There Is Only One Strategy
Fifty-odd years after creeping into our lexicon, “strategy” remains one of the most misused words in business. It shouldn’t be — for at root, it really only means one thing.
Sparking a Revolution
In 1965, a little-known Russian-American mathematician and manager named Igor Ansoff published a now out-of-print book called Corporate Strategy — and sparked a revolution in business thinking and practice.
Before then, while the word occasionally popped up in management discussions, the concept of strategy was not considered worthy of serious consideration. If business schools taught it at all, it was in the context of other courses, rather than a skill worthy of understanding and acquiring in its own right.
The idea grew in popularity in the 1970s through the influence of the nascent Boston Consulting Group, whose “experience curve” concept pointed to the long term value creation benefits of investing in becoming better at something in the near to medium term.
By the end of the century, the term “business strategy” was 350 times more popular in print than it had been before Ansoff.
Strategy vs Tactics
This is where it effectively remains today. While BCG continues to take credit for inventing strategy as a respected business practice, it remains far from alone as a practitioner. Virtually all management consultancies, from Accenture to McKinsey, offer strategic advice as part of their client offering. Many firms in other industries maintain dedicated strategy teams, some even boasting a “Chief Strategy Officer” as a member of their leadership teams.
All well and good — but now that the word has surged in popularity, so has the questiosn of what it actually means?
As a growth consultant, I often meet new clients who use the terms “strategy”, “plan” and “tactics” interchangeably.
Those who have done a bit of homework tend to view strategy as “an organizational master plan” (the first definition typically found on the University of Google), and tactics as its executional components.
But is that really all there is to it? The same Google source proceeds to describe this as a plan “to achieve strategic goals” — which is unhelpfully circular. The debate over what constitutes a strategic versus a tactical goal can eat days of a typical planning cycle, without making either any clearer.
The good news is that we can do better and progress further, with a clearer understanding of what strategy really is.
Even if BCG’s experience curve has not aged well — it was developed in a bygone era when limited tools made more complex performance analysis a dream — its authors were onto something.
Two Elements of True Strategy
At its root, all business strategy is about two things, which can further be boiled down to one.
First, it entails undertaking activities that have a short term negative impact on earnings (taking a loss on a product to win customers, for example) that may be reasonably expected to turn out positive in the long run (gaining market share and building a customer base or brand).
Next, it involves learning — gaining experience that promises to deliver a sustainable cost edge, including marketing knowledge that lowers customer acquistion costs.
These may in turn be seen as two sides of the same coin.
Silicon Valley’s greatest gift to modern management thinking is the Lean methodology espoused by practitioners such as Steve Blank and Eric Ries.
The Lean philosophy begins with the observation that all businesses are in the risk or “unknowns” management business, which includes “upside risk”, or opportunities that may or may not prove illusive.
In this light the core purpose of every company is not simply to maximize earnings growth, but to engage in the essential practice that drives such growth: reducing unknowns faster than the competition, otherwise known as “learning”.
It’s a small leap from this insight to the realization that every strategy worth the name is fundamentally doing the same thing — accelerating learning.
Critics of the Lean approach have a point. Its “build/measure/learn” mantra is often mistaken for an excuse not to think, but simply to put a minimum product into the market or an interesting-sounding practice into one’s processes and watch what happens.
This can be a recipe for disaster. The best Lean practioners — indeed, the best managers, period — understand that simply chasing the latest fad or rushing a half-baked concept into production is likely to result in failure from which little knowledge can be acquired.
Do One Thing
This is where real strategic thinking comes in. Strategy is the art and science of structuring existing knowledge, identifying key unknowns, and designing business experiments to de-risk (minimize) them and learn as quickly as possible.
In turn this leads to a growing body of insight that defines an organization and constitutes one of its principal sources of competitive advantage — indeed, the only source of competitive advantage or “unfair edge” that any company can systematically build for itself, regardless of other assets such as brand, share, or location.
Curious, if not convinced? Ready to work on developing your own, to test and de-risk this very insight?
A good starting point is to start structuring your corporate self-understanding and perception of risks and opportunities through the lens of a simple tool, a one-page strategic plan or growth framework.
Such templates can be populated either by a team working with itself, or with the facilitation and guidance of a seasoned strategic advisor.
However you choose to proceed, do so with the comfort and knowledge that strategy doesn’t need to be a four-letter word, let alone a mysterious formula accessible only to those with significant time and money to invest.
Because at the end of the day, here is the stark truth. All strategic plans are effectively variants of the only strategy worth of the name: turning your company into a learning machine.
(Not convinced? Have a counterargument? Tell me at email@example.com.)
Stephen Butler is a partner at Framework, a growth consultancy.