarking companies do, the more they look alike. The
more that rivals outsource, the more generic activities become.
Competition based on operational effectiveness alone is mutually
destructive.
Competitive strategy is about being different. Strategic positions emerge from
three distinct sources (not mutually exclusive and often overlap):
, - Variety-based positioning; meeting just part of the customer’s needs.
Just doing a small part of work really good to reduce cost (Jiffy Lube only
doing lubricants, no car repairs to be faster and cheaper).
- Needs-based positioning: different customers have different needs
(information, price, support), you can’t help them all.
- Access-based positioning: geographically or customer scale to reach
customers in the best way possible (cinema in a small town; less access to
superior movies, but more locals that will only come for that theatre).
Positioning is not only about carving out a niche, it can be broad or narrow. It
requires a set of tailored activities because it’s always a function of differences in
activities. Strategy is the creation of a unique and valuable position, involving a
different set of activities.
Choosing a unique position, however, is not enough to guarantee a sustainable
advantage. A valuable position will attract imitation by incumbents, who are likely
to copy it in one of two ways;
- A competitor can reposition itself to match the superior performer.
- Stradling: seeks to match the benefits of a successful position while
maintaining its existing position.
A strategic position is not sustainable unless there are trade-offs with other
positions. You can’t be in two positions at the same time. Trade-offs protect for
straddlers and repositioners. These trade-offs arise for three reasons;
- Inconsistencies in image or reputation (company is known for one thing,
doing something else as well is inconsistent and confusing).
- Arise from activities themselves. Different positions means different
product configurations, equipment and skills.
- Arise from limits on internal coordination and control: by clearly
choosing to compete in one way and not another, senior management
makes organizational priorities clear.
False trade-offs between cost and quality occur when there is redundant or
wasted effort, poor control or accuracy or weak coordination. Simultaneous
improvement of cost and differentiation is possible when a company begins far
behind the productivity frontier or when the frontier shifts outward. At the
frontier, where companies have achieved current best practice, the trade-off
between cost and differentiation is very real indeed.
Strategy is making trade-offs in competing. It’s about what not to do. Without
trade-offs, there would be no need for choice and thus no need for strategy. While
operational effectiveness is about achieving excellence in activities or functions;
strategy is about combining activities.
Fit locks out imitators by creating a chain that is as strong as its strongest link.
There are three types of fit, although they are not mutually exclusive;
- First order: Simple consistency between activities and overall strategy
(all activities focus low cost)
- Second order: occurs when activities are reinforcing. (putting soap at
hotels to be recognized and buy later)
, - Third order: optimization of effort (keeping store stocked by having large
warehouses and minimum stock, but high turnarounds by regularly
restocking)
Coordination and information exchange across activities to eliminate redundancy
and minimize wasted effort are the most basic types of effort optimization. In all
three types of fit, the whole matters more than any individual part. Strategic fit
among many activities is fundamental not only to competitive advantage, but
also to the sustainability of that advantage.
When activities complement one another, rivals will get little benefit from
imitation unless they successfully match the whole system. Such situations tend
to promote winner-take-all competition.
Strategy is creating fit among a company’s activities. The success will depend on
doing many things well and integrating them. No fit means no distinctive strategy
and sustainability.
The desire to grow has perhaps the most perverse effect on strategy. Trade-offs
and limits appear to constrain growth. Managers are tempted to take incremental
steps that surpass those limits but blur a company’s strategic position.
Compromises and inconsistencies in pursuit of growth will erode competitive
advantage, competing in several ways will create confusion and loss of focus.
For reinforcing and preserving strategy with growth is to concentrate on
deepening strategic positions rather than broadening. Deepening means better
fit and communicating strategy to customers who should value it. Companies
grow faster by better penetrating needs and varieties where it’s distinctive.
Strong leaders willing to make choices are essential. Core of managers is
strategy (defining and communicating, trade-offs, forging fit), not operational
improvements. Leaders teach others about strategy and are willing to say no
(what to do and what not), it’s about setting limits. Improving OE (operational
effectiveness) is a necessary part of management, but it is not strategy.
