Strategy is Dead? – No, Not Really

In a recent blog posting on Forbes.com, Rick Smith states that the practice of strategy as it is taught and practiced is DEAD.

I suspect that he is exaggerating to get us talking and thinking, but my interpretation and summary of the article along with my thoughts:

  •  Incrementalism has been disrupted by disruption – that is, it is no longer sufficient to make incremental improvements.

My Response: This is nothing new. Disruptive tech and disruptive global competition has been around for the last 20+ years.

  • The past is no longer a good predictor of the future – the future has been clouded over by the rapid changes in technology and society.

My Response: The future ain’t what it used to beIt never was. Each successive generation of consumers and companies has always been different than the past.

  • Competitive lines have dissolved completely – competition and competitors can come from anywhere.

My Response: OK, you have a point. But competition has always come from both inside and outside of the industry.

  • Information has gone from scarcity to abundance – knowledge used to be the strategic discriminator.

My Response: But, all resources go from scarcity to abundance. It is not the abundance of information that results in competitive advantage, but what the firm does to convert the information to knowledge.

  • It is very difficult to forecast option values – big decisions are increasingly risky.

My Response: The future has always been dim. We are just smarter about how little we know.

  • Large-scale execution is trumped by rapid transactional learning – the ability to execute a big program, like six-sigma, is no longer as valuable as flexible and quick responses to market and environmental changes.

My Response: Yes, but we still need large-scale programs PLUS rapid testing of strategies. But, I agree that the pace of change has certainly picked up!

The author says that strategies today are guided more by the actions and reactions of the employees, not by the strategists and senior management. Along those lines a recent academic article proposes that losing middle, operations management is more damaging than losing senior management.

In my opinion, this has always been the case. Today’s strategy practice is just more rapid and riskier than it was in the past – middle management and the front lines know more, a lot more today, about the changing environment than senior management.

But I do agree that companies are doomed if they predict the future based on the past and believe that incremental improvements will win the day. Examples may include Dell and Sears and, perhaps, even Yahoo.

In summary, to win at strategy today, companies must have both a long-term direction and be making numerous low-cost experiments that keep them abreast of the changing environment. Examples? Google? Amazon?

Your comments and thoughts?

Let me know. Prof Goeltz

 

Sources:

http://www.forbes.com/sites/ricksmith/2014/09/22/is-strategy-dead-7-reasons-the-answer-may-be-yes/

Bermiss, Y Sekou and Murmann, Johann Peter, The Impact of Functional Background and Top Executive Mobility on Firm Survival (April 22, 2014). UNSW Australia Business School Research Paper No. 2014 STRE 02. Available at SSRN: http://ssrn.com/abstract=2470068 or http://dx.doi.org/10.2139/ssrn.2470068

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26 Responses

  1. Alicia Sprenkle October 1, 2014 / 12:47 pm

    I wanted to use my comment to agree with what you said about the future. While it is important to look at the past to analyze trends and activities, we never have a clear idea of what the future will be like and we never have. With the constant innovations in technology, building a strategy for the future is even more difficult. The way to get things done the easiest and the best way changes so often.

    • Profgoeltz October 1, 2014 / 7:14 pm

      Yes – If I knew the future, I would be a stock investor!

  2. Laura Ries October 1, 2014 / 2:13 pm

    Dynamite Group’s brand GARAGE, could have been one of H&M’s competitors to watch. Unfortunately, the company abruptly changed their strategy around 2009. Garage was once a cheap, high innovative brand; clothing a few of the most popular low-key celebrities, such as American Idol contestants. After the initial popularity in the US, the brand appeared to have changed their strategy into being a more costly, highly derivative brand with no celebrity endorsers. Currently, employees at store level are unhappy with the communication between themselves and corporate offices. In addition, many of these employees were given false promises of advancement and standard raises.

    Dynamite Group attempted to change their position in the market, hoping to be more successful. Dynamite Group’s other self-named brand, Dynamite, is a brand geared toward stylish, young professional women. Though these two brands contrast in style between “young trendy” and “professional trendy,” the company did not take full advantage of diversification when changing GARAGE’s price range. Although Dynamite may give the appearance of being more costly than GARAGE, the two brands actually have a very similar price range with Dynamite being ever so slightly more costly then GARAGE.

