Thursday, April 12, 2012

Strategic Thinking

In addition to referrals from friends and family, I rely on the New York Times and the Economist for book referrals. I also am a big fan of the Browser’s 5 Books interviews, and the Farnam Street blog, which seems to be devoted to reviewing the vast quantity of business books. Here’s how the anonymous author describes the blog:

The Farnam Street Blog is about the pursuit of worldly wisdom by mastering the best of what other people have already figured out.

In 2011, I spent over 1,000 hours bringing you articles on how our thoughts are influenced; the causes of human misjudgment; culture; history; mental-models; and other nutritious subjects for your brain.

I’m not sure what the business model is, although the author does seem to make money by referring readers to Amazon. But I have a hard time believing that is in any way commensurate with the amount of work involved. Nevertheless, it's great.

Today’s post about strategy, struck a chord. As someone who has been involved with projects whose strategies seemed to have ranged from “Be awesome” to “Do something” I could definitely identify with this point:

A leader’s most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them. In contexts ranging from corporate direction to national security, strategy matters. Yet we have become so accustomed to strategy as exhortation that we hardly blink an eye when a leader spouts slogans and announces high-sounding goals, calling the mixture a “strategy.”

Having been, over the past fifteen years, more of a project manager than a leader, I have often found myself in the position of having to help people see that a project lacks coherent strategy.  Frequently, though, especially in government, where the rewards of success do not directly go to the individual, leaders are unwilling to assume the risk that accompanies the adoption of a coherent plan for going forward. This point is well made in the Strategy Paradox:

The most profitable strategies are “extreme” strategies that commit companies to positions of either product differentiation or cost leadership. These extreme positions expose firms to a greater likelihood of bankruptcy by increasing the strategic risk they face. Consequently, the strategies likeliest to succeed are also likeliest to fail. That is the strategy paradox.

This point is lost in most business books, which largely chronicle the successes and ignore the failed companies, suggesting that all you have to do to succeed is copy XYZ corporation—as if the risk of failure is not equally present in each situation.

Moreover, I think organizations need to acknowledge the fact that a strategy supported by all is almost certainly a bad one, because it makes no choices. As Good Strategy Bad Strategy—the book whose review precipitated this post, and which I have ordered—states, a good strategy has three elements:

a diagnosis, a guiding policy, and coherent action. The guiding policy specifies the approach to dealing with the obstacles called out in the diagnosis. It is like a signpost, marking the direction forward but not defining the details of the trip. Coherent actions are feasible coordinated policies, resource commitments, and actions designed to carry out the guiding policy.

As the review articulates, and my personal experience supports, the vast majority of organizations have horrible strategies. In a way, that’s not bad; there’s nothing inherently wrong with a diagnosis that things are pretty much OK, and we’ll just keep on truckin’, but there seems to be a lot of time and money wasted in activities designed to create the illusion that the organization’s strategy is something different.

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