Playing To Win
Decoding the Strategy Choice Cascade
Author Answers to Reader Questions
This piece was spurred by a reader question about the order of the boxes in the Strategy Choice Cascade. It is one of many great questions I get about the structure and functioning of the five boxes in the Cascade that deserve answers. Hence, I am dedicating my 11th Year III Playing to Win Practitioner Insights (PTW/PI) piece to Decoding the Strategy Choice Cascade: Author Answers to Reader Questions. You can find the previous 121 PTW/PI here.
The Range of Questions
I get three kinds of questions about the Strategy Choice Cascade:
First are questions about the number of boxes. Why are there five boxes? Isn’t strategy the first three (Winning Aspiration (WA), Where-to-Play (WTP) and How-to-Win (HTW) and execution the last two (Must-Have Capabilities (MHC) and Enabling Management Systems (EMS))?
Second are questions about the order of the boxes. In particular, why is WTP before HTW and not the other way around?
Third, are questions about the shape of the diagram. Why is it a downward stair-step? Why not a circle? From some Agile aficionados, isn’t this the strategy equivalent of the dreaded waterfall approach in software?
They are all good questions that deserve answers!
Number of Boxes
Mine is a minority view on this front. In the field of strategy, the leading market share goes to people who see strategy as limited to the first three boxes — WA, WTP, and HTW. Second is people who see strategy essentially as one box — as the organization’s vision, mission, purpose, or aspiration, whichever term they like most. My view is trailing in current usage, but thankfully has been growing share ever since the publication of Playing to Win ten years ago!
Strategy as a single box is popular with folks who have a romantic view of strategy. All you need to do is specify your vision, mission, purpose, or aspiration, and everything else will take care of itself. That would, of course, be lovely. But I am afraid that the world isn’t quite that friendly or simple, and that is why most ‘strategies’ generated aren’t worth the paper on which they are printed. As my friend AG Lafley often says: Hope is not a strategy!
Strategy as three boxes — WA, WTP, and HTW — is the most popular and I think the popularity stems from its attractive capacity to let strategy people — many of whom have an intellectual superiority complex — off the hook. They can always blame ‘bad execution’ for their unrealistic strategies if they only have to think about the first three boxes.
I agree that the first three boxes are very important. In fact, I call the combination of WTP & HTW the ‘heart of strategy’ and argue that you can’t have a great strategy without a great heart thereof. But for me, ever the practical guy, the last two boxes are the essential ‘reality check’ for strategy. Those two boxes are the moral equivalent of the ‘check number’ the credit card companies add as the last digit of your card number (based on the Luhn Algorithm). It enables merchants to automatically ascertain whether the card number presented to them is or is not legitimate.
My view is that the first three boxes of strategy comprise merely a draft until you determine two additional things. First, your MHC passes the ‘can’t/won’t test’ — i.e., that competitors either can’t match your key capabilities required to win where you have chosen to play, or they won’t because doing so would hurt them in other ways. If instead, your MHC are identical to those of key competitors, it will be a mediocre strategy in action. That is because if your first three boxes turn out to be profound, then as soon as your competitors see that is the case, they will match your WTP/HTW combination and eliminate any advantage you have. Second, you can demonstrate that you can put in place the EMS that will enable you to build and maintain those MHC.
That is why I think of one-box strategy as delusional and three-box strategy as lazy, and why I think that if you want a strategy that will guide you to real advantage in the marketplace, you need all five boxes.
Order of Boxes
The order of the boxes in Strategy Choice Cascade is driven by two considerations.
First, I ordered the Cascade based on level of abstraction running from the upper left to the lower right. The thinking and content of WA is the most abstract: what is the overarching motivation for the organization? The thinking and content of EMS is most concrete: what management systems do we need to put in place to support our MHC?
Second, and driven in part by the first, the order I chose makes the Cascade logically tractable. If you don’t have a draft WA, it is hard to even begin to think about WTP/HTW. The WTP/HTW choice would be completely unbounded, and strategy is an exercise of picking the choice that is most attractive from the universe of choices that are possible. That requires progressive bounding of your potential choices as you go. Likewise, without a draft WTP/HTW, you don’t have any frame to guide your MHC choice. And, since the job of the EMS is to build and maintain the MHC, you can’t think usefully about EMS until you have a draft MHC.
Hence the order runs from higher abstraction to lower abstraction in a way that enables sensible logical nesting.
