# All Business Strategies Fall Into 4 Categories ![rw-book-cover](https://hbr.org/resources/images/article_assets/2024/05/May24_23_Pierre-Buttin.jpg) ## Metadata - Author: [[Harvard Business Review]] - Full Title: All Business Strategies Fall Into 4 Categories - Category: #articles - Summary: The article categorizes all business strategies into four groups based on creativity levels. Strategies can involve adapting successful approaches, importing ideas from different industries, combining features from multiple strategies, or creating entirely new strategies from scratch. Understanding these categories can help businesses innovate and stay competitive in the market. - URL: https://hbr.org/2024/05/all-business-strategies-fall-into-4-categories?ab=HP-hero-latest-text-1 ## Highlights - they generally don’t help you in the task of identifying the opportunity or crafting the strategy in the first place. ([View Highlight](https://read.readwise.io/read/01hyk3tnspkssww40axdfpe8p2)) - The framework categorizes all strategies into the following four groups, from the least creative to the most creative: adapting an existing industry strategy, combining different existing industry strategies, importing strategies from other industries, and creating a brand new strategy from scratch. ([View Highlight](https://read.readwise.io/read/01hyk3v8ywm6cgxbfcwfp3mkzj)) - As the legendary strategy expert Gary Hamel put it: “[The dirty little secret of the strategy industry is that it doesn’t have any theory of strategy creation](https://money.cnn.com/magazines/fortune/fortune_archive/1997/06/23/228085/index.htm).” ([View Highlight](https://read.readwise.io/read/01hyk3w1fzq82tm2ybhq9y72f2)) - 1. Adaptations of successful strategies from your industry. A standout example of this approach is [Shein](https://store.hbr.org/product/shein-what-is-the-future-of-fast-fashion/W34176), a Chinese company that has pushed the fast fashion concept to its limit. While traditional fast fashion companies such as Zara and H&M launch about 500 new items every week, Shein introduces 1,000 new items every day. Shein’s items are also 30–50% cheaper than the ones offered by its competitors. And unlike those companies, Shein does not have “brick and mortar” stores. It only sells its items through its app and its website. It also relies far more extensively on artificial intelligence, both upstream (to detect trends) and downstream (to optimize production). The formula has been extremely successful: between 2020 and 2022, Shein’s share of the U.S. fast fashion market went from 18% to 40%. ([View Highlight](https://read.readwise.io/read/01hyk3x8f6dpq868y7xztyw8b8)) - 2. Importing strategies from other industries. Executives and entrepreneurs rarely look beyond the confines of their industry. This is a pity because a strategy that has helped exploit an opportunity or neutralize a threat in another industry can often be a source of inspiration. Analogies are easy to make when there are strong similarities between two industries. [When Hubert Joly was appointed CEO of Best Buy in 2012, the U.S. retailer was in trouble](https://hbr.org/2023/10/how-to-connect-employees-to-your-companys-purpose). While consumers would still use its stores as a source of information and advice about products, they would make their purchases on Amazon. Best Buy had become Amazon’s showroom, which caused its revenues and profits to drop sharply. Four years later, the [*Wall Street Journal* reported](https://www.wsj.com/articles/how-to-fight-amazon-com-best-buy-style-1479660007): “Best Buy has accomplished what many once considered impossible. It successfully fought off an attack from Amazon.com.” This turnaround owes a lot to the “store-within-a-store” strategy that Joly started implementing in 2013. It was based on the insight that Best Buy was the only consumer electronics retailer with a national presence left in the U.S. Unlike Apple, companies such as Samsung, Microsoft, Hewlett-Packard, LG or Sony did not have their own stores, but they needed a place to showcase their products and engage with consumers. The “store-within-a-store” gave them the opportunity to set up branded shops within Best Buy stores in exchange for a fee. While renting retail space was a breakthrough innovation in consumer electronics retail, it is common in department stores. French department store [Le Bon Marché pioneered this model in 1852](https://www.lebonmarche.com/en/store/culture/heritage-lebonmarche). For a Frenchman such as Hubert Joly, the parallel must have been quite obvious. ([View Highlight](https://read.readwise.io/read/01hykncdzmc54qtxb9tgvxtp49)) - 2. Importing strategies from other industries. Executives and entrepreneurs rarely look beyond the confines of their industry. This is a pity because a strategy that has helped exploit