The Truth About Strategy
Over the years I’ve done a lot of things. I’ve lived in a bunch of countries, run a number of businesses and even spent some years as an independent strategic consultant. Clients would come to me to solve their problems and, inevitably, they always traced them back to strategy.
They wanted to hire me, therefore, to give them the right one and that, they felt, would set things right. I had built a strong track record of success and they were sure that I would find the elusive, magical answer.
However, once the project started, I would find that strategy was the least of their problems. Lousy products, nasty people and inherently poor management were at the crux of the issue. Successful companies, on the other hand, excel at those things. Nevertheless, it is strategy that tends to get the credit or blame. It’s time to tell the truth about strategy.
What Is Strategy?
Voltaire once said, “If you would like to converse with me, first define your terms.” Fair enough. As I wrote in an earlier post, I define strategy as:
A coherent and substantiated logic for making one set of choices rather than another.
The primary function of strategy is to frame issues for action, so it must be coherent, in that it doesn’t contradict itself and substantiated, meaning that it’s consistent with the facts. Both of those things are much harder than they sound.
You need a real understanding of the business to avoid contradiction and it takes a substantial amount of rigor to get the facts right (which is why many strategists just make them up and then go searching for research that will appear to back them up.) There’s more to a good strategy than a nice looking PowerPoint deck and a convincing voice over.
There Is No “Right” Strategy
While good strategy is rare indeed, it should be clear that it is necessary, but not sufficient for sustainable competitive advantage.
Look at Southwest Airlines, with their strategy to be “THE low-cost airline.” This is a simply stated, widely known strategy that many competitors have attempted to copy, but none have rivaled Southwest’s enormous success. In fact, most airlines are big money losers.
In a similar vein, I recently wrote about Apple and Microsoft’s widely divergent strategies. One is integrated and insular, the other modular and collaborative. Yet both are enormously, fabulously successful, with two of the highest market caps on the planet. So who has the right strategy?
These aren’t isolated examples. Look at any category and you’ll find firms with polar opposite strategies who do great and a number of competitors with very similar strategies who spew red ink. Obviously, there’s much more to profitability than strategy.
Strategy Is Not Static, It Lives and Breathes
In ancient times (and, it seems, modern times as well) high priests would cloister themselves away reading sacred texts so they could bless the lesser beings with their received wisdom. These holy men were, of course, beyond reproach because they, and they only, had access to the sources of wisdom.
Strategy encounters similar pitfalls when it is formulated by lone geniuses, working quietly behind closed doors and, presumably, screaming “eureka!” when divine inspiration leads them to a key strategic insight. Or worse, by outside consultants who hog up some conference rooms for a few months and then leave behind weighty documents and confusing white papers.
Good strategy is not static, but dynamic. It must evolve and, as Tim Harford explains in his wonderful book Adapt, that means that it must be sensitive to feedback from the system in which it has to thrive. It can’t be insular, it must interact, be questioned, embellished, augmented and sometimes thrown away.
Strategy Is Fractal and Imbued with Purpose
One thing you’ll notice at a successful company is that strategy looks the same at every level. From the lowest level employee to the most senior executive, people are on the same page and their actions reflect it.
This goes far beyond simply chanting mantras or bowing to consensus, but is a direct result of what Gary Hamel, in his book The Future of Management, calls a “community of purpose.” Defining that purpose, after all, is the essence of good strategy and the litmus test is the degree to which the organization has internalized it.
A company with a purpose won’t get thrown off course by a bad quarter, a disparaging article in the business press or by a difficult client. It will stay the course because it has a mission that is important. Moreover, it won’t be afraid to adapt its tactics because it will understand that those are merely a means to an end, not the end in itself.
Strategy is Emergent
Nobody gets their strategy right from the beginning. Look at any blindingly fantastic success – Southwest, Google, Wal-Mart – and you’ll find fumbles and failures, (and often pretty dumb ones). Interestingly, the great strategies that catapulted those companies to dominance often seem more accidental than the products of brilliance inspiration.
That is because truly great strategy is not, as some would have us believe, the product of wise men on mountains, descending intermittently, as Nietzsche’s Zarathrustra, to proclaim great truths. It is emergent, the product of experience, trial and error, and luck (both good and bad). In other words, not a priori essense, but a posteriori lessons learned well.
In other words, strategy is not a starting point, it’s a process and a collaborative one at that. It is not written in stone, nor is it ever truly complete. It evolves over time, becomes stronger as it adapts to new challenges even as it remains true to its core principles.
Good strategy is never being, it is always becoming.