82 Harvard Business Review | April 2008 | hbr.org

CAN YOU SUMMARIZE YOUR COMPANY’S STRATEGY in 35 words or

less? If so, would your colleagues put it the same way?It is our experience that very few executives can honestly an-

swer these simple questions in the affi rmative. And the compa-

nies that those executives work for are often the most successful

in their industry. One is Edward Jones, a St. Louis–based bro-

kerage fi rm with which one of us has been involved for more

than 10 years. The fourth-largest brokerage in the United States,

Jones has quadrupled its market share during the past two de-

cades, has consistently outperformed its rivals in terms of ROI

through bull and bear markets, and has been a fi xture on Fortune’s

list of the top companies to work for. It’s a safe bet that just

by David J. Collis and Michael G. RukstadG

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Can You SayWhat Your

Strategy Is?

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It’s a dirty little secret: Most executives cannot articulate the objective, scope, and advantage of their business in a simple statement. If they can’t, neither can anyone else.

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84 Harvard Business Review | April 2008 | hbr.org

about every one of its 37,000 employees could express the

company’s succinct strategy statement: Jones aims to “grow

to 17,000 fi nancial advisers by 2012 [from about 10,000 to-

day] by offering trusted and convenient face-to-face fi nan-

cial advice to conservative individual investors who delegate

their fi nancial decisions, through a national network of one-

fi nancial-adviser offi ces.”

Conversely, companies that don’t have a simple and clear

statement of strategy are likely to fall into the sorry category

of those that have failed to execute their strategy or, worse,

those that never even had one. In an astonishing number of

organizations, executives, frontline employees, and all those

in between are frustrated because no clear strategy exists for

the company or its lines of business. The kinds of complaints

that abound in such fi rms include:

“I try for months to get an initiative off the ground, and

then it is shut down because ‘it doesn’t fi t the strategy.’

Why didn’t anyone tell me that at the beginning?”

“I don’t know whether I should be pursuing this market

opportunity. I get mixed signals from the powers that be.”

“Why are we bidding on this customer’s business again?

We lost it last year, and I thought we agreed then not to

waste our time chasing the contract!”

“Should I cut the price for this customer? I don’t know if

we would be better off winning the deal at a lower price

or just losing the business.”

Leaders of fi rms are mystifi ed when what they thought

was a beautifully crafted strategy is never implemented.

They assume that the initiatives described in the volumi-

nous documentation that emerges from an annual budget or

a strategic-planning process will ensure competitive success.

They fail to appreciate the necessity of having a simple, clear,

succinct strategy statement that everyone can internalize

and use as a guiding light for making diffi cult choices.

Think of a major business as a mound of 10,000 iron

fi lings, each one representing an employee. If you scoop

up that many fi lings and drop them onto a piece of paper,

they’ll be pointing in every direction. It will be a big mess:

10,000 smart people working hard and making what they

think are the right decisions for the company – but with the

net result of confusion. Engineers in the R&D department

are creating a product with “must have” features for which

(as the marketing group could have told them) customers

will not pay; the sales force is selling customers on quick

•

•

•

•

turnaround times and customized offerings even though

the manufacturing group has just invested in equipment

designed for long production runs; and so on.

If you pass a magnet over those fi lings, what happens?

They line up. Similarly, a well-understood statement of strat-

egy aligns behavior within the business. It allows everyone

in the organization to make individual choices that reinforce

one another, rendering those 10,000 employees exponen-

tially more effective.

What goes into a good statement of strategy? Michael

Porter’s seminal article “What Is Strategy?” (HBR November–

December 1996) lays out the characteristics of strategy in

a conceptual fashion, conveying the essence of strategic

choices and distinguishing them from the relentless but com-

petitively fruitless search for operational effi ciency. However,

we have found in our work both with executives and with

students that Porter’s article does not answer the more basic

question of how to describe a particular fi rm’s strategy.

It is a dirty little secret that most executives don’t actually

know what all the elements of a strategy statement are, which

makes it impossible for them to develop one. With a clear defi –

nition, though, two things happen: First, formulation becomes

infi nitely easier because executives know what they are trying

to create. Second, implementation becomes much simpler be-

cause the strategy’s essence can be readily communicated and

easily internalized by everyone in the organization.

