John Cutler discusses “bad” strategy. I want to reply in detail. Because of course I do. N.B. I have no interest in DESTROYING him. This is mostly a “yes and”. And also a chance to clarify a few things.
Firstly it’s a little annoying that he doesn’t define what this thing he’s talking about is. Whilst it might be like trying to nail jelly to a wall with a fly swatter, we need to be clear what we are talking about. So I am going to start with Roger Martin’s definition:
Strategy is choice. Strategy is not a long planning document; it is a set of interrelated and powerful choices that positions the organization to win. There are five key choices in the Strategy Choice Cascade:
What is our winning aspiration?
Where will we play?
How will we win where we have chosen to play?
What capabilities must be in place to win?
What management systems are required to ensure the capabilities are in place?
The first comment to make is that just because you don’t have an explicit strategy that doesn’t mean that you don’t have a strategy. You are all still making choices. You just might not be aware that you are making choices.
To me, this is reminiscent of Argyris and Schön’s distinction between “espoused theories” and “theories-in-use”:
“We called these operational theories of action theories-in-use to distinguish them from the espoused theories that are used to describe and justify behavior.”
An espoused theory is what you say you do. A theory in use is what you actually do. Sometimes you might be conscious of this difference (which might be labelled hypocrisy or deceit). Sometimes you may not be aware of this difference at all.
While this distinction was originally applied to individuals, I think they apply as much - or even more so - to organizations.
For example, Microsoft have many pages about their mission, vision, and values including “Our mission is to empower every person and every organization on the planet to achieve more”
And I don’t think any of that correctly outlines their corporate strategy. If I were to say what I thought Microsoft’s actual strategy is based on their observed behaviour then it would be: ”We will dominate the late majority of primarily corporate and secondarily consumer technology. We will not attempt to be at the cutting edge of innovation. Rather we will seek to identify innovations and own them for the mass market. Our products will therefore be “good enough”. We will focus on software and intangibles because of the higher margins they offer but dabble in hardware if an opponent threatens our core interests in those spaces or if it is necessary to generate this software revenue. We will build a loyal partner ecosystem to undertake work that we do not wish to do and to defend our core products against our competitors. Our competitors are any expansionist technology company because eventually we will encounter each other in the market.”
Now Satya Nadella would never say that in public but he is not a stupid man and I am sure he has thought similar things.
Real strategy often dares not speak its name in public.
So if we go back to John Cutler’s 8 points:
A company does not have a strategy. The individuals in a company have strategies. Individuals may be better/worse at persuading others to adopt their strategy—or merge and adapt strategies—but there is no single strategy.
Yes and No. Some individuals matter more than others. Some of those individuals may even agree on the strategy. The strategy they say may even be the strategy they do. But strategy is the choices that are made not the planning document. So a company does have a strategy. It may not be coherent or reliable. But it has a strategy in action. Which is the sum of everyone’s choices.
What you are seeing communicated across the company is not the actual strategy. You are seeing a negotiated narrative, and there's a good chance you're not privy to all the information and context underpinning those implicit and explicit negotiations.
Yes and this happens in multiple ways. There is a “negotiated narrative” that is the public strategy statement of the organization that everyone knows has sweet FA to do with the actual choices being made. There are also negotiations going on around the actual choices being made. You almost certainly do not know what those are unless you are a senior exec. But you can probably work it out from observing what people do and discounting what they say.
To continue that thought, the strategy itself is a negotiation. This may seem heretical (especially to strategy nerds). Shouldn't we pursue the objectively right strategy? Realistically, the objectively and theoretically right strategy may clash too heavily with the status quo. Strategic shifts have winners and losers, right and wrongs, threats, and promotions. "Right for who?" is a critical question. What is right for an upstart designer in the first couple years of their career may not be the same as what is right for the CFO. This is why it can be much easier to pay an outside firm to tell you the strategy. It makes it easier to accept.
Well, yes. The strategy chosen will likely be the one that benefits whoever the most powerful individual is. That should be obvious. What I would say is there is no objectively right strategy. Strategies are models and all models are wrong but some are useful. There are strategies that most people would agree are stupid for the organization as a whole. But they are enacted because either 1. they benefit someone powerful or 2. the people making those strategic choices are operating without considering critical information. People exhibit bounded rationality - and sometimes it is more bounded than others. Some people’s rationality appears to be both bound and gagged.
