Playing To Win
Why Do Strategy, Anyway?
The first 51 posts of the Playing to Win/Practitioner Insights (PTW/PI) series have concerned how to do strategy. I thought it would be fun to do one on whether to do strategy. Many executives aren’t convinced that it is a worthwhile endeavor. And they could interpret some of the things I say about strategy as supportive of that view. So, to achieve clarity, I have dedicated my 52nd PTW/PI on the question: Why Do Strategy, Anyway? The answer is: To Learn Faster to Win. (Links for the rest of the PTW/PI series can be found here.)
The Case Against Strategy
The case against strategy is mainly framed as an issue of favoring practicality and action-orientation over theory and esoterica. I have observed four lines of reasoning underpinning this view. First is an undertone of: ‘tough guys/gals don’t do strategy. Strategy is for executives who like to talk and have meetings rather than take action.’ Second is an obsession with ‘execution,’ whatever that is, and a belief that somehow time spent on ‘strategy’ is time taken away from ‘execution.’ This is something I have written about repeatedly — here, here, here, and here for example. Third is that they don’t have time for strategy because their business is so fast-moving — which I have also written about.
Fourth is to interpret the work of great management thinkers as arguing against strategy. It is most common to quote the greatest management thinker in history, Peter Drucker, dissing strategy by saying: “Culture eats strategy for breakfast.” The Drucker Institute has determined through a big archival research project that Drucker never said such a thing and recently issued a definitive statement to that effect. Nonetheless, the quote continues to be used as if Drucker actually said it.
The other misused scholar is the first great Canadian management scholar, Henry Mintzberg, who introduced the concept of ‘emergent strategy.’ Mintzberg observed that because managers can’t predict the future accurately enough to have their strategy play out entirely as planned, what they actually do is often at odds with their proclaimed strategy. Instead, they make numerous course corrections in the face of substantial changes in their competitive environment. Mintzberg’s purpose was to encourage managers not to assume that they could stick rigidly with their ‘deliberate strategy’ but rather recognize that they would have to tweak their strategy to take into account unforeseen weaknesses that emerge in it.
I agree with Mintzberg (on this and many other things). However, many executives have taken emergent strategy to mean that since the future is so volatile and unpredictable, it doesn’t make sense to waste time on strategy until such time as the future becomes clear. For fun, I will ask them how will they be able to judge the point at which volatility becomes low enough and predictability high enough to start making choices? I have never gotten a good answer to that question. That notwithstanding, this line of reasoning has become the rationale for the ‘fast follower’ approach that many executives tell me proudly they are using. They just wait for someone to start doing something successful and then hop on that train. In this way, Mintzberg’s emergent strategy concept, like Drucker’s misquote, is misused to justify not doing strategy.
Executives also could use some of my views on strategy to buttress the case against. I clearly argue that you can’t predict the future and can never be certain in advance that your chosen strategy is ‘right.’ And I maintain that the best a strategy can do is shorten the odds of success. It can’t guarantee success. They may take these views of mine as arguments against strategy even though they are most certainly not.
All of these lines of reasoning in combination make it appealing to many executives to think that it is best to be a fast follower focusing on executing rather than wasting time on strategy.
The Case For Strategy
For me, the case for strategy centers on learning. I believe that doing strategy thoroughly and religiously is the key to gaining a learning advantage over competition.
The way to maximize learning in strategy is to use all your current knowledge to develop a hypothesis as to the most compelling strategy choice, then enact it, and then observe the degree to which things turn out the way you expected, then, based on those observations, develop a next generation hypothesis, which you put into action, and then observe and learn again. And so on. If you repeatedly go through that learning loop rigorously and, importantly, faster than your competitors, you will maximize your chance of ending up on top.
This is, must assuredly, not my idea. It is borrowed from what most insiders would consider the greatest air combat theoretician in history, the late Air Force Colonel John Boyd, creator of the OODA (observe, orient, decide, act) Loop. Boyd argued that if a fighter pilot rigorously goes through the OODA Loop faster than his enemy, he will maximize the probability of beating the enemy in air combat. The key is the combination — rigor in each step; and getting through more cycles of the OODA Loop faster than the enemy.
If instead, while your competition is engaging in that learning activity, you wait to see what emerges in order to fast-follow, you will always be playing catch-up on the knowledge necessary to compete, and in due course, per Boyd, you will be shot down.
The thinking loop doesn’t have to use a formal strategic planning process or strategy language. What matters is the thinking. I learned more about strategy from my father than I have from anyone else. He has only a technical high school education and started an animal feed manufacturing business at 27 years old (when I was two years old), long before a thing called business strategy existed.
Growing up, I quizzed him incessantly about the business. There was always a highly reasoned answer. Our feed delivery trucks are pristinely washed multiple times a day as necessary to connote to farmers that there will be no breakdowns and late deliveries. We never sell at any price other than our published price list — that way sales calls will be about service/quality not about negotiating price. The strategic reasoning was always crystal clear — even without what I now know as strategy language.
Because of this experience, I am an enthusiast of simple (not simplistic) and practical strategy. I am not a fan of big words and mega-concepts. But I always insist on a thesis concerning the industry, customers, our company, and competitors to underpin the set of choices being made. And then watch and adjust accordingly, again, and again.
The payoff is that you get to start working on answering important strategy questions before your competitors realize that they are questions. I have had the privilege of working for many companies that are at the top of their respective fields. One thing they have in common is that they ask questions before competitors even think about the broad category in which the question resides. Consequently, they don’t have to be better or faster at solving customer problems because they get to start work long before their competitors. That is, they have been through more OODA loops than their competitors at any given point in time. Was P&G awesome at developing and rolling out the fantastically successful Tide Pods? In truth not really. The manufacturing build up and roll out of Pods was fraught with problems. But that didn’t really matter because competitors only figured out what was coming mere months prior to the launch as word of the Pods launch filtered out. But that was years after P&G had started work on the project. It gave P&G plenty of time to get the manufacturing of Tide Pods down to a science. Competition, which was numerous OODA Loops behind, didn’t have a chance.
Outflanking your competitors means learning faster than them. The fastest and most effective way of learning is to form a theory, act on the theory, observe the deviations from predictions of the theory, and then adjust accordingly — and then do it again. You can’t do that and won’t do it if you don’t think strategy is worth doing.
Business is tricky and daunting. You are always in a position of needing to make decisions today for a tomorrow that will always be uncertain. And even if you don’t think of yourself as making choices, no choice is actually a choice — because strategy is what you do, not what you say. But don’t be intimidated by the challenge. You don’t have to be perfect. It is like the adage about the campers and the bear: you don’t have to outrun the bear, just your fellow campers! You just have to learn and get better at a faster rate than your competitors.
The worst thing you can do is sit and wait until it is clear which competitor is winning and in what way before you take action. But there is a danger at the other end of the spectrum in over-intellectualizing in a vain attempt to be perfect. Players at both ends of the spectrum have slower OODA Loops than competitors in the middle.
You should think hard but expeditiously. Place your strategic bet. Then watch and learn. Tweak it if it is close; reboot if it isn’t. Do it again, and again. And that will be your advantage over your competitors who learn more slowly. It will especially be the case relative to those who watch what works for you and then imitate it. You will be gone by the time they get to where you used to be. And that is the fundamental advantage of doing strategy over making excuses for why you don’t!