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The Failure of Strategy (and Strategists)

2011 October 23
broken ideas (light bulbs)

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.

Strategic Breakdown

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…

- Greg

21 Responses leave one →
  1. October 23, 2011

    It reminds me of this from John Kay:

    “Probably the commonest sense in which the word strategy is used today is as a synonym for expensive. You can always be sure that this meaning is intended when the term strategy is used in a context which involves advice. Here are some examples of strategy meaning costly. “We are strategy consultants”, “Can we help you with your strategy?” “I advise company x on its strategy”. These can be interpreted respectively as “our fees are very high”, “we hope to send you a large bill” and “company x pays me a lot of money”. ”

    http://www.johnkay.com/1998/08/05/strategic-advantage
    Tim Kastelle´s last blog post ..Innovation When All You Have is a Noodle

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  2. October 23, 2011


    Can you imagine a strategic consultant saying, “Try this, if it fails you’ll learn so much!” and then presenting a hefty bill?

    Yes, yes I can. At least with a “and I will come along and we will learn together.”

    [Reply]

  3. Robert Neuschul permalink
    October 23, 2011

    Greg

    Yet another interesting and challenging post.

    I shall posit that there is another category of strategy – it’s an area of praxis which so far appears not to have well defined borders or even a well defined description or name tag, and not that many practitioners.

    This category is essentially the realm of the practical futurologist – the persons or teams who are looking beyond current business horizons – beyond the scope of most day to day strategy – examining what’s happening to markets, technologies and society, looking for patterns of emergent behaviour or emergent phenomenon and searching for opportunities with eyes that are much more widely open and attendant to things that may be well beyond the normal scope of day to day thinking; patterns and opportunities that may not come to pass for several years, which may in turn be dependent on other things coming together in the right way at the right time; then working out how to put the business in a position to take advantage if or when such opportunities do come along, without actively disrupting or damaging ongoing business activity in the process of moving into position.

    This is, in one limited sense, an extreme version of the Blue Ocean methodologies and tenets; looking for products services and means to move an existing business into an unassailable position, but working to a longer term plan instead of relatively short 3-5 year plans. It’s not something that relies on formalised schools of thought, it relies instead on flexibility and adaptability and on deliberately synthetic approaches to many quite varied disciplines and knowledge domains. It is in essence taking the sort of content that people like Ray Kurzweil are talking about and thinking through the implications and the likely practical impacts in N year’s time, in order to put the business in the right position at the right time.

    Robert

    [Reply]

    Greg Reply:

    Robert,

    Interesting you mention Kurzwell, he just had a great post in Technology Review:

    http://www.technologyreview.com/blog/guest/27263/?p1=blogs

    - Greg

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  4. October 23, 2011

    This is bookmarked, Greg. Nicely done.

    The joke is a consultant is someone who will take your watch and tell you the time. Raising the level of practice is important when the bar is set so low.

    -Alan

    [Reply]

    Greg Reply:

    Thanks Alan. Have a great week!

    - Greg

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  5. Gustaf Rosell permalink
    October 24, 2011

    The title and the question in itself are both very alluring. A lot of what is said is true about the top management consultants and strategic planning as a field of practice. But I disagree completely about Apple not having a strategy. Of course they have! Strategy is about making choices in its purest essence, and then applying resources, leadership and vision to make it happen. Apple and Google both does this quite well in their own ways, and Google’s statement about not having a strategy is exactly … a major part of their strategy.

    [Reply]

    Greg Reply:

    Gustaf,

    I can see how you could make that case, but still in the conventional sense, they don’t have a well structured strategy. I don’t see that as a failure of Apple or Google, but with conventional ideas about strategy.

    - Greg

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  6. October 26, 2011

    Greg,
    Some intertesting thoughts and I have to say I don’t agree with all you write.

    I’ve recently moved from working agency to working on my own and battle with the term I should use to describe myself. Strategist is not one I considered, but consultant I have considered, as well as marketer and now actually adviser after reading your post.

    I have had the benefit of visiting literally hundreds of companies and there are plenty that are successful without a “strategy”. Equally there are plenty who are not successful despite having a strategy.

