15 Truths About Strategy
Strategy is the subject of many books and articles, yet, according to Michael Carman, when it comes to making decisions about where your organisation is headed, what’s needed is simplicity and clear-headedness.
Here are 15 pointers that he suggests you use to help attain that clarity:
- There is always strategy. It’s just a matter of whether it’s conscious, understood, articulated and supported by concentrated and directed effort and resources, or whether it’s unconscious, hidden, invisible and supported in a scattered and diffuse way.
- Strategy is directional; it’s the broad direction you’re heading in rather than techniques that guide you to a specific destination with pinpoint accuracy.
- A goal or objective is not a strategy. Many people think that GE’s aim to be No.1 or No.2 in every market in which they operated was a strategy. Former GE CEO Jack Welch suggests otherwise: he says that GE’s strategy, in fact, was to move away from businesses that were being commoditised towards high value-added technology businesses or service businesses, by upgrading human resources through training and development.
- There’s always uncertainty in strategy. Strategic decision-making always involves a risk-taking decision. No amount of number crunching or hard-core quantitative analysis masks that fact. Serious strategy always involves a leap of faith.
- Elaborate and arcane strategic frameworks are more likely to serve as comfort factors to buoy strategic decision-making than they are to inform it. These things risk diverting decision-makers from the strategic nuances they can use, rather than elucidating them.
- Because the future is uncertain, and because circumstances are unpredictable, success is more likely if you are firm in specifying your strategic direction, but flexible in how you reach it. In other words, strategy should be largely tactical and open-ended. Your ‘circle of competence’ (to use Warren Buffett’s term), defines the area within which, when opportunities arise, you grasp them. This circle of competence is the area in which strategic decision-making should be centred.
- In this vein, a strategic plan can, paradoxically, work against strategy and inhibit performance.
In his 1995 report to shareholders Warren Buffett commented that his results “…have not sprung from some master plan that we concocted in 1965. In a general way, we knew then what we hoped to accomplish but had no idea what specific opportunities might make it possible. Today we remain similarly unstructured…”.
Later in the same report Buffett noted “…we do have a few advantages, perhaps the greatest being that we don’t have a strategic plan.
“Thus, we feel no need to proceed in an ordained direction… but can instead simply decide what makes sense for our owners.”
- Strategy is partly a function of what an organisation is ready for, what it can see, and what is within its field of vision. Strategy is relative, and it’s evolutionary.
- When devising strategy, look for trends and currents. Don’t fight the Zeitgeist; identify it and go with it. McDonald’s didn’t fight the trend towards healthier eating; they went with it by offering new ranges of salads and reducing the sugar content of their hamburger buns.
- Strategy isn’t really strategy until it becomes action, otherwise it’s mere intention. There must be levers to pull; something to move you in the direction you want to head, something you do to move you in the direction you want to go.
- It’s useful to treat strategy as embedded in an organisation’s processes and way of doing things. This is not to say your organisation should be constrained by current activity, but rather strategy formulation is best anchored in an understanding of the day-to-day reality of the business and its markets. It also reduces the risk of there being a schism between strategy and operations that leaves strategy as mere intention.
- No amount of strategy will compensate for poor management or organisation. A well-managed organisation is a pre-condition for effective strategy implementation. Strategic positioning without adequate management or organisational capability is like nailing jelly to a wall.
- Strategy can and does fossilise. The energy and vitality in a business or organisation permeates its operations and infuses its strategy. Successful strategy formulation will always have a better chance where there is energy and vitality in an organisation.
- Private sector strategy is fundamentally and qualitatively different from strategy in the public and not-for-profit sectors. Each has multiple stakeholders, but the bottom line in a business holds greater sway than in the non-profit sectors.
- Textbook techniques to determine strategy are unlikely to yield anything of great value. What is more likely to yield results is expertise in the business and a deep understanding of the market or operating environment.
This needs to be coupled with new perspectives that prise open invisible but restricting assumptions that limit the organisation’s growth, capability and field of vision.
Confronting knowledgeable, experienced and committed organisational people with challenging questions in a receptive environment can be the conduit to these new strategic perspectives. So can brainstorming and other means of tapping the potential of a business or organisation, and getting it ready to grasp new opportunities.