Elements of a Strategy StatementThe late Mike Rukstad, who contributed enormously to

this article, identifi ed three critical components of a good

strategy statement – objective, scope, and advantage – and

rightly believed that executives should be forced to be crys-

tal clear about them. These elements are a simple yet suffi –

cient list for any strategy (whether business or military) that

addresses competitive interaction over unbounded terrain. Any strategy statement must begin with a defi nition of

the ends that the strategy is designed to achieve. “If you

don’t know where you are going, any road will get you there”

is the appropriate maxim here. If a nation has an unclear

sense of what it seeks to achieve from a military campaign,

how can it have a hope of attaining its goal? The defi nition

of the objective should include not only an end point but

also a time frame for reaching it. A strategy to get U.S. troops

out of Iraq at some distant point in the future would be

very different from a strategy to bring them home within

two years.

Since most fi rms compete in a more or less unbounded

landscape, it is also crucial to defi ne the scope, or domain,

of the business: the part of the landscape in which the fi rm

will operate. What are the boundaries beyond which it will

not venture? If you are planning to enter the restaurant

business, will you provide sit-down or quick service? A casual

or an upscale atmosphere? What type of food will you offer –

David J. Collis (dcollis@hbs.edu) is an adjunct professor in the

strategy unit of Harvard Business School in Boston and the author of

several books on corporate strategy. He has studied and consulted

to Edward Jones, the brokerage that is the main example in this

article, and has taught in the fi rm’s management-development pro-

gram. Michael G. Rukstad was a senior research fellow at Harvard

Business School, where he taught for many years until his untimely

death in 2006.

Can You Say What Your Strategy Is?

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hbr.org | April 2008 | Harvard Business Review 85

French or Mexican? What geographic

area will you serve – the Midwest or the

East Coast?

Alone, these two aspects of strategy

are insuffi cient. You could go into busi-

ness tomorrow with the goal of be-

coming the world’s largest hamburger

chain within 10 years. But will anyone

invest in your company if you have not

explained how you are going to reach

your objective? Your competitive ad-

vantage is the essence of your strategy:

What your business will do differently

from or better than others defi nes the

all-important means by which you will

achieve your stated objective. That

advantage has complementary exter-

nal and internal components: a value

proposition that explains why the tar-

geted customer should buy your prod-

uct above all the alternatives, and a

description of how internal activities

must be aligned so that only your fi rm

can deliver that value proposition.

Defi ning the objective, scope, and

advantage requires trade-offs, which

Porter identifi ed as fundamental to

strategy. If a fi rm chooses to pursue

growth or size, it must accept that

profi tability will take a back seat. If it

chooses to serve institutional clients,

it may ignore retail customers. If the

value proposition is lower prices, the

company will not be able to compete

on, for example, fashion or fi t. Finally, if the advantage comes

from scale economies, the fi rm will not be able to accommo-

date idiosyncratic customer needs. Such trade-offs are what

distinguish individual companies strategically.

Defi ning the ObjectiveThe fi rst element of a strategy statement is the one that

most companies have in some form or other. Unfortunately,

the form is usually wrong. Companies tend to confuse their

statement of values or their mission with their strategic

objective. A strategic objective is not, for example, the

platitude of “maximizing shareholder

wealth by exceeding customer expec-

tations for _______ [insert product or

service here] and providing opportuni-

ties for our employees to lead fulfi ll-

ing lives while respecting the environ-

ment and the communities in which

we operate.” Rather, it is the single

precise objective that will drive the

business over the next fi ve years or so.

(See the exhibit “A Hierarchy of Com-

pany Statements.”) Many companies

do have – and all fi rms should have –

statements of their ultimate purpose

and the ethical values under which

they will operate, but neither of these

is the strategic objective.

The mission statement spells out

the underlying motivation for be-

ing in business in the fi rst place – the

contribution to society that the fi rm

aspires to make. (An

insurance company,

for example, might

defi ne its mission as

providing financial

security to consum-

ers.) Such statements,

how ever, are not use-

ful as strategic goals

to drive today’s busi-

ness decisions. Simi-

larly, it is good and

proper that fi rms be

clear with employees about ethical values. But principles

such as respecting individual differences and sustaining the

environment are not strategic. They govern how employees

should behave (“doing things right”); they do not guide what

the fi rm should do (“the right thing to do”).

Firms in the same business often have the same mission.

(Don’t all insurance companies aspire to provide fi nancial

security to their customers?) They may also have the same

values. They might even share a vision: an indeterminate

future goal such as being the “recognized leader in the insur-

ance fi eld.” However, it is unlikely that even two companies

The trade-offs companies makeare what distinguish them strategically from other fi rms.

A Hierarchy of Company Statements

Organizational direction comes in several forms. The mission state-ment is your loftiest guiding light – and your least specifi c. As you work your way down the hierarchy, the statements become more concrete, practical, and ultimately unique. No other company will have the same strategy statement, which defi nes your competitive advantage, or balanced scorecard, which tracks how you implement your particular strategy.

MISSIONWhy we exist

VALUESWhat we believe in and how we will behave

VISIONWhat we want to be

STRATEGYWhat our competitive game plan will be

BALANCED SCORECARDHow we will monitor and implement that plan

The BASIC ELEMENTS of a Strategy Statement

OBJECTIVE = Ends

SCOPE = Domain

ADVANTAGE = Means

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Can You Say What Your Strategy Is?

86 Harvard Business Review | April 2008 | hbr.org

in the same business will have the same strategic objective.

Indeed, if your fi rm’s strategy can be applied to any other

fi rm, you don’t have a very good one.

It is always easy to claim that maximizing shareholder

value is the company’s objective. In some sense all strategies

are designed to do this. However, the question to ask when

creating an actionable strategic statement is, Which objec-

tive is most likely to maximize shareholder value over the

next several years? (Growth? Achieving a certain market

share? Becoming the market leader?) The strategic objective

should be specifi c, measurable, and time bound. It should

also be a single goal. It is not suffi cient to say, “We seek to

grow profi tably.” Which matters more – growth or profi tabil-

ity? A salesperson needs to know the answer when she’s

deciding how aggressive to be on price. There could well

be a host of subordinate goals that follow from the strate-

gic objective, and these might serve as metrics on a bal-

anced scorecard that monitors progress for which individu-

als will be held accountable. Yet the ultimate objective that

will drive the operation of the business over the next several

years should always be clear.

The choice of objective has a profound impact on a fi rm.

When Boeing shifted its primary goal from being the largest

player in the aircraft industry to being the most profi table,

it had to restructure the entire organization, from sales to

manufacturing. For example, the company dropped its pol-

icy of competing with Airbus to the last cent on every deal

and abandoned its commitment to maintain a manufactur-

ing capacity that could deliver more than half a peak year’s

demand for planes.

Another company, after years of seeking to maximize prof-

its at the expense of growth, issued a corporate mandate to

generate at least 10% organic growth per year. The change in strategy forced the fi rm to switch its focus from shrinking to

serve only its profi table core customers and competing on

the basis of cost or effi ciency to differentiating its products,

which led to a host of new product features and services that

appealed to a wider set of customers.

At Edward Jones, discussion among the partners about

the fi rm’s objective ignited a passionate exchange. One

said, “Our ultimate objective has to be maximizing profi t

per partner.” Another responded, “Not all fi nancial advisers

are partners – so if we maximize revenue per partner, we are

ignoring the other 30,000-plus people who make the busi-

ness work!” Another added, “Our ultimate customer is the

client. We cannot just worry about partner profi ts. In fact, we

should start by maximizing value for the customer and let

the profi ts fl ow to us from there!” And so on. This intense de-

bate not only drove alignment with the objective of healthy

growth in the number of fi nancial advisers but also ensured

that every implication of that choice was fully explored. Set-

ting an ambitious growth target at each point in its 85-year

history, Edward Jones has continually increased its scale

and market presence. Striving to achieve such growth has

increased long-term profi t per adviser and led the fi rm to its

unique confi guration: Its only profi t center is the individual

fi nancial adviser. Other activities, even investment banking,

serve as support functions and are not held accountable for

generating profi t.

Defi ning the ScopeA fi rm’s scope encompasses three dimensions: customer or of-

fering, geographic location, and vertical integration. Clearly

defi ned boundaries in those areas should make it obvious to

managers which activities they should concentrate on and,

more important, which they should not do.

The three dimensions may vary in relevance. For Edward

Jones, the most important is the customer. The fi rm is confi g-

ured to meet the needs of one very specifi c type of client. Un-

like just about every other brokerage in the business, Jones

does not defi ne its archetypal customer by net worth or in-

come. Nor does it use demographics, profession, or spending

habits. Rather, the defi nition is psychographic: The compa-

ny’s customers are long-term investors who have a conserva-

tive investment philosophy and are uncomfortable making

serious fi nancial decisions without the support of a trusted

adviser. In the terminology of the business, Jones targets the

“delegator,” not the “validator” or the “do-it-yourselfer.”

The scope of an enterprise does not prescribe exactly what

should be done within the specifi ed bounds. In fact, it encour-

ages experimentation and initiative. But to ensure that the

borders are clear to all employees, the scope should specify

where the fi rm or business will not go. That will prevent man-

agers from spending long hours on projects that get turned

down by higher-ups because they do not fi t the strategy.

For example, clarity about who the customer is and who it

is not has kept Edward Jones from pursuing day traders. Even

at the height of the internet bubble, the company chose not

to introduce online trading (it is still not available to Jones

customers). Unlike the many brokerages that committed

hundreds of millions of dollars and endless executive hours

to debates over whether to introduce online trading (and

if so, how to price and position it in a way that did not can-

nibalize or confl ict with traditional offerings), Jones wasted

no money or time on that decision because it had set clear

boundaries.

Similarly, Jones is not vertically integrated into propri-

etary mutual funds, so as not to violate the independence

of its fi nancial advisers and undermine clients’ trust. Nor

will the company offer penny stocks, shares from IPOs, com-

modities, or options – investment products that it believes

are too risky for the conservative clients it chooses to serve.

And it does not have metropolitan offi ces in business dis-

tricts, because they would not allow for the convenient, face-

to-face interactions in casual settings that the fi rm seeks to

provide. Knowing not to extend its scope in these directions

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has allowed the fi rm to focus on doing what it does well and

reap the benefi ts of simplicity, standardization, and deep

experience.

Defi ning the AdvantageGiven that a sustainable competitive advantage is the es-

sence of strategy, it should be no surprise that advantage

is the most critical aspect of a strategy statement. Clarity

about what makes the fi rm distinctive is what most helps

employees understand how they can contribute to successful

execution of its strategy.

As mentioned above, the complete defi nition of a fi rm’s

competitive advantage consists of two parts. The fi rst is a

statement of the customer value proposition. Any strat-

egy statement that cannot explain why customers should

buy your product or service is doomed to failure. A simple

graphic that maps your value proposition against those of

rivals can be an extremely easy and useful way of identifying

what makes yours distinctive. (See the exhibit “Wal-Mart’s

Value Proposition.”)

The second part of the statement of advantage captures

the unique activities or the complex combination of activi-

ties allowing that fi rm alone to deliver the customer value

proposition. This is where the strategy statement draws

from Porter’s defi nition of strategy as making consistent

choices about the confi guration of the fi rm’s activities. It is

also where the activity-system map that Porter describes in

“What Is Strategy?” comes into play.

As the exhibit “Edward Jones’s Activity-System Map” shows,

the brokerage’s value proposition is to provide convenient,

trusted, personal service and advice. What is most distinctive

about Jones is that it has only one fi nancial adviser in an offi ce,

which allows it to have more offi ces (10,000 nationally) than

competitors do. Merrill Lynch has about 15,000 brokers but

only 1,000 offi ces. To make it easy for its targeted customers

to visit at their convenience – and to provide a relaxed, per-

sonable, nonthreatening environment – Jones puts its offi ces

in strip malls and the retail districts of rural areas and sub-

urbs rather than high-rise buildings in the central business

districts of big cities. These choices alone require Jones to

differ radically from other brokerages in the confi guration of

its activities. With no branch-offi ce management providing

direction or support, each fi nancial adviser must be an en-

trepreneur who delights in running his or her own operation.

Since such people are an exception in the industry, Jones has

to bring all its own fi nancial advisers in from other indus-

tries or backgrounds and train them, at great expense. Until

2007, when it switched to an internet-based service, the fi rm

had to have its own satellite network to provide its widely

dispersed offi ces with real-time quotes and allow them to

execute trades. Because the company has 10,000 separate

offi ces, its real estate and communication costs are about

50% higher than the industry average. However, all those

offi ces allow the fi nancial advisers who run them to deliver

convenient, trusted, personal service and advice.

Other successful players in this industry also have distinc-

tive value propositions and unique confi gurations of activi-

ties to support them.

Merrill Lynch. During the fi ve-year tenure of former CEO Stan O’Neal, who retired in October 2007, Merrill Lynch

Wal-Mart’s Value Proposition

Wal-Mart’s value proposition can be summed up as “everyday low prices for a broad range of goods that are always in stock in convenient geographic locations.” It is those aspects of the customer experience that the company overdelivers relative to competitors. Under-performance on other dimensions, such as ambience and sales help, is a strategic choice that generates cost savings, which fuel the company’s price advantage.

If the local mom-and-pop hardware store has survived, it also has a value proposition: convenience, proprietors who have known you for years, free coffee and doughnuts on Saturday mornings, and so on.

Sears falls in the middle on many criteria. As a result, customers lack a lot of compelling reasons to shop there, which goes a long way toward explaining why the company is struggling to remain profi table.

Low prices

Selection acrosscategories

Rural convenience

Reliable prices

In-stockmerchandise

Merchandise quality

Suburbanconvenience

Selection withincategories

Sales help

Ambience

Wal-MartSearsMom & popstores

Customer purchase criteria*

poor excellent

Delivery on criteria

Source: Jan Rivkin, Harvard Business School

* in approximate order of importance to Wal-Mart’s target customer group

hbr.org | April 2008 | Harvard Business Review 87

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Can You Say What Your Strategy Is?

developed an effective strategy that it called “Total Merrill.”

The company’s value proposition: to provide for all the fi –

nancial needs of its high-net-worth customers – those with

liquid fi nancial assets of more than $250,000 – through retire-ment. While a lot of brokerages cater to people with a high

net worth, they focus on asset accumulation before retire-

ment. Merrill’s view is that as baby boomers age and move

from the relatively simple phase of accumulating assets to

the much more complex, higher-risk phase of drawing cash

from their retirement accounts, their needs change. Dur-

ing this stage, they will want to consolidate their fi nancial

assets with a single trusted partner that can help them fi g-

ure out how to optimize income over their remaining years

by making the best decisions on everything from annuities

to payout ratios to long-term-care insurance. Merrill offers

coherent fi nancial plans for such customers and provides

access to a very wide range of sophisticated products based

on a Monte Carlo simulation of the probabilities of running

out of money according to different annual rates of return

on different categories of assets.

How does Merrill intend to deliver this value to its chosen

customers in a way that’s unique among large fi rms? First,

it is pushing brokers – especially new ones – to become cer-

tifi ed fi nancial planners and has raised internal training re-

PRICEone-timecommission

TARGET CUSTOMER

individual

conservative

delegates decisions

BRANCH SUPPORTbranch-office assistant

PRODUCT

blue chips

mutual funds

ONE FINANCIAL ADVISER PER OFFICEadvisers run their own offices

MARKETING

local mailings

knocking on doors

INVESTMENTPHILOSOPHYlong-termbuy and hold

BROKER TYPE

entrepreneur

member of community

HIRE & TRAINhire from outside industry

internally train all financial advisers

VALUES & CULTURE

volunteerism

mentoring

OWNERSHIPpartnership, not public

COMPENSATIONeach financial adviser is a profit center

TECHNOLOGY

satellite (historically)

HEADQUARTERSSt. Louis home office for all activities

REGIONAL STRUCTUREno regional management

LOCATION

rural

suburban

strip mall

CUSTOMER RELATIONSHIP

face-to-face

convenient

trusted financialadviser

Edward Jones’s Activity-System Map

This map illustrates how activities at the brokerage Edward Jones connect to deliver competitive advantage. The fi rm’s customer value proposition appears near the center of the map – in the “customer relationship” bubble – and the supporting activities hang off it. Only the major connections are shown.

