The Core of Strategy
Three Key Points Behind Every Strategy
Everyone keeps telling us the AI-driven white-collar apocalypse is coming. So imagine you and I decide to get out: we pool our money and open a café.
That sounds simple enough. We rent a space, decorate it, buy beans, turn them into coffee, and sell it for more than it costs to make. Done.
Then we sit down to make actual decisions, and the simplicity disappears. Where should we locate? What should the space feel like? Should we buy the best beans we can find or keep costs down? How much customization of drinks should we allow? How many people should we staff per shift? How should we price? What do we do when a competitor opens across the street?
People often say we should break big problems down and solve them piece by piece. That is good advice in much of life. In business, it is also an efficient way to end up with a place where nothing fits: a premium menu with bargain pricing, a beautiful space with rushed service, a third-place vibe with policies that make people feel unwelcome.
What we need isn’t a longer list and more detail. We need a way to make decisions fit together. We need a strategy.
A useful starting point is three linked questions:
How do we create value? We find customers whose needs aren’t being served as well as they could be, and we design an offer they prefer over alternatives.
How do we capture value? We choose prices and policies that turn customers’ willingness to pay into profit.
How do we defend value? We make it harder for copycats to use the same positioning to target the same customers once we’ve shown the concept works.
The questions are simple on the surface, but their power is that they force consistency. If we get the first part right—who we serve and how—we can derive hundreds of downstream decisions without getting lost because each decision has a north star. That doesn’t mean every answer becomes obvious. It means the range of sensible answers becomes much narrower. And as we’ll see, fit isn’t just a nice feature of a good strategy. In the end, it is the strategy.
I’m developing these ideas more fully in a book on strategy and am currently doing a small review round. If you find this useful and are open to reading a chapter or two later on, I’ve included details at the end.
I’m using a café here because it’s easy to picture. The same questions apply whether you run a local service business, a consumer brand, or a software company.
Create Value: Pick a Job, Then Build a System
Before we talk about beans or branding, we need to understand the different reasons people go to a café.
A café can serve many jobs. Someone might want a quick caffeine hit on the way to work, somewhere to sit and get things done, a neutral place to meet, or a place to treat themselves.
We can serve several jobs, but we cannot design the whole business around all of them at once. They require different trade-offs. Strategy starts when we choose which job we want to be great at, and which jobs we are willing to be merely decent at—or not serve at all.
So we’ve narrowed the location to a certain area in our city and decided we’ll serve customers who want to treat themselves and socialize. They come to relax, feel welcome, get something special, sit with friends, and leave with a few good photos. We want to serve dates, reunions, and the kind of occasion where someone says, “Let’s go somewhere nice.” After visiting the other cafés in the area, we think this segment is underserved relative to what’s possible.
Tailor What We Offer
That choice immediately starts shaping everything else.
If we were serving customers trying to fuel up, speed and price would anchor the whole model. We’d look for a location near a train station or business district, where people pass in a rush and convenience matters most. But because we serve customers who want to treat themselves, different things matter more: warmth, presentation, and the feeling that this was worth it. That pushes us toward a different kind of location—not a place people use by default, but a place they choose on purpose as part of a stroll, a date, or an afternoon out. We want to be where our target customers already go to relax—for example, near parks, nice shopping streets, or cinemas. We accept higher rent and heavier weekend demand because that is the price of being a destination.
The same logic helps us shape the space itself. A fuel-up café would optimize for throughput: fast ordering, limited dwell time, and practical seating. A work-friendly café would optimize for laptop comfort: outlets, larger tables, quieter acoustics, and customers staying for hours. We choose neither. We want people to linger, but in a social and indulgent way. So we bias the space toward smaller tables, comfortable seating, warmer lighting, photogenic corners, and a layout that feels intimate rather than office-like. That helps the job we want to serve, even if it means giving up some all-day laptop traffic.
Now the idea of fit starts to become concrete. Take the menu. How much variety should we offer, and how often should we change it? Our hypothesis is that our customers value novelty and newness. The naive response would be to offer everything. But that creates too much complexity in service. It leads to longer lines, more errors, more stressed staff, and less consistent quality. In trying to give customers more choice, we would undermine exactly the experience they are paying for.
The opposite extreme also has problems. We could offer a tiny artisanal menu with almost no choice. That might look elegant, but it would be too restrictive for a group trying to pick a place for a treat. So we make a more balanced choice: a small core menu we can execute perfectly, plus a rotating layer that satisfies the desire for novelty. Customization, but in a bounded and modular way: people can choose base drink, hot or iced, milk choice, sweetness level, one or two flavor options, one finish. Customers still feel in control, but the kitchen doesn’t collapse on Saturday afternoon.
