The Jungle Called Strategy
William A. Cohen, PhD, Major General, USAFR, Ret.
is a jungle, or at least the development of strategy is. There are so many
approaches to planning and developing strategy, all of which claim great
success, that one would think that business strategists would be successful in
their endeavors at least 90% of the time. The unfortunate fact is that
strategists are lucky to reach all their objectives on a consistent basis even
half of the time. Yet brilliant practitioners and professors have all labored
over strategy systems to develop what on the face of it are very innovative
systems. Yet, results have been very inconsistent. These means to strategy
fall into five separate categories:
look at each.
Method Approach to Strategy
the method approach, the strategist is required to follow a precise series of
actions based on a specific methodology. The very first method designed to
develop business strategy was invented in 1960 by Bruce Henderson, president
of the Boston Consulting Group. It is the well-known BCG Matrix with “cash
cows,” “stars,” “dogs,” and “problem children” placed according
to market share and market growth rate in a four-celled matrix in its original
Henderson noted that companies that
dominated their markets tended to be more profitable. Businesses that were in
this category were termed “cash cows.” It followed logically that if
companies could dominate a growing market, they would have both growing
profits an assured future. Companies that were in this category of the
four-celled quadrant were classified as “stars”. Obviously, strategists
should allocate resources to these businesses to enable them to capture and
retain shares of a market with a high growth rate.
would these resources come from? Some would come from their “cash cows.”
Others would come from “dogs.” These were businesses owned by the company
that had low market share in a market with a low growth rate. You got rid of
“dogs.” That freed up more resources to invest in “stars.” You looked
carefully at “problem children” in high growth rate markets, but with a
low market shared. With these companies, you committed the resources to
capture additional market shares and turn them into “stars,” or cut off
resources, turned them into “dogs,” and dropped them.
As time went on, the important entry
variables were refined by BCG and reworked by others. Basically, this method
approach is a means of deciding where to allocate resources for grand
strategy. Called portfolio management, it worked well for that purpose alone,
but wasn’t much good for developing strategies for anything else. Other
methods worked well for say, determining tactics depending on the stage of the
product life cycle, etc. The point is, method strategies can work for a
specific purpose, but they ignore other aspects of the situation such as
environmental and assets which can significantly affect outcomes.
Replication Approach to Strategy
the replication method, the strategist analyzes the situation, uncovers
aspects of the situation, such as environmental and assets, which can
significantly affect outcomes, finds out what works, and does the same thing.
The most well-known replication method used in business strategy is the PIMS
or profit impact of marketing strategy. The
project was initiated and developed at the General Electric Company from the
mid-1960s and expanded upon at the Management Science Institute at Harvard in
the early 1970s; and finally is still carried on by The
Strategic Planning Institute, like the Boston Consulting Group, in Boston.
Today, more than 3000 separate strategic experiences are in the PIMS database.
With PIMS, the strategists is given what are called “strategic
benchmarks.” In sum total, this is the experience of businesses in the PIMS database, which are
situationally comparable to the strategist’s business. The strategist
develops a strategy based on this information.
Without question, what PIMS supplies
is good intelligence, and any strategist would be a fool to ignore it.
At the same time, it must be recognized that every strategic situation
is different, even to the personality of the company and competitor leaders
involved, and whether there was a full moon and its affect on the tides. One
small difference can cause a significant shift in results. Moreover, given
benchmarks that indicate a certain result 99% of the time, if you happen to
fall into that 1% outside of the benchmark results, you have a 100% failure.
Insight Approach to Strategy
idea with the insight approach is that we gain valuable insights into business
insights by looking at some other discipline or field of human endeavor. The
most popular along these lines is warfare and the notion that “business is
war.” There was even a best selling book, Marketing Warfare by Trout
and Ries (McGraw Hill 1986) in which the book was dedicated to “one of the
greatest marketing strategists the world has ever known: Karl von Clausewitz.”
