Thursday, November 13th, 2008

What is a Strategy?

I have significant professional experience in strategy development. I often write about how things are strategically good or poor, or how such-and-such seems to have no strategy. But what actually is a strategy?

There are four parts to a strategy-driven program:

  • A vision for what you want to achieve
  • A set of capabilities or programs you need to get there
  • A list of activities to bring them into reality
  • Execution, execution, execution.

There’s also continuous re-evaluation and refinement all along the way.

It starts with a vision. As they say, begin with the end in mind. A vision can be quantitative or qualitative, but since you need to be able to know when you get there, some degree of measurability is a must. Without a shared community vision of what success looks like, it’s tough to get anywhere.

What is your aspiration for your city? That’s a question I love to ask since I find it very revealing. When I asked one local leader in Indianapolis, he said, “To be one of the top ten cities in America people desire to live in.” Previous generations of leaders said they wanted the city “To be the amateur sports capital of the world.” Chicago said one of its aspirations was “To host the Olympic games in 2016”. There also seems to be a local goal to elevate Chicago to the same level as London, Paris, Shanghai, etc. as one of the world’s truly elite global cities. As you can see, embedded in this is usually some notion of a target market and the need for a value proposition to serve it.

Many civic improvement programs don’t seem to have a vision of success built into them. I often cite life sciences. Practically every Midwest city has said life sciences is one of their strategic industries of the future. But what does success look like? I’ll consider one example, both good and bad, from the BioBelt program in St. Louis. They have a two part aspiration. One is to “create the premier location for plant sciences”. Premier means first, so that’s a clear aspiration. Plant sciences is a specific area to target. The other half of their goal, to be a “major center for medical sciences” is less good. Most cities have fairly large health care sector and medical school. What does it mean to be a major center? In a growth industry like life sciences it is easy to let goals like that lull you into a false sense of security because a rising tide lifts all boats. You can be adding jobs, but falling behind. Medical sciences is also a very broad term. I might prefer something like, “To be one of the top five centers for bio-informatics employment and company headquarters in America.” String a few of these together and you have the makings of a program.

As I’ve said before, the best strategies often target a whitespace opportunity where there is not an entrenched competitor and you can get first mover advantage. One could say, “To be the world’s #1 financial center”, but can you really displace New York and London? It also helps to pick something where there is an intuitive reason to believe you are well-placed to succeed. For example, Indianapolis said, implicitly, it wanted to be “one of the top three cities in the world for motorsport employment and company headquarters”. Given its massive motorsport heritage and brand, plus multiple world renowned racing facilities, this was a good pick. By the way, not all aspirations have to be around being at the top. It’s ok to shoot for average if that’s good enough for you.

The second piece of the puzzle is to figure out the capabilities and programs you need to have in order to achieve the vision. This is where the real hard work beings. If you want to be at the top of a market, you need to create a value proposition that creates differentiated appeal and which has sustainable competitive advantage. As Warren Buffet might say, you need to build a “wide moat” business. Wal-Mart figured out that the biggest driver of staple retail prices was price. It wanted to be the lowest price provider and have “always low prices”. It realized that it was in a commodity business, and thus it is all about having a cost advantage. So they built a business with huge economies of scale, purchasing power, a world class logistics infrastructure, limited discounting, no-frills buildings, world class IT, etc. to create a juggernaut.

As a city, you need to think about the capabilities you need across all the dimensions of a city. Some of these are:

  • Human Capital. For example, what types of people do you need to attract to be a leading city in the arts, life sciences, high tech, etc? This is often the most important item.
  • Legal and Regulatory Environments. This importance of this can’t be under-estimated. Some have argued that one factor in Silicon Valley’s ascendancy over Boston’s Route 128 corridor is that California does not honor non-competes and Massachusetts does. One reason Medco chose Indianapolis over Louisville for its 1,200 job mail order pharmacy system was that Indiana permitted remote verification while Kentucky did not.
  • Financial and Business Practices and Access to Capital. Is money available to achieve what you want? Will your venture capitalists fund a business based on a back of the napkin business plan, or will they put you through the wringer and make you sign most of your rights away?
  • Social Structures and Local Culture. This one is harder to change, but very important. New York and London are very open to outside ideas. Silicon Valley’s open network of firms and culture of collaboration is key to that area’s success. If you want to have an entrepreneurial culture, then it has to be more than ok to fail, it has to be expected as a normal part of business.
  • Facilities and Other Infrastructure. Do you need laboratories, incubator spaces, a race track, a cyclotron, a super-computer, etc? If, for example, like Portland, you want to be a transit, bike, and pedestrian oriented community, you need to built lots and lots of facilities just like they did. If you want to be an airport hub, you’d better have a good airport.
  • Academic and Research Capabilities. Kansas City wanted in the life sciences business and didn’t have a medical school, so it had to get local billionaires to establish an independent research institute.
  • Non-Governmental Organizations and Other Associations. Do you need an umbrella marketing group? Do you need to set up other types of associations? What about non-profits?
  • Corporate Community and Support Structures. How does the local business community need to be involved or not involved?
  • Geographic Considerations and Connections. Is your geography favorable to, say, an aspiration like “being one of the top five ports of entry for international immigrants”? Where else do you need to build connections to in order to support your ambitions?