That’s what tailoring means. We don’t just design what customers want in the abstract. We design what we can reliably produce under pressure in a way that still serves what they want. Every decision has to pass both tests.
The same fit logic applies to marketing. We don’t targeting generic coffee drinkers. So the question isn’t “how do we run ads?” but “how do our particular customers discover new places?” The store itself is the first mechanism. If we choose the location well, we naturally capture foot traffic from people already in the right mood. That also tells us something about channels. Search ads for “coffee near me” may matter at the margin, but they’re unlikely to be the core. Discovery is more likely to come from people seeing the place while already out, from friends suggesting it, from local recommendation loops, and from images that make someone say, “Let’s go there this weekend.”
The deeper point is that marketing should be built into the offer itself. Our customers are there to socialize, and they’ll naturally photograph the drinks, the food, and the space. So we should design drink and food presentations and the space with that in mind—photogenic corners, interesting art, considered lighting—not just because it looks nice, but because it makes the marketing system work. Location, product, and marketing fit together.
Our People System
A premium café doesn’t feel premium because we wrote “quality” in a business plan. If we’re understaffed, our processes are unclear, and responsibilities are vague, customers will feel it regardless of the menu. We need to create an organization and a culture that support the strategy.
This too is a choice. We could run a very lean model where everyone has to do everything. That saves labor, but under pressure it often turns messy. Or we could centralize too much authority in the manager. That protects control, but slows down recovery when something goes wrong. Neither is ideal for our concept. Customers are paying for a smooth experience, even when the café is busy. So we need clarity in roles, faster local judgment, and service that still feels intentional when the place is full.
During peaks, we run clear stations: register, espresso lead and bar support, kitchen, plus a floater who keeps things from breaking down. For us, plating and handoff are nearly as important as the espresso machine, because presentation is part of what customers are paying for.
We also push many decisions down instead of routing everything through the manager. We want the staff to feel responsible for the customer experience. A barista can remake a drink that looks off without asking. A server can comp a pastry if a guest is visibly unhappy. The manager still decides higher-level questions—menu changes, staffing levels, suppliers—but frontline staff should be able to fix failures before they become part of the guest’s memory of the visit.
Culture matters just as much, but talking about quality in the abstract is unlikely to be helpful. Culture only becomes real when it takes the form of specific behaviors, rituals, and norms. The handoff is a good example. We treat it as part of the product: baristas and servers call the name clearly, make eye contact, hand over the drink with care, and present desserts neatly. Small actions like these shape how the café feels far more than abstract talk about service.
Over time, the norms and deeper understanding of what we’re about can help our staff to make consistent decisions in ambiguous situations. In our café, the recurring tension is speed versus experience. If a line forms, do people rush drinks out with sloppier presentation, or do they protect the feel of the place and accept a little less throughput? No manual can cover every version of that choice. Culture is what tells people what matters when they have to decide in real time.
We reinforce that culture by giving feedback after shifts, while the details are still fresh, and by not sending mixed signals. If we preach quality but punish staff whenever lines get long, the real culture becomes: say quality, do speed. Culture is what we actually reward.
Organization and culture aren’t side issues. Two cafés can have the same menu, similar locations, and the same stated value proposition, yet customers will still have completely different experiences because of how the organizations behind them actually work.
Capture Value: Prices and Policies That Match
We don’t only set prices against other cafés. We set them against whatever our customers are mentally comparing us to. We have to put ourselves in their shoes. When they are considering our café—whether they’re walking past it or planning a day out with a friend—what alternatives are they really comparing us to? That sets the reference prices in their minds.
A customer choosing between us and a quick stop at a chain café has a reference price of perhaps five to seven dollars. A customer choosing between us and a dinner out, a shopping trip, or a trendy brunch spot for a Saturday treat has a very different reference price for the occasion. Those are different customers and different pricing conversations.
This is why our positioning decision—serving treat-yourself occasions rather than quick fueling—is not just a branding choice. It’s also a pricing choice. By targeting those occasions, we move ourselves out of the café comparison set and into the “nice thing to do on a weekend” comparison set. That raises the ceiling. A customer in that frame of mind may not blink at spending twentyfive dollars per person if the experience feels worth it. The menu, the location, the service rituals—all of that does more than create a better experience. It changes the frame customers use when deciding whether we are worth the money.