The connection with war is because
the study of strategy started with warfare and the concept that there are
military principles for success in strategy has been accepted for several
thousand years. It is perhaps for this reason that the very word
“strategy” comes from the Greek word “strategos” which means “the
art of the general.” There
are insights to be gleamed from military strategy, and part of my own work is
based on both my lifelong study of military strategy and my experience as a
general. However, there is, or should be, a cautionary note here, and that’s
where people get carried away.
to copy warfare as a model for business strategy have generally failed. Except
in the sense of commitment to win, there is no such thing as “marketing
warfare,” for business is not war. This is not only because war necessitates
the taking of human life while the practice of business does not, but for
other basic reasons.
war is not a continuous activity. A war is fought, and then it is over. It may
start up again later, but for the time, it is done.
Successful and unsuccessful forces are disbanded, nations frequently
disarm and citizens look for a “peace dividend.” A successful business
goes on and on nonstop. In the United States, there are businesses that are
more than a hundred years old. In Europe and Asia, there are businesses that
are several centuries old. Some of these businesses haven’t missed a day. In
battle, even The Hundred Years’ War came to an end.
speed is always crucial to war strategy. Colonel John Boyd, a brilliant Air
Force strategist developed what he called the OODA loop. “OODA” stands for
observation, orientation, decision, and action. From personal observations as a fighter pilot during the
Korean War, he theorized that anyone that could “get inside” a
competitor’s OODA loop (that is, do one of the four parts faster than his
opponent) would invariably emerge victorious. His theories provided
considerable insight into modern land combat to the extent that it is said
that at one time the U.S. Marine Corps completely altered its concept of land
battle based on his theories.
Boyd’s death some business strategists adopted his concepts of the OODA loop
and ancillary theories. Even the editors of Harvard Business Review
were impressed, and they published an article about Boyd’s theories some
years ago. But alas, while the OODA concept may have universal concept in
warfare, it has much less application to business. As Peter Drucker has noted,
astute business competitors actually can succeed by electing not to be
first in the market, but in allowing someone else to do the groundwork and
make their mistakes first. So speed, at least when it comes to being first to
market, may not always be all that important. Despite the success of Apple
Computer in creating the computer market, which in itself was a masterful
application of basic strategic principles, it is IBM, IBM clones and Microsoft
who are currently the market leaders in this field.
insights provide just that, insights. They are not a consistently system of
successful strategy development.
Concept Approach to Strategy
the last section we looked at strategy for insights and John Boyd’s OODA
loop was noted as an example of caution in looking at warfare, The OODA loop
is an example of the concept approach. The concept is the notion of
observation, orientation, decision, and action and the idea of moving faster
than a competitor by being quicker in one or more of these phases. If speed is
important in a particular business situation, than this idea works.
If your object is to be the first into the market with a new product
concept, you can spend additional time, energy and resources on a premium
business intelligence system that can put you ahead of competitors. Foregoing
the idea of buy-in that was one of the essentials of Total Quality Management,
you can make it a one-person or small group decision, and forget about the
niceties of ownership and charge forward to pick up the pieces later. When
speed is important, OODA works just as effectively in business as Boyd found
it to work in aerial combat. However, when some other aspect in the situation
makes something else more important, say the very limited resources you have
available to spend, than the OODA is not the concept you want to adopt.
the principles approach, you seek basic truths that are essential to make any
strategy work and apply them to the situation.
Sometimes the principles may conflict in application, or may be
irrelevant to a particular situation. That’s
okay so long as they are considered. Moreover, the use of principles does not
mean that you cannot use one or more of the previous approaches. If you your
organization employs one of the method approaches, consideration of
economizing to mass or use of the indirect approach can only enhance your
application of the method employed. Moreover,
as shown in last month’s newsletter there is also a method by which you can
employ the essential principles for business strategy more effectively.
10 Essential Prin
ciples of Business Strategy
those that missed them last month, here are the principles for successful
business strategy that I have developed.
Commit Fully to a Definite Objective
Seize the Initiative and Keep It
Economize to Mass Your Resources
Use Strategic Positioning
Do the Unexpected
Keep Things Simple
Prepare Multiple Simultaneous Alternatives
Take the Indirect Approach to Your Objective
Practice Timing and Sequencing
Exploit Your Success
those interested in learning more, please turn to last month’s newsletter.
Also watch for the publication of my new book The Art of the Strategist:10 Essential Principles for Leading Your Company
to Victory to be published by AMACOM in 2004.