    Dynamite Group has also focused more on expanding GARAGE than Dynamite itself. After the initial drop in popularity with Garage, it is a wonder why Dynamite has not called more attention to their self-named brand. It is more similar to H&M’s customer offering but it offers a much wider range of young professional selections. H&M carries of selections in their stores but this department is lacking since it is geared more toward the young and trendy. H&M Group has other brands to take care of the young professional’s market but all physical stores are primarily located in Europe. It is important to note that Dynamite Group only has a strong presence in the US and Canada and H&M Group is looking to expand H&M, as well as their other brands, into the US. Advice to Dynamite Group would be to take advantage of the young professionals market in the US before H&M Group generates popularity in the US as it almost effortlessly did in Europe. Dynamite also appears to cater to more American styles and is considerably cheaper that H&M Group’s brands.

    • Profgoeltz October 1, 2014 / 7:13 pm

      Terrific and thoughtful. Thanks!

  3. dylank October 1, 2014 / 3:28 pm

    I agree that you must have a long-term direction as well as make numerous low-cost experiments to keep up with the changing environment. Past ways of thinking have changed, and much of what was believed to be accomplished by the 21st Century has not been achieved. Many T.V. shows and other forms of publication believed that our technology would be drastically improved, for example a car. Many believed that hover cars would be on the roads by now, however we are still working to perfect cars that run on fuels other than gas. If you look at the eBay and PayPal breakup, when eBay started did they ever think that websites, like Alibaba, would have built upon their idea? Looking at eBay, eBay started out as an auction site, using money orders or cash on pickup as their form of payment. PayPal was developed to shorten the time of the transaction. Alibaba built on eBay’s idea and offers much more, from services to an exact product you are looking for. eBay should have had an idea where they wanted to be, but they focused more on perfecting their auction website, focusing on past success. PayPal was an experiment to make paying the seller easier, and it worked. However, nothing was done beyond that, besides perfecting the online programs. They could have looked into products or services that Alibaba now offers and now it is believed that both eBay and PayPal will be sold at some point. Companies now cannot be afraid to take a risk, the entrepreneur takes a big risk when the venture started, and is this any different? Companies may start small and claim a small niche market, but sooner or later they have to have a strategy for the future. The past is the past, we now have to take the time to become innovative and create a need that no one else has explored.

    • Profgoeltz October 1, 2014 / 7:16 pm

      The problem for managers and strategists is being both a short-term detailed analyst AND a broad, directional thinker. Most of us are good at one or the other, not both

  4. Amanda Kelley October 1, 2014 / 4:44 pm

    I agree that you can never move forward with a business if you focus on what has happened in the past. The reason I believe this is because so much changes and people always want to do bigger and better then they have in the past, not repeat history. They want to make their own mark in the world, so they are constantly improving to keep up with the recent times. This is good because we always want the most recent things and rely on the most recent information.

    • Profgoeltz October 1, 2014 / 7:17 pm

      Yes, good thoughts. But, the culture and structure and routines are all based on the past. Or are they?

  5. David Higman October 1, 2014 / 6:08 pm

    I think that long term strategies are important, provided they are revised along the way to make sure that all of the relevant changes that have occurred since the strategy has been created has been taken into account. So in a way long term strategies need to be used as a road map for where the firm want to be in the next so many years, but they need to keep in the mind that their strategy could need to be radically changed if not thrown out entirely depending upon future develops that would affect the long terms strategy. Businesses need to revise and review their long term strategies over the course of its general timeline. We cannot use the past as an indicator of the future, most times we either expected to much or didn’t expect a specific development at all. I think the most important part of a strategy is for it to be flexible. It needs to be able to change as the world changes to be successful, because if the strategy runs counter to the current culture it will not be successful. An important thing to note would be that businesses cannot become relaxed even if their successful and their strategies are currently working successfully. There is always the chance that someone will improve on what you do, and do it better and cheaper. A business cannot rely on the past, it cannot sit comfortably in the present, it needs to have a skeptically eye toward the future and what could come in order to be successful. Strategy is not dead, but it has fundamentally changed over time as a result of the changing world that’s around it. The fact that the world and strategy changes so rapidly is the reason why some big changes in strategy can either make or break a company. It can be very risky, but it can also be very rewarding as a result.

    • Profgoeltz October 1, 2014 / 7:19 pm

      Yes, but constant revisions lead to chaos. It is a delicate balancing act!

