Strategy in Practice: From Position to Objective to Initiative

A strategic risk is a risk to a stated position, so with nothing written down there is nothing for it to be a risk to. Position, objective and initiative narrow at each step: what the business decided to be, the checkable outcome that follows, and the money committed to reach it. One invented register maker records the last of the three, at Rs 24,40,000/-, and neither of the first two.

Why is a chain about strategy sitting in a reading order about what could break a business?

A strategic risk bites on the position a business picked out for itself. Business Risk: The Risks That Sit Inside the Operation works that position out at length. So with no position written down there is nothing for it to be a risk to, and the first move in measuring a strategic risk is going to look for the sentence rather than measuring anything at all.

The missing sentence is the whole reason a chain running position, objective, initiative belongs beside the risks that sit inside an operation rather than beside the choices a management makes. The chain is not here to teach anybody how to choose. The chain is here because it produces the stated position every other measurement on a strategic risk has to point at.

The chain runs in one line. Three links, each narrower than the one above it, and the honest question is which of the three one business actually records. The accounts record the third link exactly, to the rupee, and nothing published anywhere in these notes records the first two.

The shape of that is familiar from ordinary life. Somebody asks a friend whether the move to the new flat went well. The friend can produce the removal bill to the last rupee, dated, with the van company's name on it. Asked what the move was for, the friend offers a shrug and three sentences that do not agree with each other. The bill is exact and the reason was never written down, and nobody involved did anything careless. An exact bill beside a missing reason is where almost every business is standing when a reader arrives with a question about strategy.

One business runs through the chain. Anjani Stationers Private Limited, an invented manufacturer, turns paper into hard-bound registers, and every one of them goes to an institution inside a single city. Across one published year it raised its standing baseCost that lands every year at the same size however many units go out of the door. Space, people on a monthly wage and the wearing down of machines already paid for all sit in here. by Rs 24,40,000/-, and that figure is exact, dated and sitting on the face of a statement. The purpose the money served is a different kind of question, and the difference between an exact figure and a stated purpose is the whole subject below.

Strategic Positioning

A position is what the business decided to be, for whom, against what alternative, and therefore what it decided not to do. The clause about what the business decided not to do is not decoration. A position that rules nothing out is not a position, it is a description. Anything that can be said of the business and of every rival at once has ruled nothing out and has decided nothing.

Now work the case, and work it the only honest way, by putting what is actually published beside what a position would need. Six things about Anjani Stationers are on the record. The business makes hard-bound registers. The business sells to institutions in one city. The business carries 36 accounts. The business has held one relationship with the Sunrise Public School group for eleven years. The business realises Rs 108.00/- a register. And the record states plainly, with no number against it, that the name over its door is known to head teachers right across the district.

Read that list twice and then say the hard thing plainly. Every one of those six is a fact about the trading the business carries on, and not one of them is a sentence saying what the business decided to be. Eleven years of steady supply to one school group is a pattern in a record. A pattern in a record and a decision in a document are two different objects, and everything below turns on the difference between them.

Now the distinction worth carrying away, said once and said flat. A position is either written down or it is inferred, and an inferred position belongs to whoever inferred it. There is no third state where a position exists quietly in the way the business behaves and can be recovered by a careful enough reader. Recovery is authorship.

The everyday version runs like this. A shop on a busy street has sold the same three things for twenty years. Asked about the shop's purpose, the person behind the counter gives three different answers on three different days: a convenience for the flats above, a specialist in the one line it stocks deepest, whatever the last customer happened to ask for. The twenty years are real. The sentence is not there, and no amount of watching the shop produces it.

Strategic Objective

An objective is a position turned into something somebody could check. An objective takes one thing the position rules in and gives it a quantity, a unit the business already counts, and a date. An objective that cannot come back false is not an objective. The falsifiability test does more work than any list of qualities. An objective is also the link a reader is most likely to think they already understand, so the anatomy is worth pulling apart properly.

The quantity has to be a number rather than a direction. More, better, stronger and deeper are directions. Directions name which way somebody would like to travel and never say when the travelling is done. A direction cannot be met and cannot be missed, so it survives every year unharmed.

The unit has to be something the business already counts. An objective stated in a unit nobody measures cannot be checked even in principle, however precise the number attached to it looks. Anjani Stationers counts registers, accounts and rupees. Only those three units are available. Anything requiring a survey nobody runs, or a score nobody keeps, is a number with no meter behind it.

And the date has to be a date. This is the part everybody drops. An objective with no date cannot be false yet, and a thing that cannot be false yet can never be false at all. The moment of judgement keeps moving ahead of the judge. A date is what converts an intention into something a colleague can hold the drafter to.

