The Passion and Discipline of Strategy

Krzysztof Obloj

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN: 9781349462841, 9781137334930
• eBook ISBN: 9781137334947
• Topic: Business
• Subtopic: Business General
• Index: Business

Utilises the experiences of the best companies and leaders in emerging and mature markets to highlight the necessary linkage of passion and discipline in an effective strategy process. Passion motivates and maintains a manager's focus, whilst discipline is necessary to make passion productive and effective.

1

What Is Strategy Anyway?

At the fair of definitions and concepts

There is no single definition of strategy. There never has been nor will there ever be. Even if we allow ourselves to be more liberal methodologically and to think about ways of defining strategy other than through classical requirements using definiendum, we will always define strategy either too narrowly, too broadly or simply in a way that allows academics, practitioners and consultants to simultaneously agree. Does it mean that we don’t understand what strategy is? No.

As a scientific discipline, strategic management is a theory of company effectiveness. It is a difficult, technical and multidisciplinary field at the intersection of modern microeconomics, financial theory, organizational studies, marketing, quantitative methods and social psychology. As a practice, strategic management is a search for the best way for companies to develop. This is why the simplest definition of strategy is a coherent and effective response to environmental challenges. Strategy is neither an elaboration of plans and budgets, nor a hundred slides in PowerPoint, nor a list of key company competencies. It is a coherent concept of action based on a few complementary key choices that allows companies to benefit from opportunities to build competitive advantage and to earn above-average results.

‘Strategy’, as described by Sun-Tzu in the book Art of War from the 6th century BC, or as discussed by 17th-century samurai Musashi Miyamoto in the Book of Five Rings, as in the classical treatise About War by Clusewitz, or as stated by Michael Porter in his famous work Competitive Strategy, has a different meaning but always includes common elements.¹ Also academic definitions of strategy have changed every 10 years for the last 50 years as a function of new theories and schools of strategy. Yet they include a common foundation: a set of choices made by top managers using company resources and opportunities from the environment to improve effectiveness of a company’s activities. Despite this common thread, strategy is even more difficult to define than it was 20 or 30 years ago. Although having a good definition of strategy is crucial for the theory and practice of management, nothing will change because in recent years the field of management has become a big market, if not to say a bazaar of theories, concepts, models and terms. There are many reasons for this.

Certainly one of the reasons is the increase in the intensity of competition, sometimes referred to as hyper-competition, globalization and faster – actual or alleged – aging of old recipes for effective management. Managers have a feeling that to fight effectively for one’s place in the market, they have to seek new model solutions and new practices. Demand creates a market for theories, concepts and terms. Novelty is priceless in this market – as is the case of other products on the market. Expressiveness or even outrageousness can also be important. That is why the titles of books have become ever more radical. No one will bother with forlorn and boring titles such as Effective Management or Principles of Good Management. An optimal gambit for the launch of a new book is to signal in its title an end of strategy, structure and so on and/or to announce a new beginning (horizontal organization, virtual organization, remote working, creativity as the main company drive, China or India as the empire of the 21st century, etc.). The use of colorful metaphors, emotions and imaginative narration is universal. Typical of this is the beginning of the book by Lynda Gratton from the London Business School titled Hot Spots: ‘You always know when you are in a Hot Spot. You feel energized and vibrantly alive. Your brain is buzzing with ideas and the people around you share your joy and excitement. The energy is palpable, bright and shining. These are times when what you and others have always known becomes clearer, when adding value becomes more possible. Times when the ideas and insights from others miraculously combine with your own in a process of synthesis from which spring novelty, new ideas and innovation. Times when you explore together what previously seemed opaque and distant.’²

Simultaneously many of these books and concepts incessantly repeat the same recommendations – act flexibly, quickly and stay focused. Create new markets, surprise leaders with an attack, take advantage of human resources, build organizational culture, cut expenditure, be innovative and break the rules of the game (all of them at best). It doesn’t mean that these obvious claims have no sense. They are really important because, after all, management also consists of a fast, flexible, innovative action with a constant minimization of costs. The problem, however, is that there is no best way to manage or to be successful, although it is often promised by bestsellers. What is more, every novel approach gets imitated and loses with time its uniqueness and effectiveness.

A great demand for new management concepts also provokes a sort of industrialization of management schools, even those that are traditionally academic. Business schools change the logic of their functioning. The old academic centers, closed for years in ivory university towers, fight today actively for revenues as governments reduce subsidies. The simplest and often the most effective way to do this is to offer a continuing stream of new corporate training and restructure old programs such as MBAs and EMBAs. Of course, this trend is both good and bad. It brings academia closer to management practices and forces academics to pay greater attention to contemporary organizational challenges and problems. At the same time, however, it decreases the independence of thinking and changes the relationship between lecturers and students. They stop being partners for a dialog and become – which is often the case of students of MBAs and EMBAs – customers demanding recipes and instant recommendations. This forces schools (which are ever more dependent on revenues from executive management programs) to act as normal corporations, and so their curricula become products almost to the same degree as yogurt or cars.

