This paper studies the nature and structure of strategy (in its everyday sense), starting from a functional definition of strategy as `the smallest set of (core) choices to optimally guide the other choices.’ This definition captures the idea of strategy as the core of a – potentially flexible and adaptive – intended course of action. It coincides with the equilibrium outcome of a`strategy formulation game’ where a person can look ahead, investigate, and announce a set of choices to the rest of the organization.
Starting from that definition, the paper studies what makes a decision`strategic’ and what makes strategy important, considering the ability to commit, irreversibility and persistence, the presence and type of uncertainty, the number and strength of interactions and the centrality of a choice, the level and importance of a choice, the need for specific capabilities, competition, and dynamics. It shows, for example, that irreversibility does not make a decision more strategic but does make strategy more valuable, that long-range strategies will be more concise, why a choice what not to do can be very strategic, and that a strategy`bet’ can be valuable. It also shows how understanding the structure of strategy may enable a strategist to develop the optimal strategy in a very parsimonious way.