Only then do the specific pricing tools come into view. If customers are buying an occasion rather than just caffeine, we should not rely only on single-item pricing. We should price in ways that fit the job: a signature drink that lifts the menu, add-ons that improve presentation rather than just quantity, tiered menus with a few affordable but still high-quality options, and bundles built for pairs or groups. Two drinks plus a shared dessert, or a round of drinks plus a dessert platter, can raise what we earn per table during peak hours when seating is scarce, while still feeling consistent with a premium concept.
Policies matter as much as prices. Laptop guests may work well off-peak, but on busy weekends they quietly undermine the atmosphere we are trying to sell. So we choose a clear rule: laptops are welcome on weekdays, but we’re social-first on weekends. That’s better than leaving things vague and trying to manage it awkwardly in the moment. Good policies are often pricing decisions in disguise. They shape who the space is for, how long people stay, and what kind of demand we attract.
Pricing becomes even more interesting once we consider how competitors might respond. If we lower prices to fill seats on slow weekdays, some extra guests may come in—but many of them are probably diverted from somewhere nearby. Knowledge of our actions will spread quickly between business owners. If the effect is large enough, competitors will respond by cutting their own prices. Then we may end up roughly where we started, only with lower margins all around. We aren’t pricing in a vacuum, so we should consider likely competitor reactions before making moves.
Defend Value: Making Imitation Hard
If the concept works, we should expect imitation. Some businesses are protected by stronger barriers—scarce assets, scale economies, proprietary know-how, network effects, switching costs, or powerful brands. Cafés usually are not. The hard entry barriers in this business are low. The interior, the menu, and much of the operational setup are all visible and easy to copy.
Some things are harder to copy. A great location is one, because a local market may not support two cafés with the same positioning in equally good spots. Parts of our brand are harder to copy too: reviews, word of mouth, and the confidence customers build over time that we’ll consistently deliver.
Still, we should not overstate this. A café isn’t a software platform with network effects or high switching costs. In this kind of business, defense is usually local and partial, not absolute. The goal isn’t to become impossible to imitate. The goal is to become harder to match well enough so that we keep a lead.
Part of that lead comes from individual assets like location and reputation. Part of it comes from fit. A competitor can copy our menu. They can find a nice location. They can write down our service rituals and hire good people. But copying one or two elements of a tightly fitted system without copying the whole thing often produces something incoherent rather than a weaker version of what we built: a beautiful space with rushed service, or a craft menu inside a culture that really rewards speed. The very thing we worked hardest to avoid.
That interdependence is what makes the whole harder to replicate than it first appears. And this is why fit, which began as a way to make better decisions, also becomes part of the defense question. A strategy that fits together creates value. The same fit can also slow imitation, because it forces a rival to copy not just isolated choices, but an entire operating logic.
Strategy Is Recursive
On paper this all sounds clean: choose a job, build a system, price it well, defend it. In reality, it’s recursive.
It’s unrealistic to believe we can plan everything up front and then simply execute. All of this is hypothesis. As we start to build the business, we’ll run into things we didn’t foresee.
We may not find the right location and have to pivot. Customers’ willingness to pay for our offer may be lower than we assumed. We may learn that some customizations create too much chaos, or that some detail we spent money on doesn’t actually matter to customers. We may attract laptop campers who hurt the atmosphere and force us to tighten the rules on weekdays too.
The same is true for pricing. We can estimate willingness to pay, but in the end we’re still guessing. So we should view it as a hypothesis, raise prices carefully, and watch what happens to volumes, reviews, what staff hear from guests, what kind of customer starts showing up, and what kind of customer stops coming.
And if customer habits shift, the strategy may need to shift with them.
The framework doesn’t remove uncertainty. It gives us a disciplined way to learn without turning the café into a pile of disconnected decisions. When something isn’t working, it tells us where to look. Did we choose the wrong job? Design the wrong system? Send the wrong price signal? Create rules that undermine the experience? And when we consider a change, it reminds us to ask what else that change might disturb.
That is what a strategy is for.
Become an early reader: I’m in the late stages of writing The Elements of Strategy, a book that tries to integrate value creation (fit between customer jobs and value chain), value capture (pricing and bargaining), and value defense (competitive dynamics) into one coherent framework. I’m now sharing the draft with early readers who are interested in strategy and willing to give blunt feedback—what’s clear, what’s weak, where does the logic break, and what’s genuinely useful. If that sounds interesting, you can get the current manuscript here:
