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So many nostrums, but no certain strategic elixir
Article Type: The strategists bookshelf From: Strategy & Leadership, Volume 42, Issue 2
Strategy, A History
Oxford University Press,
Managers these days have no trouble finding guides to strategy: what it is, what techniques work, how to apply them. The bookshelves of corporate veterans sag wearily with dissertations on the subject, typically illustrated with case studies that purport to validate each authors thesis. But beware the nostrum merchants. Most of the guides are infected with the biases of academia, a consulting career or a stint as a corporate executive. Nonetheless, as Lawrence Freedman observes in his monumental Strategy, A History, everyone needs a strategy. Leaders of armies, corporations and political parties, for example, are expected to articulate a way to compete successfully in an uncertain future.
So what is it they need? Strategy, according to the author, who distills a definition from the multitude of conflicting possibilities, is a description of what to do. Strategy must be fluid and flexible, must be determined by the starting point, not the ending point. And the realization of strategy entails the acquisition of power.
References in the literature to business strategy were uncommon before about 1960. This should be no surprise, for prior to the start of the industrial revolution formal strategy had probably not been formulated. Strategy in war and politics, however, were practiced by the ancient Greeks and before. So the author starts his traverse of the history of strategy with the Bible, in which he observes that both deception and coercion were vital strategic practices. Freedman argues that both are necessary – coercion, in particular, facilitates future acts.
Military strategy and its evolution occupy much of the central section of the book, not surprising given the authors credentials as Professor of War Studies at Kings College. Carl von Clausewitz, Liddell Hart and other military strategists get full treatment. Noteworthy is Freedmans emphasis on the emerging importance of information superiority, originally highlighted in the revolution in military affairs (RMA) documents produced in the 1990s. They cite as a critical strategic advantage the ability to “collect, process, and disseminate an uninterrupted flow of information while exploiting or denying an adversarys ability to do the same, a concept that is particularly apt in the case of asymmetric wars – engagement between dissimilar forces. At the same time, Freedman acknowledges the risk of a surplus of data – too much to filter, too much to evaluate, too much to digest. But he nonetheless asserts that future conflicts will revolve around knowledge.
The treatment of business strategy is more condensed, but relatively comprehensive, organized into sections devoted to strategy from below and strategy from above. He does a good job tracing the transit of strategy thinking from Taylor through Drucker, Ansoff and others. A useful chapter addresses the disagreement between the design school of strategy formulation and the emergent strategy school, and the conflict between structuralists (Porter et al.) and reconstructionists (Kim, Mauborgne et al.). Freedman avoids endorsing any of them, cynically offering us Chekhovs admonition: If many remedies are prescribed for an illness, you may be certain that the illness has no cure.
Along the way Freedman records the rise and fall of various panaceas for poor performance, such as TQM, and BPR, as well as the disenchantment with corporate strategic planning that occurred in the early days of the Welch tenure at GE. He notes the facile solutions offered by the Peters and Waterman and their acolytes – omitting, curiously, any reference to the Jim Collins model.
The author draws our attention to the limits of rational choice; the more uncertain the environment, the harder for managers to discern a rational way forward. The origins of this dilemma are persuasively summarized in his critique of decision-making. He argues that people fear failure and are prone to cognitive dissonance, sticking with a belief plainly at odds with the evidence, usually because the belief has been held and cherished for a long time. People like to anchor their beliefs so they can claim they have external support. They are more likely to take risk to support the status quo than to get to a better place. They compartmentalize issues so that decisions are taken on one matter with little thought about the implications on another. They see patterns in data where none exist, represent events as examples of a familiar type rather than acknowledge distinctive features and zoom in on fresh facts rather than big pictures. Probabilities are routinely miscalculated, so people assume that very probable outcomes are less likely than they really are. Conversely, they riskily assume that outcomes that are quite unlikely are more likely than they really are, and that extremely improbable events – the Black Swans lurking over the horizon – have no chance of occurring at all. They view decisions in isolation rather than part of a bigger picture. So not surprisingly, managers therefore often make a muddle of strategy!
One of Freedmans most provocative chapters addresses recent findings in cognitive psychology that distinguish between system I and system 2 thinking processes. System 1 thinking is subconscious, intuitive, implicit, whereas system 2 thinking is conscious, explicit and analytical. The rational decisions of system 2 are often confounded by the emotions associated with system 1, unless a determined effort is made to control them. So-called rationality in its pure form is unusual.
Freedman sees increasing value in the formulation of stories. Yet he warns that management books that analyze corporate success consistently exaggerate the impact of leadership style and management practices. For example, many familiar stories that are often quoted to illustrate strategic successes turn out on further examination to be either fabricated or subject to alternative interpretations offering different lessons. He applies the same indictment to the use of case histories in the typical business school curriculum.
So stories have their limitations as strategic action exemplars. But research suggests that power to influence comes less from knowing the right stories than from how to tell them – how to utilize them as instruments of propaganda. Which means that the skill of persuasion – or rhetoric, in Aristotles language – is critical. Scripts on the other hand may have more value than narratives. A script will define the role of the characters and encourage them to act in such a way that the story about some future state is realized.
The author ends his exposition by commenting that although we have today many sources of advice – books, journals, academics, consultants, current and former executives – their advice is diverse and often contradictory. So while developing a strategy through dialog is worthwhile, it is hard to implement, as most practitioners will concede. The longer the sequence of planned moves, the greater the number of human agents who must act in particular ways. The more ambitious the project, the more likely that something will go wrong. The world of strategy is full of disappointment and frustration, of means not working, of ends not reached. As a result, Freedman concludes, strategy is not about reaching a prior objective. Practical strategy is simply about moving to the next stage. Which returns us his thesis that strategic behavior is the art of creating power.
Where does this leave us? It would seem that perhaps selecting the best strategy is a matter of chance, and an optimal strategy may be a fantasy or chimera at best. Is the notion of a Master Strategist itself a myth? After all:
Managers today must cope with many variables – and game theory does not work under these conditions.
More data simply creates more fog.
History is no guide. What worked for yesterdays manager is unlikely to work when the entire competitive and customer landscape has changed.
The future is increasingly uncertain. As that illustrious strategist Mike Tyson tells us, “Everyone has a plan till they get punched in the mouth.
Managers (and their competitors) do not make rational decisions anyway – they act to maximize individual utility.
Corporate managers tend to focus their attention on the books on business strategy or strategic management, drilling down into the details of how to do it better. By default, then, they ignore the important work that has been done in other fields such as sociology, politics and military warfare. Freedmans history can remedy this!
I urge readers to set aside that stack of recent how-to-do-strategy manuals, those quick digests of corporate success and failure, and start reading Strategy, A History. If you are a strategist or aspiring strategist, the investment will bring high returns in the form of new perspectives on the limitations and possibilities of practicing strategy.
Robert J. Allio
Robert J. Allios management career includes both senior corporate and academic positions. A principal of Allio Associates, a strategy consultancy located in Providence, RI (firstname.lastname@example.org), he is a Strategy & Leadership Contributing Editor and the author of The Seven Faces of Leadership (2002).