This is a sample, and oriented towards thinking about industry clusters. Other aspirations might have a completely different list. And each one can lead to a whole other set of questions. As I’ve said many times, you can’t have a life sciences industry without life scientists. Why would these extremely in demand people want to pick your city? Cities are a complex, interconnected network of variables that all affect each other dynamically over time. You’ve got to think holistically and look beyond simple linear cause and effect.

Again, it’s not enough just to have answers to these questions that might work. You also have to consider the competitive situation. If your vision is attractive, then you’ll probably have lots of other people trying to get there too. They’ll see what you’ve done and copy it. Some ambitions, like having a great trail network, are available to all, but others aren’t. It’s not enough to just figure out how to serve a market, you have to serve it better than the competition. You have to build that wide moat business.

Once you’ve gotten to this, you then need to transition it into an action plan and go do it successfully. This is the realm of execution. If you don’t execute, then the greatest strategy in the world is all for naught.

As you can see, this isn’t easy.

Let’s walk through one good example, one I’ve used before, the Indianapolis quest to be America’s amateur sports event capital. That was the vision. It was easy to measure because you can total up things like events, attendance, and economic impact and compare yourself to others via league tables. It was a whitespace opportunity that targeted an underserved segment of the events market. It was also a key capability input into other aspirations like boosting the city’s downtown, improving its brand reputation and exposure, and making it a more attractive destination for companies and the labor force of the future. And the capabilities built for amateur sports are leveragable across other target areas.

What capabilities did the city establish? It created the Indiana Sport Corp. to manage the process of luring and hosting events. I don’t know if it was the first organization of its kind, but it was one of the first. It built many facilities such as the Hoosier Dome, the Natatorium, the Velodrome, etc. It leveraged the city’s strong volunteer base to create an army of people ready to help out and welcome visitors for these events. It designed its entire downtown around the facilities cluster, such as by putting its stadium directly next to the convention center, with nearby, attached, hotels, dining, and shopping. It created an approach to literally saturate and rebrand the entire downtown around the even being hosted. Perhaps most importantly, it sought out non-profit sanctioning bodies like USA Track and Field, creating a small industry mini-cluster. As part of this, it figured out how to provide services to those organizations and signed deals locking up long term event dates. This culminated with the push to lure the NCAA from Kansas City and building a museum there. They city also backed other initiatives through its life sciences effort, such as the National Institute of Fitness and Sports. And it has continued to sustain the effort. It wasn’t a one shot program but a long term effort that is ongoing.

The results were a big success. Indy is one of the top amateur sports events cities in America, and has remained one of the top players despite a lot of new entrants trying to get a piece of the pie.

I hope this posting illustrates some of what cities need to be thinking about when it comes to defining and achieving their aspirations.

Topics: Strategic Planning

4 Responses to “What is a Strategy?”

  1. thundermutt says:

    This also works at the neighborhood/area level within a city or metro area. An oft-cited example by The Urbanophile is Carmel.

    Fountain Square is an emerging example of a deliberate arts-and-entertainment district strategy. That’s not a unique strategy, but there is certainly nothing else like it locally in history, execution, and outcome.

  2. Alon Levy says:

    New York and London are very open to outside ideas.

    I can’t speak for London, but New Yorkers think that any idea outside the Five Boroughs is beneath their dignity to look at. They accept immigrants, as long as said immigrants adjust to New York’s ideas of how to succeed, but they definitely don’t accept new ideas.

    Case in point: congestion pricing. The first study promoting it was published in the 1960s. In the 70s, Singapore became the first city in the world to implement it. London learned from Singapore. In New York, the Mayor of London had to come over and personally pitch the idea to Bloomberg, and even then, the public discourse about Bloomberg’s plan paid lip service to talking about London’s experience, and ignored Singapore entirely.

  3. Hussey says:

    This question sounds really interesting to me. As most of us tend to give lecture on Strategy but how many of us really know and value them.

  4. Jon says:

    Nicely written! Your assessment of strategy is spot on. I’m going to link to this on my blog.

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