A specific question that I get concerns the ordering of WTP and HTW: Shouldn’t HTW be before WTP? I assume that the question comes from readers who have sworn allegiance to the ‘resource-based view of the firm’ because they were taught it at business school. RBV (as it is called) arose out of the business academy in the mid-1980s in response to the frustration of academics with the success of Mike Porter’s view of strategy. Jealousy is the most powerful driver in the academic world! Because Porter was so annoyingly successful, strategy academics closed ranks on an anti-Porterian view, so much so that now it is virtually impossible to get a tenure stream appointment in the strategy department of a top 50 North American business school without pledging full allegiance to RBV. So much for ‘academic freedom.’ It is the same freedom that Henry Ford offered: you can have your car in any color as long as it is black.
In RBV, strategy radiates out from capabilities. The theory argues that strategy involves accumulating resources that are valuable, rare, inimitable, and non-substitutable (termed VRIN). These VRIN resources enable you to win.
Even though it has been around for almost 40 years and strategy academics love it, RBV just hasn’t broken through into the world of practice. Since I began strategy consulting in 1981, I have been consulting on strategy the entire time that RBV has been around as a concept, and I have only seen it mentioned once in those 40 decades by one client — and that one, a low-level manager in a strategy department, not a CSO or CEO. To me, that is stunning, especially for a theory that has absolutely dominated the teaching of strategy over the past quarter century.
The problem for the theory is that a resource is only a resource in a specific place behind a specific strategy. Hence you need a theory for where to focus your resources so that you know what resources to build for that particular place. RBV provides no help for that question, so while theoretically titillating for strategy academics, it isn’t useful for strategy practitioners (which, of course, doesn’t deter strategy academics one bit — they keep teaching it to unsuspecting students). The need to tailor your HTW to the needs of a particular WTP is why that WTP comes before HTW in the Cascade, and similarly why HTW comes before MHC.
That having been said, WTP and HTW need to be a matched pair. A WTP choice is useless without a HTW for that WTP. Likewise, a HTW is useless without a WTP on which to focus. The single biggest problem with people using the Playing to Win toolbox is that they tend to make lists of WTPs, then choose and lock-and-load on what seems to be an attractive one, and only then start to think about HTW. That approach only rarely generates a useful strategy.
And that leads to the final set of questions…
Shape of the Diagram
The core structure of the diagram is an upper left-to-lower right flow illustrated by the solid arrows and a flow back in the opposite direction illustrated by the dashed arrows. The people who want a circle generally object to the directionality of the Cascade. The argument that they make is since you have to toggle back and forth shouldn’t it be a circle in which each of the five elements is equal, not subordinate or dominant? And shouldn’t you be able to start anywhere?
No, they are not logically equal, as I have discussed above. They are logically nested, even if they must be considered as a system. That is a fundamental tension in strategy — it is holistic, but it has parts. Both need to be embraced.
And it matters where you start. That is the problem with RBV. It starts in an unproductive place — capabilities. There is a logical nesting of the exploration that must be carried out and the cascade provides that guidance.
That does lead to the question of whether that directionality makes it a waterfall process, analogous to the waterfall approach in software, against which the Agile movement was a reaction. Is, therefore, the cascade anti-Agile? I don’t think so — because of the dashed arrows. As with Agile, the Cascade calls for iteratively revisiting assumptions and logic as more information becomes available, not locking and loading on one element at a time (which would be the case if the Cascade only included the downward solid arrows).
Take each of the five boxes very seriously. Don’t spend disproportionate time on first three boxes. That is a classic strategy mistake. You need to perform the reality check for yours to be a lasting and effective strategy.
Toggle back and forth among the five boxes. The heart is the WTP/HTW combination, so don’t give it short shrift. Don’t spend disproportionate time and energy up front on WA. See it as simply guiding you in a general vector. As you explore WTP/HTW possibilities, toggle back to refine your WA so that there is fit among the first three elements.
Then toggle down to the reality check to see whether your WTP/HTW can be put into action, whether it is strong and will last. Check whether your MHC and EMS are truly distinctive from those of competitors in your WTP. If not, toggle back up to the heart of strategy to explore possibilities that might be stronger. And then up to the WA and back down to the reality check until all five elements fit together and reinforce one another.
That is how to use the Strategy Choice Cascade and why it has the five boxes it has, in the specific order, with the particular shape.