Another reason for the growth of market-like nature of the management field is the dramatic globalization, growing professionalism and standardization of consulting services. It is a huge market worth almost 400 billion dollars, which in the 1980s grew roughly by 20 percent per year. In the last two decades, as the pace of growth decreased, consulting companies were forced (like business schools) into a more intensive fight for customers. They publish good monthly and quarterly journals (with a pinch of science) and books describing their proposals of model organizational solutions. They create new products and try to build new markets. They try above all to coin new catchy phrases, always creating additional demand. When you look carefully at the development of the consulting market, it is probably the one most driven by new ideas and phrases.³

In the 1970s the market was fueled with concepts and techniques of strategic planning and prognoses (e.g. Delphi, analysis of cross impacts). In the 1980s many interesting and novel ideas appeared – kaizen, quality circles, continuous improvement and then reengineering. The 1990s were less dynamic but the concept of key competences, the famous New Economy based on the Internet and the threat of computer systems brought by the year 2000 (Y2K) added vigor to the market.

The years of the most recent decade do not have such catchy slogans and terms, which, no doubt, may also partially explain the decrease of growth dynamics of the consulting market. The convergence of such phenomena as globalization, the change of logic of business and the growing professionalism of consulting has made the management field a very competitive marketplace, in which thousands of sellers – academia, consultants, accidental prophets – try to draw the attention of managers and to think of new words and phrases which hide theories, concepts, models and solutions. Since nobody has time and the attention span, the novelty and the ability to draw attention by words alone is crucial. It is enough to look at the management market in the last years – since the word ‘strategy’ was an effective and interesting way to wrap any concept, everything has become strategic. Ordinary marketing has become strategic, as have human resources, logistics or finance. A price reduction has become a discount strategy; outsourcing has become a strategic concentration; concentration has become a market niche strategy; and mergers and acquisitions have become a growth strategy. What is more, the strategy field itself has started to abound in new terms and phrases, among which undoubtedly the most interesting is the Blue ocean strategy coined by W. Chan Kim and Renee Mauborgne, lecturers from the French business school, INSEAD.⁴ It must be honestly stated that this is a more beautiful and more marketable term than ‘comb analysis’ or ‘configuration analysis’, other names of similar means to build strategy. The concept of the Blue ocean is also much better theoretically grounded and contains more tools than configuration analysis, which had been simply a method of designing innovative strategies or products. And as any well-wrapped product of a better quality, Blue ocean sells much better, until it is replaced by a new theory or concept.

Changing nature of strategy

The natural cacophony of terms, models, concepts and theories favors pessimistic voices claiming that there has been a crisis and a blur of the management field’s identity. Management science and its sub-fields (such as strategic management, international management or marketing) have trouble precisely defining the scope of their research and analyses. They don’t have unambiguous methodological standards, they like to use theories worked out in related fields (mainly economics and sociology), and they are vulnerable to fashion. At the same time, the management field systematically welcomes scientists from other fields – sociology, psychology and especially economics, transmitting their theories and concepts without caring too much about the existing order. The result among researchers is a constantly growing variety of discussion about the problems of management and a systematic sensation of crisis or a sense that the field is out of control. Pointless discussions and questions such as ‘Is a lack of strategy a strategy?’ – which is not the same as the very serious and eternal philosophical question Parmenides posed when he asked whether nonexistence is a form of existence – create an additional sense of disorder and confusion. And finally there has been a slowly growing realization that much management research has little practical value. The world of science, both in its positivistic and phenomenological version, lives its own life, with little relation to the functioning of actual organizations. Only seldom does the field realize it is time to examine real management practices.

It is worth keeping a certain distance to the immaturity of the field and to the idiosyncratic behaviors of scientists. Knowing its past and achievements helps to accomplish this. In 1995 R. Rumelt, D. Schendel and D. Teece, for all practical purposes the founding fathers of the field of strategic management, published an important collective work. It is a set of papers from a conference, which hosted the most prominent strategy theorists. Each of them had discussed precisely one key question or issue from the field. A careful study of their book reveals that there is a constant set of questions for which we have better and better answers and theoretical frameworks.⁵

In 2008 a fascinating analysis of the historical development of strategy was presented by S. Cummings and U. Daellenbach.⁶ They based their analysis on 2366 articles published between 1986 and 2006 in the oldest scientific periodical of strategic management field – Long Range Planning. The question asked by the authors was straightforward: What was the direction of the field’s evolution? The analysis showed – to the surprise of many – that a couple of terminological categories had remained almost unchanged during this period, namely corporation, organization and processes, creativity and innovativeness (this issue is not as new as authors of books discovering the meaning of company’s innovativeness would like it to be), change, technology, decisions, mergers, acquisitions and disinvestments. This means that for the last 20 years the field of strategic management searches for answers to the following questions:

1)What does an organization’s success depend on?

2)How are company resources organized and used?

3)How does the organization react to changes in its environment, for example, technological breakthroughs?

