There is little evidence to suggest ‘formal strategising’ makes any significant contribution to profits. For the analysis you build your strategy on is almost guaranteed to be wrong. So, when choosing your next strategy provider don’t choose the best one - choose the cheapest, as this will make it easier for you to ignore their recommendations when unpredictable reality bites.
Formal cycles of ‘meetings, discussions, and negotiations’ build consensus about the direction the organisation should take and allocate roles and resources to realise it. But formal strategising is dogged by flawed inputs: inaccurate perceptions of the current market; unrealistic assumptions about firm capabilities; and wild guesses about the unpredictable future. So, what if it’s not a brave new world your strategy is signposting you towards, but is instead entirely the wrong direction?
Firms adopting formal strategies tend to be less profitable. Not only do they rely on analysis about the future that’s guaranteed to be wrong, but they also depend on formal reports for communication and evaluation of results. The result is a rigid organisation - too slow to respond. Crucial information gets stuck in non-dynamic feedback loops. And when the future doesn’t pan out as planned they become increasingly fragile and susceptible to implosion or collapse.
Profitable firms, on the other hand, tend to have managers that make use of informal channels of communication and evaluation. This fosters an increased awareness of the knowable present (what’s really happening now and why). Strategies built on awareness change effortlessly as new evidence and insights are discovered. For they are built on an ongoing search for the ‘truth of the position’.
Like a game of chess, the future has too many variations to viably calculate everything that might happen. So, like the chess grandmaster we must seek to make moves that improve our current position, recognise favourable patterns and deploy resources to stabilise and amplify areas of strength (and disrupt areas of weakness). For this creates openings. And one doesn’t win at chess by making moves directly aimed at mating your opponent or winning particular pieces, but by cashing on sufficient positional advantage and timely exploiting opportunities.
In a complex world we must be wary of creating arrogant strategies. Part one of this series of blogs warned against the danger of strategy being developed at the top, then passed down to ‘operationalists’ to execute. Part two explained how culture acts as a barrier to successful implementation. This final part argues for a strategic process built on awareness of what’s really happening and why. And next week’s blog will introduce a viable method for doing this.