    I’m sure now I think about it there are probably lots who are successful with a strategy and plenty who are failing because of a lack of strategy.

    Having a startegy is not therefore a route to success. However, I believe that having the right strategy is.

    Being strategic is about making positive decisions and having a vision of where you are going, what you are trying to achieve and what you need to do tactically to achieve that strategic goal. People that only work tactically tend to make reactive decisions and tend to be a passenger and not a driver. They will win or lose but it’s probably out of their control.

    In the end you can end up arguing about the definition of the word strategy, when actually what’s important is that advisers to businesses turn up with their experience and knowledge and get paid, not for the time they spend with that business, but for sharing the 20 years of experience to inform the business about its potential opportunities, issues and advise on what course it could take.

    Of course any adviser should stick around live or die by their advice.

    My final thought is related to Alan’s comment/joke above in which he suggests “a consultant is someone who will take your watch and tell you the time.”

    In many ways that’s exactly right … if I want to know the time and I have a watch and don’t realise that I have the tools at my disposal, the adviser/consultant’s role is to show me I have the tools to tell the time. Equally though if I know what my watch is for I’d be silly to enagage or pay someone to tell me that … unless I thought that my watch was the best way to tell the time and was reasonably happy I was reading it right, but wanted the expertise of an experienced timekeeper to confirm I was reading it right.

    Of course business is more complex than that but the example stands I believe.

    My bottom line is good advice and expertise is worth paying for and bringing into a business as required. If you give good advice and charge an appropriate rate where is the problem in that?

    Michael

    [Reply]

    Greg Reply:

    Michael,

    You make some very good points and I agree that having a sound strategy is an important element of success. Moreover, my commentary was a generalization and surely does not apply to every person involved in strategy and I definitely agree with your comment “good advice and expertise is worth paying for and bringing into a business as required.”

    However, I do feel that there is a strong tendency for strategists to discount the tacit knowledge of people involved in the day-to-day.

    Thank you for a very thoughtful comment.

    - Greg

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  7. October 27, 2011

    Dear gentlement, I find your conversation very interesting, especially when I saw Peter Drucker’s name. If I remember correctly he had quite a distinctive approach to strategy, it was considered “way ahead of his time”, especially after he had analyzed General Motors and the way in which the CEO mr. Durand had rebuilt or even built that organization. Then reading on I agree with Alan, who said ” a consultant is someone who will take your watch and tell you the time”. When we used to do strategic management consulting services for one of the big two audit firms in the world, we would joke, not in front of the client, but at the end of our strategic management workshops.

    The joke was that we were actually informing the strategic management group, exaclty what they knew and what they had shared with us. We only put it in better wording, inside fancy plastic folders, and handed their own thoughts back to them, summarized in these files. It was then up to them to implement the measurable and achievable objectives, using the action plans and adhering to the story lines we had inserted into these files. Then we would leave, and probably never hear from the client again.

    I read a book called “Management under circumstances of uncertainty”, respect to the author, I cannot remember his name. The book talks about any organization of systems, a computer system is equalled to an organization. The end result is that all systems will sort themselves out, given the formal structures of management, people will establish informal reporting and knowledge lines, thereby making an organization work. It seems that as long as people want to work, eat and make a living, they will survive.

    But then in a court of law I saw a young Indian gentleman with R300million cash in his bank account, and when questioned by the judge as to the extent of his qualifications we were very surprised. He indicated he has a BSC degree, a Behind the Shop Counte Degree. Thus it is my summary that cash in the bank is all that counts in the end. In forensic accounting we call it “follow the money”.

    Kind regards.

    [Reply]

    Greg Reply:

    Thanks for sharing Helgard.

    - Greg

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  8. October 31, 2011

    Great post, Greg! Don’t you think that one of the reasons strategies fail might be that today’s big organizations are that hard to drive and change that it is doubtful if they implement selected strategy at all?
    Stan Yanakiev´s last blog post ..Project Management in the Cloud

    [Reply]

    Greg Reply:

    I think it’s hard to generalize that way, but it surely happens.

