The first ingredient of a superior strategic position is the explicit answer to the question, "What business are we in?" Although very few companies actually ask themselves this question, let alone answer it, my research suggests that this is the single, most important step in the crafting of a superior strategy. Why? Because a company's implicit or explicit perception of the business it is in conditions everything that company "sees" and "does." The definition of the business is the filter through which all information passes. It is the filter that tells managers which opportunities to pursue and which to reject as ''not applicable to our business.'' Thus, what business a company believes it is in conditions who it sees as its customers and its competitors and what it sees as its competitive advantage. It also determines what are thought to be the keys to success in the business and thus ultimately determines how it is going to play the game that is, plan and execute its strategy. Given the important role that this "filter" plays in the development of strategy, it is only appropriate that managers give it considerable thought.