The Failure of Strategy (and Strategists)
Early in my career, I got to know a guy who left his position as Managing Director of a prestigious network ad agency to become a consultant. He called himself a “strategist.”
Boy was I impressed! “He must be really smart,” I thought, to have people pay him just to tell them what to do. However, over the years (and, ironically, after becoming a strategist myself), I’ve become decidedly less enamored.
I’m not alone either. While strategists have multiplied, they have struggled to remain relevant. They are often seen as grandstanders and blowhards, thinkers rather than doers, who are out of touch with operational reality while quick to take credit for operational successes. It doesn’t have to be this way, but strategists need to get a better grip on reality.
The Rise of Consultants
The practice of consulting has arguably been around since 1886 when Arthur D. Little started out and got a big boost when Frederick Winslow Taylor invented scientific management soon after. However, it really began to take shape in the post-war era, spurred on by Peter Drucker’s legendary study of General Motors.
By the 1960’s and 1970’s a whole slew of methodologies and models came to the fore. BCG’s matrix told companies how to manage their portfolios. Porter’s 5 forces analysis helped to position a business in the marketplace. Hamel and Prahalad urged corporations to focus on their core competencies. The list goes on.
Before long, management consulting became sexy, attracting the top students from prestigious MBA programs and raking in a ton of cash. Not surprisingly, other professionals wanted in.
Accounting firms started bundling strategic advice with auditing services (creating a conflict of interest nightmare). Ad agencies built out strategic teams separate from client service departments. Ordinary professionals re-branded themselves “strategists” and offered their services freelance.
It wasn’t enough to do a job well anymore, you had to have a strategy.
The problem with strategy, of course, is accountability. You should be able to show results. Without that, you just have a bunch of guys hanging around making pretty graphs and saying clever things. Unfortunately, there is a growing body of evidence that strategic doctrine is faulty.
Apple’s Non Strategy: As I wrote in an earlier post, the world’s most valuable technology company succeeds in defiance of the world’s great strategic minds. They stuck with their low market share, low growth Macintosh business. They went into retail with no clear competency for making it a success and routinely enter highly competitive, low margin categories.
The dissonance is no accident. Before his death, Steve Jobs had this to say in a Fortune interview:
We do no market research. We don’t hire consultants. The only consultants I’ve ever hired in my 10 years is one firm to analyze Gateway’s retail strategy so I would not make some of the same mistakes they made [when launching Apple's retail stores]. But we never hire consultants, per se. We just want to make great products.
Just make great products. Who woudah thunk it?
Google’s Non-Strategy: Apple’s chief rival seems to have a lack of strategy as well. When they started out, they didn’t have a bank account much less a business plan. They routinely launch products with no idea about how to monetize them and often seem to be in complete disarray (although have certainly improved in recent years).
Moreover, they seem to like it that way. Not too long ago I met with a senior executive at Google who proudly told me that they benefit from every failure. Can you imagine a strategic consultant saying, “Try this, if it fails you’ll learn so much!” and then presenting a hefty bill?
The Innovator’s Dilemma: In the early 1990’s, Harvard professor Clayton Christensen set out to learn why successful companies falter. He found, much to his surprise, that they failed by investing heavily in R&D, listening to customers and pursuing greater profit margins. In other words, following closely the principles taught at his school.
In actuality, many markets are over-served, so there are great opportunities in building inferior products for consumer who don’t exist yet. Eventually, these products get better and move upstream to wreak havok in the mainstream category (i.e. digital cameras and then camera phones). He called this phenomenon disruptive innovation.
Strategic Safari: In his book Strategic Safari, management theorist Henry Mintzberg identifies ten separate schools of strategy, each having experienced its own periods of dominance and decline. One era’s gospel becomes the next’s cautionary tale. How are we to take that seriously?
Mintzberg would later write, “to be an effective manager – even, dare I say, a great leader – maybe you don’t have to be wonderful, just normal and clearheaded” Do you really need a consultant for that?
3 Levels of Strategy
One of the sources of confusion is that strategy is so broadly defined that the term has become somewhat meaningless. In actuality, when people talk about strategy, they mean one of three levels of strategy:
Strategic Intent: This is the organizing principle of a company, its DNA if you will. For instance, when Herb Kelleher started Southwest Airlines, he aimed to be “THE low cost airline,” and that drove decision making for everything from what kinds of planes they bought, to which routes they flew to what they served for lunch.
However, strategic intent is formed by the founder or the current CEO, not by strategists (and if it is, you’re in serious trouble).
Strategic Moves: These are things that involve resource allocation, like launching a new product, building a new factory or making an acquisition, so they involve the entire senior management.
Management consultants have been very successful in this area. They have developed skills and practices (i.e. EVA analysis) specifically for analyzing investment and capital structure. Moreover, they have hordes of whip smart, analytically talented young MBA’s they can throw at research studies.
A common misconception among other professional services (especially ad agencies) is that management consultancies get paid a lot of money because they are “strategists.” In actuality, it is because their fees are usually one-time costs that are tied to large investments and are treated differently than a “strategic” fee tied to an ongoing service.
Operational Strategies: Much of the time, when we use the term “strategy” we are talking about these. We might have a sales strategy for the quarter, a strategy for an ad campaign or even a strategy for a meeting with a supplier. There are literally hundreds of operational strategies going on in a company at any one time.
This is the area that most professional strategists are hired to help with. Unfortunately, many have become captivated with “big picture strategy” and eschew anything that smacks of “implementation.” That’s a big mistake. You gain credibility by doing well the job you were hired for, you lose it when you keep insisting on doing something else.
Moreover, great high level strategies rise out of operational excellence. For instance, Wal-Mart got good at logistics, which filtered up into investment in technology and eventually became part and parcel of their strategic intent of having an “everyday low price.” Mintzberg calls the concept emergent strategy.
Divining Answers vs. Framing Problems
People on the front lines have a wealth of knowledge, both explicit and tacit. They’re the ones who talk directly to customers, see market forces at work and understand the ins and outs of how to get things done.
A good strategist can supplement that knowledge with information aggregated from different sources, which may include qualitative and quantitative research, case studies and insights gleaned from other companies and industries. Unfortunately, all too often strategists seek to replace hands-on knowledge rather than to augment it.
The proper role for a strategist is not to make plans which the “little people” need to carry out to fruition (and then take the blame when things don’t work out as hoped), but to frame problems and to crystallize issues so that they become more actionable.
After all, companies get paid for getting things done, not for grand strategies. The work product always has to come first. As Mintzberg wrote, “Strategies are not immaculately conceived in detached offices so much as learned through tangible experiences.”
The Danger of Believing Everything You Think
Ideas can make people do strange things. In Dostoyevski’s novel, The Demons, the character Kirilov killed himself to prove his idea. Usually, strategists prefer others to die for their sins, but every once in a while one is foolish enough to believe in his own obsession enough to test it out on himself.
A few months ago, I came across a story about a modern day Kirilov, Steve Rubel of Edelman Digital. Apparently, Mr. Rubel has come to believe in something he calls the media cloverleaf (not an unreasonable concept, but such things change over time).
He then decided to nuke his 5-year old blog in order to be at the center of the “cloverleaf” and thereby gain authority. Think about that for a second. A self-proclaimed “thought leader” destroys five whole years of his thoughts just because he had a new one.
Only a strategist…