Now report the case, without hedging. Nothing published anywhere in these notes states an objective for this business. The absence was not assumed from the shape of the record. A search ran through these notes for the phrase, using a pattern first proved against a phrase known to be present, and it came back with nothing at all. So the row is empty, and empty is a finding rather than a gap in the reading.

How should a note fill that row? The word unanswered, at full size, on its own line, in the same weight as the rows that are filled. Not a smaller font, not a footnote, not a dash. And then the reader knows precisely what to request next, being one sentence that carries a number, a unit the business already counts, and a date. A request like that can be answered in a minute or refused in a minute, and either reply is worth more than a paragraph of inference.

The conditions that would have to be true for a commitment to pay, stated before the money moves and checkable afterwards, are set out under How to Evaluate a Strategic Initiative Before It Is Taken.

The household version is short. One household says it wants to save more this year. The household next door says it wants Rs 1,00,000/- put aside by the end of the school year. Twelve months later only the second one can be wrong, and only the second one ever produced a conversation in March about whether the saving was on track.

Strategic Initiative

An initiative is an objective turned into a commitment of money, people or time that somebody signed. An initiative is the narrowest of the three links and the only one anybody has to put a name to a document for. An initiative is also the one link these notes record in full, so the figures below can be worked in the open rather than described.

Across one published year the standing base at Anjani Stationers went to Rs 74,00,000/- from Rs 49,60,000/-. The rise is Rs 24,40,000/-, or 49.19 per cent on top of what the first year carried. The accounts set down in six words where the money went, and those six words are the whole of what anybody said: people, space, and a binding operation the business bought into.

Now the part that teaches. Not one of the three is priced. Three things are named and one total is exact, so the cell is a single exact figure sitting above three empty rows. Amounts against accounting headsThe labelled buckets a set of accounts sorts spending into, so that similar costs are added up together. A head records where an amount was booked, and it is set by the rules of presentation rather than by anybody's reason for spending. do exist in these notes, assembled elsewhere and closing to the rupee, and those workings state in their own words that no line anywhere states the split, that an estimate is not a disclosure, and that a price against a head is still not a purpose. No head-level amount appears here. Setting three amounts beside three named purposes is exactly the mapping nobody published, and a reader would make it in their head whatever the caption underneath said.

Now to why standing cost is the right place for an initiative to land. A standing cost is the answer to for how long as well as to how much. The cost arrives every year until something is undone. A one-off payment closes on its own. A rent, a salaried person and a floor of space renew themselves quietly at the start of every year with nobody signing anything a second time. A qualification travels wherever the figure travels. The Rs 74,00,000/- is itself temporary, and a one-off item sitting inside it drops away.

One further published fact belongs here and is quoted exactly as it stands. The binding operation is Chitra Binding Works Private Limited, in which Anjani Stationers took a seventy per cent holdingA stake in a second company big enough to control it, bought outright. The buyer books what it handed over, and the stake is then something it holds, which is a different thing from trading. for Rs 21,00,000/-, with a guarantee of Rs 8,00,000/- over that company's borrowing disclosed rather than recognisedAn amount described in the notes to a set of accounts without being carried as a figure in the statements themselves. It is set out, and it is not added into any total.. The temptation runs the other way, so say the next thing immediately and in the open. The Rs 21,00,000/- is an investing payment and the Rs 24,40,000/- is an operating cost, so neither one is any part of the other, and no subtraction across them is available to anybody. The two live in different statements, and a subtraction across that line produces a number belonging to neither.

The household picture runs like this. A household takes a bigger flat and can name exactly the three things it was taken for: a room for the grandmother, a place to put the sewing machine, and a shorter walk to the school. Asked what any one of the three cost, the household has no answer. One cheque covered all of it. The total is exact and the split was never made, and no amount of staring at the cheque produces it.

What happens when the three links are read from the bottom upwards?

The three links are usually drawn top down. Somebody inside the business would build them in that order. A reader outside travels the other way, and the other way is where the chain stops being three definitions.

Start at the bottom. The initiative has an exact price, Rs 24,40,000/-, sitting on the face of a statement, dated, closing exactly against the year's other movements. There is nothing soft about it. One step up sits the objective, and the row is blank. One step further up sits the position, and that row is blank too.

The only link in this chain that leaves a trace in a set of accounts is the last one, and that is why almost every business can state what it spent and not what it was for. The reason is that each link is checked somewhere different. A position is checked against a document the business wrote about itself. An objective is checked against a count the business already keeps. An initiative is checked against the cost base. A commitment that arrives every year is exactly what a standing cost is. Two of those three places are nowhere near a set of accounts.