4)What does the process of developing a strategy look like?

5)What is the role of creativity and innovations in this process?

6)What are strategic consequences of the biggest investment decisions on mergers, acquisitions or disinvestments?

History also shows that there are terms and categories that appear out of the blue and become fashionable until their popularity starts to decrease. Such was the fate of terms such as portfolio analysis, scenario planning, vision, mission, benchmarking and the prognostic method called Delphi (who still remembers it today?), all of which had their five minutes of fame in the 1970s. In the 1990s their place was taken by terms such as organizational learning, knowledge management, organizational culture, ethics and corporate social responsibility as well as organizational networks. In addition to their historical analysis, Cummings and Daellenbach have done something very interesting – they conducted an analysis of changes in central and peripheral terms and their mutual relations. The analysis brings an important message to both practitioners and theorists, because it reveals three important trends which may well explain the amorphous boundaries of the field of strategic management.

First, central terms change – in the 1970s it was planning, in the 1980s (times of the dominance of strategy as market position) it was industry and strategy, in the 1990s it was change and strategy, and then organization, process, knowledge, relations and the adjective ‘strategic’ – so the substantive becomes an adjective indicating a dynamic and more systemic nature of the research and analysis.

The second trend is a growing number of terms and relations between them. Strategic management becomes a more eclectic and complex field, which reflects the real practice of building strategy in a company operating in a hyper-competitive market, which ever more often resembles the landscape during a constant earthquake.

Third, time orientation changes, which is reflected in the ‘grammar’ of strategy. In the 1960s and 1970s the word ‘strategy’ was treated as substantive and understood as a set of decisions taken today in order to build the future of an organization. The time arrow points toward the future with today as its point of departure. In the 1980s and 1990s strategy became a verb – researchers were less interested in the strategy’s content and more interested in the process, in which the routines and processes shaped in the past created relatively stable patterns of actions shaping the current state and the future of the organization. Time is therefore dragged – what counts above all else is the impact of the past on the current state and the future of the company. In recent years, strategy has been ever more often treated in a complex way, as a sort of adjective. Researchers are interested in a set of strategic activities – structure, processes and relations. Time orientation changes again – researchers try to look at the company’s current situation from the perspective of the future.

Regardless of how indicative the research of articles in one periodical journal is (though a 20-year period allows for an excellent overview of a field’s evolution), the analysis presented shows a growing eclecticism of the field – because it reflects the changing logic of the market and the organization. Together with the growing complexity of the organization’s world, the field of strategy becomes more complex, but it has its stable fundamental elements. Being enriched with new terms and models of thinking, it always tries to find its place as a link between the organization and the environment, as a flow of innovative and adaptable decisions and actions in which the past, the current state and the predictions about possible scenarios of future events play an important role. If the above analysis of strategic management’s evolution allows for an explanation of the growing complexity of the field and for a discussion of theorists’ uncertainty regarding its identity, it is more difficult to counter the second, more general reason for the aforementioned pessimism. It is in my opinion a natural extension of the spirit of our times, where we lack the optimism of the past. Today fear and inquietude dominate, as does the acceptance of diverse systemic imperfections of political and economic measures. Faith in the possibility of getting to know the ‘true’ answers by means of scientific cognition is limited. The literature is full of dramatic negative consequences of the civilization’s progress, and postmodernists silently assumed as theirs the directive that ‘anything goes’. The mood of the ‘fashionable pessimism’ has been dramatically deepened by the economic crisis that started in 2008. Its progress during 2009–11 makes us think about the words of Zorba the Greek about a ‘splendiferous crash’, but speaking seriously it questions the present construction of a liberal market economy with its modern concept of an organization, which has seemed to be so natural and the only right systemic measure since the decline of the alternative – the socialist system.⁷

Nobody knows now how this crisis will end, but knowing the history of economics allows us to keep a certain distance from the aforementioned pessimism. In the 20th century, we experienced at least a couple of great economic and financial crises. The crisis of the American financial system in 1907 was an endless flow of bankruptcies of financial institutions, dramatic reductions of lending capacity, price and production reduction as well as the breakdown of world stock exchanges. The stock exchange crises from 1927 and the financial crisis from 1931 were even worse. Problems of financial institutions started with the collapse of Creditanstalt, the biggest Austrian bank, and they moved to the whole of Europe (especially in Germany) and to the US in the blink of an eye. During the latter crisis, gross domestic product fell by more than 29 percent and returned to 1929 levels only in 1939! Economies almost drowned – ...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures
• Acknowledgments
• Preface
• 1. What Is Strategy Anyway?
• 2. Passion and Strategic Choices
• 3. Discipline of Strategy Execution: Sensemaking and Territory
• 4. Discipline of Strategy Execution: Goals and Business Model
• 5. The Effect of Passion and Discipline – Competitive Advantage
• 6. What Makes a Good Strategy?
• 7. Company Adrift – Inertia, Organizational Games and Unsure Leaders
• Notes
• Index