an opportunity or neutralize a threat in another industry can often be a source of inspiration. Analogies are easy to make when there are strong similarities between two industries. [When Hubert Joly was appointed CEO of Best Buy in 2012, the U.S. retailer was in trouble](https://hbr.org/2023/10/how-to-connect-employees-to-your-companys-purpose). While consumers would still use its stores as a source of information and advice about products, they would make their purchases on Amazon. Best Buy had become Amazon’s showroom, which caused its revenues and profits to drop sharply. Four years later, the [*Wall Street Journal* reported](https://www.wsj.com/articles/how-to-fight-amazon-com-best-buy-style-1479660007): “Best Buy has accomplished what many once considered impossible. It successfully fought off an attack from Amazon.com.” This turnaround owes a lot to the “store-within-a-store” strategy that Joly started implementing in 2013. It was based on the insight that Best Buy was the only consumer electronics retailer with a national presence left in the U.S. Unlike Apple, companies such as Samsung, Microsoft, Hewlett-Packard, LG or Sony did not have their own stores, but they needed a place to showcase their products and engage with consumers. The “store-within-a-store” gave them the opportunity to set up branded shops within Best Buy stores in exchange for a fee. ([View Highlight](https://read.readwise.io/read/01hyk3ykvm718ya1qezc66h72q)) - 3. Combining strategies from multiple different industries. In many cases, new strategies can also be created by grafting additional features drawn from other strategies onto the existing strategy. A good example is [Spotify](https://hbr.org/2020/07/how-spotify-and-tiktok-beat-their-copycats). Launched in 2008, it has grown to number over 500 million users in 2023, outperforming Apple Music by a factor of five. In addition to providing on-demand music, the Swedish streaming company enables users to connect with other users and artists. They can view the music their friends are listening to. They can share playlists and follow artists. In other words, Spotify has simply combined conventional music streaming and social networking in a single service. ([View Highlight](https://read.readwise.io/read/01hyknev7cjmvbjpsa72f7a97w)) - 4. Strategies created from scratch. The three types of strategy described so far essentially import or combine strategic features that already exist. The fourth and final category consists of novel strategies developed from first principles. As Elon Musk said, “[boil things down to their fundamental truths and reason up from there as opposed to reasoning by analogy](https://fs.blog/elon-musk-framework-thinking/).” This involves a three-step process: (1) challenging conventional thinking, (2) breaking problems into their fundamental principles (i.e., their most basic elements or truths) and (3) creating new solutions from scratch. Musk famously used this process to come up with Space X’s affordable and reusable rockets. His original plan was to buy second hand rockets in Russia, but they were too expensive. Using first principles thinking, he wondered why rockets are so expensive (step 1). After breaking them down into their components, he noticed that the cost of materials was only two percent of the total price (step 2). Therefore, he decided to buy materials (such as aluminum alloys, titanium and carbon fiber) on the commodity market and build his own rockets (step 3). ([View Highlight](https://read.readwise.io/read/01hykp2e74az01xwty4y9dsma5)) - As one of them replied to the founders of Airbnb: “The potential market opportunity does not seem large enough.” To grasp Airbnb’s novel strategy, the media initially made comparisons with existing ones. For instance, the *Financial Times* [explained](https://www.ft.com/content/9aac5f80-b924-11e0-bd87-00144feabdc0) that Airbnb “functions as an eBay-style intermediary.” But the founders of Airbnb did not use analogical reasoning to craft their strategy. In the late 2000s, conventional thinking in the hospitality industry was that accommodation was synonymous with hotels (step 1). Airbnb’s founders challenged this assumption and identified two fundamental truths. First, travelers need a place to stay. Second, some people have spare rooms or properties (step 2). Building on these two principles, they created a platform that disrupted the hotel industry by connecting travelers who look for a more authentic (and often less expensive) experience than hotels with hosts who are willing to rent their spare rooms or properties (step 3). Ironically, Airbnb’s strategy is now used as an analogy by executives and entrepreneurs in many different industries (e.g., the Airbnb of fashion). ([View Highlight](https://read.readwise.io/read/01hykp5b7eck4e1jf2rr7m67gc))