Killing Off Strategy

Cristian Mitreanu over at RedefiningStrategy.com writes a powerful piece in MIT Sloan about the failures of organisations to create effective corporate strategy. He traces the problem to interpretation of the word strategy itself:

The original meaning of the word derives from the Greek strategia, which is the ability to employ available resources to win a military conflict. This etymological heritage generates problems when the concept is used in a business context because it implies the existence, even the necessity, of opponents. As a result, in most managers’ minds, the notion of a corporate strategy implies a strong focus on competition. Since competition takes place almost exclusively at the offering level, most organizations concentrate their strategic efforts on constantly improving the goods and services they offer. This overemphasis on the temporary success of a given offering, however, can often obscure the kind of thinking and emphasis that would lead to sustained success. Even a continuous repetition of temporary successes does not equate to sustainable strategy. In an effort to increase the value of single offerings, the organization may be distracted from larger questions of structure, mission and opportunity.

Cristian's analysis is similar to some thinking about the problems of militaristic overtones in old logic marketing (campaigns, targets, response etc.) But he goes one step further in his discussion of the role of objectives:

Strategy has yet another martial connotation that can be detrimental in a business context. In war, objectives can often be clearly defined, and so strategy is thought of as a means to a specific end. This view has persisted in the corporate world where strategies are conceived as plans to accomplish specific goals. Although corporate strategy can be very goal-oriented, especially in the early stages of a company’s development, the very nature of goals implies temporary success. By contrast, sustainable success is not, and cannot be by definition, an end unto itself or a goal to achieve. That is, goal orientation becomes arguably inappropriate when success has to be indefinitely sustained.

His conclusion neatly brings the customer - and especially the continuous cultivation of a deep understanding of what customers value - back into the picture as to what strategy should be:

So how should strategy be, in a most literal sense, redefined? Clearly, it cannot rely too strongly on objectives nor can it focus too heavily on competition. A more fundamental concept is needed to guide an organization in seeing its big picture. And that concept is the customer. To create sustainable, long-term success, an organization must first and fundamentally understand and relate to its customers. It is the ongoing cultivation of that understanding — based neither on specific competitors nor temporal objectives — which must be at the heart of any real strategy. And it is that from which all objectives should naturally flow.

Unlike like most MIT Sloan pieces, you can read the full article here.

Comments

[Cristian Mitreanu]

Chris,

Thanks for your post centered on my MIT Sloan article, and sorry for being late acknowledging this.

Obviously, the customer is not everything when it comes to strategy. But it is the foundation of a successful strategy. The customer (actually, the customer's problem solving behavior) provides the perpetual fixed reference system on which strategy (a basic formula for enduring success) can be anchored. Objectives, competition, offerings, industries, even competencies (they are interconnected with offerings/industries) have all a limited existence. Therefore, the effectiveness of a corporate strategy based on them can be significantly reduced.

The term "strategy" is deceiving, conceptually validating the use of objectives and positioning relative to competition. So, like you, I am strongly advocating the demise of "corporate strategy" as a term used to refer to the fundamental formula for enduring corporate success.

Cristian Mitreanu
www.BizBigPic.com

[Chris Lawer]

Graham

I can see where you are coming from with real options and the role of strategy in making trade-offs - yet I would concur with Cristian that the first purpose of strategy should to be develop and sustain a capability for ongoing customer value-discovery. By doing so, value-driven strategy can continuously feed the subsequent optioning process that helps a firm make appropriate, evolving capability and investment trade-offs.

Importantly, a strategy centred on sustained value discovery is independent of short-term objectives and should have a better ability to sense and respond to significant shifts in turbulent environments. When enacted effectively it can help to avoid the perils of short-sightedness and competitive positioning arising from keeping too close a watch on near rivals.

Then again, I concede that the title of the post is a little misleading as I dont advocate Killing Off Strategy at all! Maybe, I was just in need of some old-style attention and got carried away seeing the death of Spartacus!

[GrahamHill]

Chris

Understanding customers is very important in strategy but not the be-all and end-all. Strategy in turbulent, dynamic markets like those we tend to live in today is about developing a portfolio of real options we can exercise as the market evolves.

The individual real options are developed based upon the trade-off between customers' desired outcomes (what customers want), company capabilities to deliver them (what the company can do) and the financial value of doing so (whether it is worth it). It is increasingly useful to consider how these factors and their inherent trade-offs change over the end-to-end lifeycyle of the customer.

Whether you apply military metaphors to strategy, biological ones, complexity science ones or some other ones is not really relevant. At the end of the day, it all comes to these three trade-offs and how they change over time.

Of course, we can never know how these things will work out over any longer period of time. So we need real options.

Graham Hill
Independent Management Consultant