We recently attended a conference where former Hewlett-Packard CEO Carly Fiorina gave an excellent speech on strategy. Among Fiorina's assertions was that M&A is a tactic, not a strategy. We couldn't agree more.

First off, what's the difference?

A strategy is essentially a plan built out of a set of choices designed to achieve a goal, which reinforces a business model. Strategy can consist of choices involving participation (which markets, segments, and customers to serve) or competition (how to compete in those markets, segments, and customers that are served). Successful businesses develop strategies that provide them with competitive advantages and/or allow them to participate in attractive markets.

A tactic, by comparison, is simply a specific means to achieving a strategy.

HP states in its 2011 annual report: "Our long-term strategy is focused on leveraging our portfolio of hardware, software and services as we adapt to a changing/hybrid model of IT delivery and consumption driven by the growing adoption of cloud computing and increased demand for solutions."  The company goes on to say, "To successfully execute on this strategy, we need to continue to evolve our historically hardware-centric business model towards a model that includes more software and higher value services offerings. In addition, we need to continue to further evolve the focus of our organization towards the delivery of integrated IT solutions for our customers."

You could interpret these two quotes as: HP's strategy is to move into the cloud computing market by competing through a pretty extensive breadth of hardware, software and services to be more competitive in IT delivery.  It plans to do this by shifting its focus from hardware to services and IT delivery solutions.

How does HP shift its focus and achieve its strategy? Here's where tactics come in. It could invest in R&D to develop new technology, create a joint venture, do nothing, or acquire the solutions it wants.

Notice nothing in the strategy itself mentions acquiring companies or divesting its current business units. M&A is simply one potential action HP can take to achieve its strategy. It may end up being the only way the company achieves its strategy, but that is a tactical choice for HP, not the objective.

Why is this distinction necessary? When companies view M&A as a strategy, they run the risk of losing sight of how to create value through their business models by emphasizing a tactic that has no clear goal. This can result in poor decision-making, value-destroying transactions and a lack of clarity around what other areas of an organization need to do to achieve a goal. For many companies, M&A is a tool, and like any other tool, needs a purpose in order to be useful.

(There are some gray areas, of course, such as private equity groups whose business model is M&A, yet even those groups still need to develop a strategy that differentiates them from their competitors.)