88 Harvard Business Review | April 2008 | hbr.org

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hbr.org | April 2008 | Harvard Business Review 89

CUSTOMERS’needs

COMPETITORS’offerings

COMPANY’Scapabilities

CONTEXT(technology, industry

demographics, regulation, and so on)

SWEETSPOT

quirements to put them on that road.

The certifi ed fi nancial planner license

is more diffi cult for brokers to obtain

than the standard Series 7 license, be-

cause it requires candidates to have a

college degree and to master nearly

100 integrated fi nancial-planning top-

ics. Second, Merrill offers all forms

of insurance, annuities, covered calls,

hedge funds, banking services, and so

on (unlike Edward Jones, which offers

a much more limited menu of invest-

ment products). Since several of these

products are technically complex,

Merrill needs product specialists to

support the client-facing broker. This

“Team Merrill” organization poses

very different HR and compensation

issues from those posed by Edward

Jones’s single-adviser offi ces. Merrill’s

compensation system has to share in-

come among the team members and

reward referrals.

Wells Fargo. This San Francisco bank competes in the brokerage busi-

ness as part of its tactic to cross-sell

services to its retail banking custom-

ers in order to boost profi t per customer. (It aims to sell each

customer at least eight different products.) Wells Fargo’s

objective for its brokerage arm, clearly stated in a recent an-

nual report, is to triple its share of customers’ fi nancial assets.

The brokerage’s means for achieving this goal is the parent

company’s database of 23 million customers, many of them

brought into the fi rm through one particular aspect of the

banking relationship: the mortgage. Wells Fargo differs from

Edward Jones and Merrill Lynch in its aim to offer personal-

ized, rather than personal, service. For example, the fi rm’s

IT system allows a bank clerk to know a limited amount of

information about a customer (name, birthday, and so on)

and appear to be familiar with him or her, which is quite dif-

ferent from the ongoing individual relationships that Jones

and Merrill brokers have with their clients.

LPL Financial. Different again is LPL Financial, with of-fi ces in Boston, San Diego, and Charlotte, North Carolina.

LPL sees its brokers (all of whom are independent fi nancial

advisers affi liated with the fi rm) rather than consumers as its

clients and has confi gured all of its activities to provide in-

dividualized solutions and the highest payouts to its brokers.

This means that the vast majority of the activities performed

by the corporate headquarters staff are services, such as train-

ing, that brokers choose and pay for on an à la carte basis. As

a result, LPL’s headquarters staff is very small (0.20 people

per broker) compared with that of Edward Jones (1.45 peo-

ple per broker). Low overhead allows

LPL to offer a higher payout to brokers

than Jones and Merrill do, which is its

distinctive value proposition to its cho-

sen customer: the broker.

By now it should be apparent how

a careful description of the unique ac-

tivities a fi rm performs to generate a

distinctive customer value proposition

effectively captures its strategy. A rela-

tively simple description in a strategy

statement provides an incisive charac-

terization that could not belong to any

other fi rm. This is the goal. When that

statement has been internalized by all

employees, they can easily understand

how their daily activities contribute to

the overall success of the fi rm and how

to correctly make the diffi cult choices

they confront in their jobs.

Developing a Strategy StatementHow, then, should a fi rm go about

crafting its strategy statement? Obvi-

ously, the fi rst step is to create a great

strategy, which requires careful evalu-

ation of the industry landscape. This

includes developing a detailed understanding of customer

needs, segmenting customers, and then identifying unique

ways of creating value for the ones the fi rm chooses to serve.

It also calls for an analysis of competitors’ current strategies

and a prediction of how they might change in the future.

The process must involve a rigorous, objective assessment

of the fi rm’s capabilities and resources and those of competi-

tors, as described in “Competing on Resources: Strategy in

the 1990s,” by David J. Collis and Cynthia A. Montgomery

(HBR July–August 1995) – not just a feel-good exercise of

identifying core competencies. The creative part of develop-

ing strategy is fi nding the sweet spot that aligns the fi rm’s

capabilities with customer needs in a way that competitors

cannot match given the changing external context – factors

such as technology, industry demographics, and regulation.