For some groups of people in the company, the risks involved with an opinionated strategy—edgy, crux-focused, long-term—are unsatisfactory and not worth the effort. It doesn't meet their needs. Probabilistically, the neutral 6 out of 10 option is perfectly fine. Strategy, as many people picture it, has a long-term component. Not everyone is going to stick around for the long term.
The strategy you have is underpinned by the assumptions that support. When those assumptions change, your strategy needs to change. For some organizations, those assumptions will hold true for decades. For others, they may change on a monthly basis. Whether you have a long term or a short term strategy depends on the nature of your capabilities and your environment.
Different assumptions (the nature of your customers, you technical capabilities, the ferocity of your competitors) change at different rates. Therefore elements of your strategy will change at different rates.
Mature organizations do not typically pursue ‘edgy” strategies because they have more to lose. Why take risks if you don’t have to?
The thought process was not put in writing or communicated. The real strategy sits in people's brains (continuous and unconscious) and is converted to a plan, pillars, or targets/goals. People sometimes ask themselves, "What's going on, and what's the problem?" and generate a plan. Strategy happened—you weren't in their head. The same probably happens to you often. Many of the most effective strategists I've encountered are more intuitive, naturalistic internal strategizers. They don't care much about talking about it.
Well, strategy is choices. And people make choices for all kinds of reasons. Some of which they are aware of. I am an intuitive thinker by style. I don’t engage in exhaustive analysis. I am pulled towards something and I don’t always know why. Then I do the analysis to see if I am wrong or not. However I would strongly advise that actually writing a strategy down is helpful. Because then you can see if you are actually full of s-t. Having to explain your strategy to people is also good because they can tell you if they think you are actually full of s-t.
What you don’t need is 300 pages of mission/vision/values on one hand and financial analysis on the other. You need to state your choices as clearly and succinctly as possible.
The big bet has been played, and you must go through the motions. This can be hard to grasp, but people tend to over-index the immediate options and decisions. It is considered a bad strategy when the strategy fails to inform those decisions (or over-prescribes solutions to those issues). But when you step back, you'll often find that the key strategic "move" has been in motion for many years, has been funded, and is playing its course. When we consider that companies themselves are strategic bets in investment portfolios, we start to see that when you step back, many of the details you see (and stress about) as an IC or front-line manager are relatively unimportant.
Again, this comes back to timeframes. And also path dependence. Previous decisions may limit your current options. Articulating a strategy and the assumptions that underpin it help you to understand exactly what you are doing and the timeframes on which you are operating.
Many of the great strategies we hear about are post-facto rationalizations of emergent, very non-strategic-looking activities at the time. Authors try to capture that emergent soup, and people who were there may imagine it to be more structured in retrospect. But many famous companies tried things, stumbled into something that worked, mixed that with some luck, and doubled down.
100% true. No notes.
Things are working too well to inspire a strategy. While the lack of a real strategy may make your role difficult, it helps to keep in mind all the positive things happening. Is there a catalyst to "Be Bold!" right now? For you, the ramifications are serious. Overall, there's a ton of inertia.
There is never not a strategy. The strategy might be: “Do what we’ve always done”. And that strategy will be valid as long as the assumptions underpinning it are also valid. And when they are no longer valid, you will need to start thinking. Assuming that you are still capable of doing so.
Lessons for the young players (with an interest in strategy)
Read Roger Martin & Richard Rumelt.
Realize that 99% of what passes for “strategy” is BS.
Start by thinking about what you have control over and the rationale for the choices that you are making.
Ask your manager for the rationales behind what they have to do. If they cannot give you a sensible answer then it is not wise to push them.
Recognize that strategy and execution are not separate things but simply “before’ and “after” photos of the same thing. Learn whether you are good at strategy by looking at your results in execution. There are no strategic thinkers, only strategic doers.
Understand that different organizations operate in a different contexts and have different appetites for strategic thought. Big, successful organizations will typically have a “Strategy” department staffed by ex-McKinsey consultants. Despite the name, there may not actually be a lot of strategizing there (it’ll likely be a lot of financial analysis, budgeting, and maybe justifying acquisitions). You are unlikely to be welcome there.
Find situations where the environment is highly dynamic and ambiguous. This is where the strategic doer shines.
Hopefully your strategy is not “Bad” in the same way Michael Jackson was “Bad”…