The generalisation has to be said carefully. An account of strategy usually overreaches on exactly this sentence. The pattern is a property of what accounts record. The pattern is not a claim about how businesses think. A business with all three links written down would leave exactly the same trace in its accounts as one with none of them written down. No statement anywhere carries a row for what somebody decided to be. So the blanks are invisible in the numbers, in both directions at once, and a reader who believes they can spot a thoughtful business by the shape of its cost base is reading something that is not there.

The everyday version is sitting in any inbox. A bank statement shows every payment made across a year, to the paisa, with dates and payees. The statement records not one reason for any of them. The statement is complete and it answers a different question from the one the reader brought to it.

What did the commitment actually leave behind?

Here is why the two blank rows are a question about risk rather than a complaint about somebody's filing. The commitment landed, and the year closes on it exactly.

ContributionRevenue less only those costs that move up and down with the number of units. Whatever survives that one subtraction is what there is to meet everything else with. rose from Rs 1,02,60,000/- to Rs 1,15,50,000/-, up Rs 12,90,000/-. The standing base went up by Rs 24,40,000/-. And operating profitThe result of a year's trading, struck before any interest and before any tax. Take the standing costs away from contribution and this is what is sitting there. fell from Rs 53,00,000/- to Rs 41,50,000/-, down Rs 11,50,000/-. Rs 12,90,000/- of extra contribution less Rs 24,40,000/- of extra standing cost lands on exactly Rs 11,50,000/-, with no residue left over for any other cause.

The subtraction is a fact about the year. Now to what the commitment did to the exposure. A larger standing base means the same movement in revenue now lands harder on the result. The distance is published directly: it stood at 1.94 in the first year and at 2.78 in the second. The decomposition is published too, and it is the part worth slowing down for. Pin the standing base to the Rs 49,60,000/- the first year carried, then feed in the second year's revenue and contribution: the operating result comes out at Rs 65,90,000/- and the reading at 1.75. So revenue growth on its own was pushing the reading down, from 1.94 to 1.75, and the rise in standing cost then carried the whole way from 1.75 to 2.78.

Two qualifications travel with those readings and neither is optional. The division of cost into a moving part and a standing part is an estimate. Nobody disclosed it, and each reading printed here sits on top of it. And these notes say plainly that the Rs 74,00,000/- will not stay at that size. One item inside it arrived only once. Print the reading bare, with neither sentence beside it, and an estimate has quietly been promoted into something somebody disclosed.

One more thing, and it stops a common double count. The distance from the point where contribution would exactly meet the standing base is published too. The two readings are not two findings. Multiply the pair together and the answer comes out at exactly one, whatever the revenue and whatever the base. Each reading is the other one turned over. A note carrying both as two agreeing measurements has written one thing down twice, in two different voices. Only one of the two appears here.

A commitment taken without a written position still changes how hard every later movement lands, and that change is the strategic risk. A distance is not a forecast. A reading of 2.78 says how hard a movement would land if one arrived, and says nothing whatever about whether one is on the way.

Think of a household that took a bigger rent for reasons nobody now remembers. The reasons went; the rent stayed. Every short month since has been heavier than a short month used to be, and the heaviness does not consult the reasoning at all.

What can a reader honestly do when the first two rows come back blank?

Say the ordinary thing first, and say it early. Nothing that follows works without it. Almost nobody writes the position down. Anjani Stationers is not unusual, and nothing in these notes says anybody was careless. A thin paper trail behind a real decision is the normal condition of small and medium businesses everywhere, and treating it as a character flaw would convict most of the trading world on the same evidence.

So what is left for a reader? Two things, and both of them are real work rather than consolation.

First, ask for the sentence. If a business describes a commitment as strategic, then the position it is strategic to either exists somewhere in writing or it does not, and finding out which takes one question. The question costs a minute and has only two possible answers, and both of them are worth having. A produced document changes the whole reading. A shrug is also information, and it is information obtained rather than assumed.

Second, if there is no sentence, record that the commitment is being measured against nothing, and write it at full size. Not as a caveat in smaller type at the bottom. Not as a phrase hedged into the middle of a paragraph about something else. A row that says the position is not stated is a finding about what is available to be checked, and the next reader needs it in the same weight as everything else in the note.

One escape has to be closed, and it is the one an analyst reaches for. Reconstructing the position from what the business spent produces a sentence, and the sentence is the analyst's own. Every subsequent test of the business against it is a test of that drafting. An inferred position is the analyst's own sentence, and testing a commitment against it measures the analyst. There is no version of this where enough care converts an inference into somebody else's decision.

The tests that could honestly have been run before the money moved are set out under How to Evaluate a Strategic Initiative Before It Is Taken.

The human version is one sentence long. Ask a friend why they moved cities and they answer with the cost of the van.