What Is Strategy? It’s a Lot Simpler Than You Think
Harvard Business Review
9 min, 32 sec
Felix Oberholzer-Gee explains strategy as a simple concept centered on creating value, using the value stick model to illustrate how companies create value for customers, employees, and suppliers.
Summary
- Strategy is a simple plan to create value; it's about looking forward and planning for future opportunities.
- Value is the difference between what customers are willing to pay and sellers' costs, which is depicted using the value stick figure.
- Companies can raise customers' willingness to pay by improving product quality, using complements, and leveraging network effects.
- Attractiveness in the job market can be increased by paying more or improving job conditions, which lowers employees' willingness to sell.
- Best Buy's turnaround strategy is highlighted as an example of increasing customer willingness to pay and reducing supplier costs, leading to high profitability.
Chapter 1
![Felix Oberholzer-Gee introduces the concept of strategy and explains that it is not complicated but rather a plan to create value.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NTYsInB1ciI6ImJsb2JfaWQifX0=--349dea7219e530c45b4c4ebb9f1a434068c6a662/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_11.jpg)
Felix Oberholzer-Gee introduces the concept of strategy and explains that it is not complicated but rather a plan to create value.
- Strategy is often perceived as complex but is actually straightforward and involves creating a plan to generate value.
- Companies create strategies to plan how they will generate value in the future, not just to analyze financial endpoints.
![Felix Oberholzer-Gee introduces the concept of strategy and explains that it is not complicated but rather a plan to create value.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NTYsInB1ciI6ImJsb2JfaWQifX0=--349dea7219e530c45b4c4ebb9f1a434068c6a662/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_11.jpg)
Chapter 2
![The concept of value creation is explained using the value stick figure, showing the difference between willingness to pay and sell.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NTgsInB1ciI6ImJsb2JfaWQifX0=--4099c3550d61346fba6b543d1adddf2d8fce6758/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_52.jpg)
The concept of value creation is explained using the value stick figure, showing the difference between willingness to pay and sell.
- Value creation for a company is measured by the difference between customers' willingness to pay and suppliers' willingness to sell.
- The value stick figure illustrates this concept, with willingness to pay and sell at the top and bottom, respectively.
![The concept of value creation is explained using the value stick figure, showing the difference between willingness to pay and sell.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NTgsInB1ciI6ImJsb2JfaWQifX0=--4099c3550d61346fba6b543d1adddf2d8fce6758/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_52.jpg)
Chapter 3
![Willingness to pay and sell are detailed as the core drivers of value for customers and employees.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjAsInB1ciI6ImJsb2JfaWQifX0=--091e97fbb79a390ebff315b6609f85facccdb6d9/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_134.jpg)
Willingness to pay and sell are detailed as the core drivers of value for customers and employees.
- Willingness to pay reflects the maximum a customer would spend on a product, while willingness to sell is the minimum compensation an employee would accept.
- Value for customers and employees is the difference between their willingness to pay or sell and the actual price or compensation.
![Willingness to pay and sell are detailed as the core drivers of value for customers and employees.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjAsInB1ciI6ImJsb2JfaWQifX0=--091e97fbb79a390ebff315b6609f85facccdb6d9/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_134.jpg)
Chapter 4
![The distribution of created value among customers, employees, and the company's margins is analyzed.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjIsInB1ciI6ImJsb2JfaWQifX0=--35870ce627078a340475fe5e7a5f89741987d13f/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_207.jpg)
The distribution of created value among customers, employees, and the company's margins is analyzed.
- The total value created is split between customers, employees, and the company, as reflected by customer delight, job attractiveness, and company margins, respectively.
- Strategies to increase value involve raising customers' willingness to pay and reducing employees' willingness to sell.
![The distribution of created value among customers, employees, and the company's margins is analyzed.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjIsInB1ciI6ImJsb2JfaWQifX0=--35870ce627078a340475fe5e7a5f89741987d13f/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_207.jpg)
Chapter 5
![Various strategies to increase customers' willingness to pay are outlined, including improving product quality, complements, and network effects.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjQsInB1ciI6ImJsb2JfaWQifX0=--d62920b6b740fb17e7a4b096a80f2f3f9e66fb08/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_267.jpg)
Various strategies to increase customers' willingness to pay are outlined, including improving product quality, complements, and network effects.
- Improving product quality, utilizing complements like razor and razor blades, and leveraging network effects are methods to increase willingness to pay.
- Adoption and popularity of a product can significantly raise willingness to pay, as seen with social media platforms.
![Various strategies to increase customers' willingness to pay are outlined, including improving product quality, complements, and network effects.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjQsInB1ciI6ImJsb2JfaWQifX0=--d62920b6b740fb17e7a4b096a80f2f3f9e66fb08/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_267.jpg)
Chapter 6
![The discussion shifts to how companies can make jobs more attractive to lower employees' willingness to sell without simply raising compensation.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjYsInB1ciI6ImJsb2JfaWQifX0=--999580da5ea9c7bd3d5a4c23c7bb878cf163f28c/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_341.jpg)
The discussion shifts to how companies can make jobs more attractive to lower employees' willingness to sell without simply raising compensation.
- Paying more money or improving job conditions can make a job more attractive, thus reducing employees' willingness to sell.
- Enhancing the job itself creates value, while increasing pay only redistributes value without creating more.
![The discussion shifts to how companies can make jobs more attractive to lower employees' willingness to sell without simply raising compensation.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjYsInB1ciI6ImJsb2JfaWQifX0=--999580da5ea9c7bd3d5a4c23c7bb878cf163f28c/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_341.jpg)
Chapter 7
![A case study of Best Buy's turnaround strategy demonstrates how the company increased willingness to pay and reduced supplier costs.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjgsInB1ciI6ImJsb2JfaWQifX0=--f57cebe8662d28ab000e830b09db383cd429ba56/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_473.jpg)
A case study of Best Buy's turnaround strategy demonstrates how the company increased willingness to pay and reduced supplier costs.
- Best Buy avoided expected bankruptcy by innovating its strategy, using stores as warehouses for better shipping times and creating store-in-store experiences for major brands.
- These strategies led to increased customer willingness to pay, lower vendor willingness to sell, and higher employee engagement.
![A case study of Best Buy's turnaround strategy demonstrates how the company increased willingness to pay and reduced supplier costs.](https://www.videogist.co/rails/active_storage/representations/redirect/eyJfcmFpbHMiOnsiZGF0YSI6NTM2NjgsInB1ciI6ImJsb2JfaWQifX0=--f57cebe8662d28ab000e830b09db383cd429ba56/eyJfcmFpbHMiOnsiZGF0YSI6eyJmb3JtYXQiOiJqcGciLCJyZXNpemVfdG9fbGltaXQiOls3MjAsbnVsbF19LCJwdXIiOiJ2YXJpYXRpb24ifX0=--c9426325207613fdd890ee7713353fad711030c7/3235_473.jpg)
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