Where's Strategy Going?

 Recently, I came across this interesting McKinsey conversations on where is strategy as a practice heading. Some nuggets from it-

"Strategy tools are abstractions from reality that illuminate and identify some features and causal relations while simplifying or omitting others. So their usefulness depends on context, and their effectiveness changes with time." Prof. Jacobides of LBS.

"I disagree with the notion that the world is changing and that this has somehow made our established strategy tools obsolete. Most changes in the business environment have been in degree rather than kind: the speedier diffusion of technology, the growing intensity of competition as a result of internationalization, increased concern over business’s social and environmental responsibilities. Most of the core concepts and frameworks of strategy have not been devalued by change.

Our analysis of competition extends well beyond Porter’s five-forces framework, to recognize the role of complements, network externalities, and platforms. Our understanding of the benefits of strategic flexibility has been transformed by the analysis of real options. A major problem is that the theoretical and empirical research in strategy has moved so quickly, and over such a broad front, that its distillation into intuitive concepts and frameworks applicable to strategy-making processes of firms has lagged far behind." Prof. Robert Grant of Bocconi. He kind-of makes sense?

"My view is that we need both the consultant- or firm-driven focus on “themes” and better frameworks, not only to teach strategy, but also to help executives rethink what they do, perhaps by helping to improve their judgment, to frame difficult problems, or to deal with individual or organizational biases. We should ask ourselves what types of frameworks can work best." 

"Very few traditional frameworks, even scenario planning, were built for “black swan” events, which many companies now face every ten years or so. And a lot of frameworks are still presented in very qualitative terms. What’s different today is the availability of data, which means you can research the frameworks’ empirical validity." Sven Smit of McK. Very important point. 

"...strategy tools are only effective if they provide executives with a way to get a comprehensive view of their company in the context of industry as a whole. You can go to an oil-and-gas conference and get an oil-and-gas perspective. Then, you go to another conference and see things from a supply-chain angle. There are competing frameworks that overlap and it’s often confusing. It is quite important to have effective frameworks that pull together these different views into a comprehensive picture." Sudeep Maitra of Centrica. Another extremely important observation. 

Seven needs identified by workshop participants for today’s strategist

1. Techniques for identifying structural versus cyclical changes in the external environment
2. Techniques for spotting and harnessing cross-functional capabilities that a company has and may be able to leverage for competitive advantage
3. Tools for stimulating the creation of options, particularly where change is occurring rapidly and the scope for strategic action is shifting
4. Tools for stimulating the understanding of forces that are truly dynamic, with multiple second-, third-, and fourth-order effects
5. Proven tools for improving strategy processes, breaking inertia, and jolting conventional thinking
6. Techniques for generating and harnessing insights from big data about customers, competitors, and suppliers
7. Techniques for identifying and focusing the top team’s attention on new or poorly understood risks—before it is too late

"One of the toughest strategy challenges is still the creation of options—creating them is the black box of strategy. It’s easy to write “diverge” on the strategy-process map, but it’s darned difficult to create truly innovative strategy options." Said Dan Simpson of Clorox. He says Design Thinking could be useful in creating useful strategic options before the management.

"Framing questions is the other tough challenge, and it’s one of the most important yet underappreciated parts of strategy development. Questions are the lens by which problems are defined and addressed. Generating great answers to bad questions is all too common and not all that helpful in strategy." Super important.

Here's Mark Wilson from Unilever, talking about a very Unilever-type of a problem-

"What’s also important are methods that challenge organizational inertia—notably inertia in the form of senior leaders who naturally tend to protect their own share of resources, as well as reward systems that have a momentum of their own. 

If it’s really true that the strategy community is currently focused more on producing insights than new techniques, that’s probably a good thing. It’s incredibly valuable to have insights coming from outside to jolt your thinking. Most executives are still surprisingly ill-informed about what goes on outside the walls of their own businesses."

"We probably don’t think enough about the way competitors move; the thing we lack most is probably a better view of the competitive environment. Information is very anecdotal in the countries where we operate, so maintaining the brand, which protects you from the ins and outs of fashion, is our number-one priority." Matt Mcevoy of Burberry.

Now comes the interesting bit of conversations.

"We shouldn’t forget that strategy frameworks are also tools to allow political conversations—to help navigate the political tensions in a corporation. Strategy discussions are invariably burdened by resource-allocation agendas; actually, what’s labeled “strategic” is often what is politically protected by senior management, not what’s most valuable for a firm. Many a strategy discussion is actually about executives saying, “You aren’t going to cut my unit.”

In both teaching and research, I think we don’t pay enough attention to the difference between strategy as resource allocation and strategy as insight generation. There is a yearly strategy process, which focuses on resource allocation. We should acknowledge it as such and better understand its pathologies. But we also need to take a fresh look at how we identify ways to improve a firm’s positioning and performance, by explicitly asking, “What insight-generating activities, tools, and frameworks would be useful?”" That's Prof Jacobides.

"I agree that much of the song and dance called strategy in companies is really a resource-allocation process laced with pride. I have yet to see anybody say, “I understand my business is on the way down. I will give you $50 million cash back this year and the same again next year. I can see lots of good opportunities in the company for us to better use that $50 million!”

We would argue that good resource allocation is an outcome of strategy. There’s a lot of empirical evidence that, actually, the strategist cannot pick the winner but can pick the loser. It’s about killing stuff more than about promoting stuff. Then, when you recognize the winner, promote it and give it resources. But picking the winner, as we know from the segment-level data on venture capital and private equity, is harder than weeding out the loser." Svet from McK.

"Someone once said to me, “Do you know something about projects in a business? Up to a certain point, they’re almost impossible to keep alive, and then they flip virtually overnight to being almost impossible to kill.” And that state can change over just a few weeks. It’s a function of gatekeeping processes and which reputations have become sufficiently attached to the project." That's Mark Wilson from Unilever. 

Does this give a picture that the medieval feudal mindset still reeks some part of the modern corporate boardrooms and evolution is going to take some more time for us, humans, to consider beyond our individual turfs. Till then, a Chanakya or, Tsun Zhu will be as relevant in boardrooms as war zones (Apart from many of the pertinent frameworks, of course).