    - Greg

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  9. November 1, 2011

    From my experience as a project manager what leads to failure of the projects most of the time is lack of vision and strategy, not lack of doing. I see my colleagues project managers involved in firefighting and failing to see the big picture, the events they should expect in more than two weeks. So, doing some thinking upfront or ‘strategizing’ would be useful.

    [Reply]

    Greg Reply:

    That’s true. However, it’s easy to overreach.

    - Greg

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  10. November 7, 2011

    Hi Greg
    I think Apple has a very clear strategy. It deploys what I would consider a purist product strategy. Step 1: Be first to market (by creating something that no-one else has or by doing it differently); Step 2: Cannibalise yourself before you can be copied by cheap (usually Asian) manufacturers and; Step 3: in this way the incumbent retains first mover advantage, leadership brand positioning and positions its competitors as copycats. In addition, I think the world of tech attracts entrepreneurs and innovators, who tend to love the freedom from bureaucracy that tech offers them, and this is why so much innovation in safety (free from fear of failure) takes place.
    Finally, I have both worked with strategists/consultants (and worked as a strategist myself on occasion). The number one problem with strategist/consultants is that their theories (usually drawn from academia) are not practical to implement in the real world. In my view, the best strategists have done a spell inside an organisation where they learned their trade from the inside. These people tend to be much more pragmatic. They are realistic about what can be done. It should be compulsory for anyone offering advice in my view.

    PS I was very sad at the passing of Steve Jobs. He was the finest product marketer this world has seen for a very long time.
    Fiona´s last blog post ..Goodbye Steve – And Thanks

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  11. Kristian permalink
    December 12, 2011

    Fiona; I’m still a student with a course in strategy, and i came by this post because i’m constantly wondering about the claims made in the literature. Under the assumption that it’s true that Apple never hired any consultants or did strategic planning/management in it’s conventional sense, then your post captures my problems very well.

    By the very definition of strategy, as long as you have some form of intention or goal then you will have an implicit plan or strategy on how to get there – quite simply, just by being sentient we will have some desired future and conceive of a strategy on some level. My problem is that at some point, we have to distinguish between strategy as a “natural” phenomena and what the frameworks add to it. If google/apple never intentionally applied the frameworks in their decision making, then i find it hard to accept that they can somehow take credit for their future success.

    Also, the observation you made is rather biased when its made after the fact and reminds me of BCG’s analysis of Hondas entry into the North American market. My problem is that your statements, like BCG’s, are made after the fact and are not testable because they have no predictive value. And this seems to be a general problem, most of the strategic literature make up frameworks that explain what has worked in the past – but fail to make predictions that allows us to validate or falsify them.

    PS: Sorry if i was not clear, i find that it is hard to express my thoughts when it comes to strategy.

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  12. December 14, 2011

    Point noted, very well written. One should become a consultant if one wants to talk; coming up with a strategy is only half the job done, executing it the way you planned it is the whole key.

    But, I have worked and know consultants. If you take an example of a theorist (who is just like a consultant to the scientists who do experiments), you will know that these guys know only about what exists and they can prove all kinds of things, which scientists value a lot…So, people want theorists because they can prove stuff with their theory. Although, they don’t really make sense when implemented (at least, not all the time).

    I think that the guy who shot down his very own blog to make a point is isn’t his whole strategy, the new one will definitely be the next version of his own blog.
    Girish´s last blog post ..I didn’t misunderstand, you miscommunicated

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  13. Steven Keith permalink
    January 17, 2012

    As a person who has been a senior level strategist for over a decade, I have come to learn one unshakable principle in strategy creation.

    Sometimes the best solution(s) are the ones staring us right in the face. Which, upon completion of our work, can seem so simple and so obvious to our clients. But not until we are done vetting, mitigating and prototyping. Not always, but sometimes. And when a solution is simple or elegant or obvious and not fraught with unnecessary complexity, our clients are thinking, “we paid you for that?!?”

    Sometimes the strategist’s job is providing confidence in an approach or certainty in a known path…instead of cutting a whole new swath.

    This has happened to me a half dozen times.

    [Reply]

    Greg Reply:

    I can vouch for that. I think also that often the process itself runs away from the objective. You sit people in a room for long enough, reality has a tendency to bend.

    - Greg

    [Reply]

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