Cloudonomics: The Business Value of Cloud Computing, + Website

Strategy

What is strategy, anyway? Edward Luttwak, a senior fellow at the Center for Strategic and International Studies, has stated that the word is used to mean everything from doctrine, to practice, to theory.20 Generally, however, Luttwak observed that there are two key dimensions: a “horizontal” dimension related to the interactions between adversaries actively opposed to each other’s objectives and a “vertical” dimension relating the macroscopic to the minute: grand strategy to theaters, operations, tactics, and technologies. Although focused on military strategy, Luttwak’s insights are directly applicable to competitive strategy as well.

The leading figure in competitive strategy is arguably Michael Porter, a professor at Harvard Business School and the author of numerous books on strategy. Porter has distinguished between corporate strategy, the approach used in defining the portfolio of businesses that a company will have, and competitive strategy: how each business unit with a relatively holistic product portfolio will compete against others in a specific market.21

To understand the difference, consider General Electric (GE). At the firm level, GE makes decisions regarding the collection of business units that it comprises: aircraft engines, locomotives, healthcare, financial, and others. Under former CEO Jack Welch, GE developed a corporate strategy—and a basis for action—oriented around each unit being either number 1 or 2 in its industry. This formed the basis for ...