(See the exhibit “The Strategic Sweet Spot.”) We have found

that one of the best ways to do this is to develop two or three

plausible but very different strategic options.

For example, fl eshing out two dramatically different alter-

natives – becoming a cheap Red Lobster or a fi sh McDonald’s –

helped executives at the Long John Silver’s chain of restau-

rants understand the strategic choices that they had to make.

They had been trying to do a bit of everything, and this

exercise showed them that their initiatives – such as offer-

ing early-evening table service and expanding drive-through

service – were strategically inconsistent. (Competing on the

The Strategic Sweet Spot

The strategic sweet spot of a company is where it meets customers’ needs in a way that rivals can’t, given the context in which it competes.

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90 Harvard Business Review | April 2008 | hbr.org

basis of table service requires bigger restaurants and more

employees, while drive-through service requires high-traffi c

locations and smaller footprints.) As a result, they chose to

be a fi sh McDonald’s, building smaller restaurants with drive-

through service in high-traffi c locations.

The process of developing the strategy and then crafting

the statement that captures its essence in a readily communi-

cable manner should involve employees in all parts of the

company and at all levels of the hierarchy. The wording of

the strategy statement should be worked through in pains-

taking detail. In fact, that can be the most powerful part

of the strategy development process. It is usually in heated

discussions over the choice of a single word that a strat-

egy is crystallized and executives truly understand what it

will involve.

The end result should be a brief statement that refl ects

the three elements of an effective strategy. It should be ac-

companied by detailed annotations that elucidate the strate-

gy’s nuances (to preempt any possible misreading) and spell

out its implications. (See the exhibit “Leaving No Room for

Misinterpretation.”)

When the strategy statement is circulated throughout the

company, the value proposition chart and activity-system

map should be attached. They serve as simple reminders of

the twin aspects of competitive advantage that underpin the

strategy. Cascading the statement throughout the organiza-

tion, so that each level of management will be the teacher

for the level below, becomes the starting point for incorpo-

rating strategy into everyone’s behavior. The strategy will

really have traction only when executives can be confi dent

that the actions of empowered frontline employees will be

guided by the same principles that they themselves follow.

• • •

The value of rhetoric should not be underestimated. A 35-

word statement can have a substantial impact on a compa-

ny’s success. Words do lead to action. Spending the time to

develop the few words that truly capture your strategy and

that will energize and empower your people will raise the

long-term fi nancial performance of your organization.

Reprint R0804E

To order, see page 139.

Leaving No Room for Misinterpretation

Executives at Edward Jones have devel-oped a detailed understanding of every element of the fi rm’s strategy. Here is an example.

Edward Jones’s Strategy Statement

To grow to 17,000 fi nancial advis-

ers by 2012 by offering trusted and

convenient face-to-face fi nancial

advice to conservative individual

investors who delegate their

fi nancial decisions, through a

national network of one-fi nancial-

adviser offi ces.

”conservative“

Our investment philosophy is long-term buy and hold. We do not sell penny stocks, commodities, or other high-risk instruments.As a result we do not serve day traders and see no need to offer online trading.

We charge commissions on trades because this is the cheapest way to buy stocks (compared with a wrap fee, which charges an-nually as a percentage of assets) when the average length of time the investor holds the stock or mutual fund is over 10 years.

”individual“

We do not advise institutions or companies.

We do not segment according to wealth, age, or other demo-graphics. The company will serve all customers that fi t its conser-vative investment philosophy. Brokers will call on any and every potential customer. Stories abound within Jones of millionaires who live in trailers – people all the other brokerages would never think of approaching.

”investors“

Our basic service is investment. We do not seek to offer services such as checking accounts for their own sake, but only as part of the management of a client’s assets.

”who delegate their fi nancial decisions“

We do not target self-directed do-it-yourselfers, who are comfort-able making their own investment decisions. We are also unlikely to serve validators, who are merely looking for reassurance that their decisions are correct.

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