  6. Lauren Pepito October 1, 2014 / 6:23 pm

    I agree with your statement “The future ain’t what it used to be – It never was.” Just because the past is not a good predictor of the future does not mean strategy is dead. It just means businesses have to learn how to strategize in a different way. There will always be rapid changes in technology and society therefore you cannot strategically plan your future for the long term. However, you can still strategize because a company should always want to reach a goal. If the company sticks to their mission, goals and objectives and innovate from their core values, their planning should take them into a long-term direction of success. Incremental improvements will not take companies to the top but as long as they are one step ahead of their competitors, they will get there soon. The business world would be lost without a strategy or a plan.

    • Profgoeltz October 1, 2014 / 7:18 pm

      Good thoughts. But how doe management balance the sort-term demands of the shareholders with the long-term visions?

  7. Tara Lambert October 1, 2014 / 9:07 pm

    This article from Forbes says that strategy is dead but to plan a business you need to have a strategy. You can’t just start a business and just leave it to do nothing. It has to have something planned. The business doesn’t have a specific direction unless you plan things out. Therefore, strategy can’t be dead.

  8. Michael Fyke October 1, 2014 / 9:25 pm

    I agree that just having a abundance of information does not give a competitive advantage. Gaining a competitive advantage comes from being able to utilize this abundance of information better than your competition. With access to the internet every company will have abundance of information, but how you use this information is the key to success. Strategy is not dead because companies have to formulate strategies based on all the information available to them in order to be successful.

    • Prof Goeltz October 4, 2014 / 8:17 am

      The use of Big Data may be the answer, but strategy has yet to really link up with Business Analytics

  9. Julia Zufolo October 1, 2014 / 11:10 pm

    I think that with any strategy it is definitely important to have a long-term goal or plan and it is important to keep up with the current trends in order to kind of predict the future (although that is difficult to do). To go back to some other comments, I also think it is true that a company may have to re-evaluate their long-term strategy many times based on new trends and technology that surface. I somewhat agree with the idea that the past cannot predict the future. But I also think that the past does actually play a small role in formulating a strategy because you can only get better by learning from the past, just as in life. If something did not work out for the company in the past they can figure out how to improve on those things or implement something different for their future goals. I do not think they should rely solely on the past to predict the future but they should incorporate what they have learned from the past mixed with future goals to create the best possible strategy for their company.

    • Prof Goeltz October 4, 2014 / 8:18 am

      Aha! We can’t escape the past, so we might as well build on it and learn from it?

  10. Jon Czarnecki October 2, 2014 / 1:10 am

    I found the article interesting and informative, but I also especially agreed with the importance of the middle management – and the common employee – having a direct influence on strategy. Your example of Google sums it up nicely – their work environment encourages transparency between the employees, middle management, and upper management alike. Their success in this decade could most certainly be attributed to their expansion in the smartphone industry and the software that powers their phones. To clarify, Android is an open operating system; this means that, feasibly, one person or a phone manufacturer can customize their phone to adjust to current market trends in the industry. App development also has way less red tape in terms of regulations, further bolstering their strategy initiative. Another example would be Valve Software – once a rather renowned game developer, their business environment and strategy has fostered extremely dynamic development and growth for the company. Instead of just developing video games, they now distribute games, software, and even have a specialized economic branch of analysts that try to gauge the purchasing climate in this age of high speed internet and ease of piracy.

    • Prof Goeltz October 4, 2014 / 8:37 am

      This is a very interesting area to explore further – how strategy emerges instead of being planned, and how it emerges from the frontline and from middle management.

  11. LeahBanton October 2, 2014 / 9:19 am

    There seems to be a common theme in each of your responses to Mr. Smith’s initial points. This theme is the fact that the business world is constantly evolving and has done so since it came into existence. Strategies have evolved with them, continuing to attempt to adapt to an ever changing and advancing world. So as you pointed out repeatedly, strategy is not dead at all. In fact, it is almost a living, breathing organism that will continue to exist as the business world does, ever changing along with its environment.

    • Prof Goeltz October 4, 2014 / 8:38 am

      Yes! And it is breathing down our necks and is about to catch us! Run faster!

  12. Megan Campbell October 2, 2014 / 2:24 pm

    “Losing middle, operartions management is more damaging than losing senior management”

    This is something I want to comment on. At my job I am required to take leadership classes from which the focus of management is quite relevant. During my leadership classes I have learned that higher management tend to focus more on middle management to give them the skills and training needed to move on up to higher management, this is a goal of higher management. The way I look at it is if higher management is focusing their valuable time and knowledge on middle management that will make them a huge asset to the company. The reason being, not only is middle management picking higher management brains they are also able to see the mistakes they make and learn from them causing them to be more of an asset.

    • Prof Goeltz October 4, 2014 / 8:40 am

      Indeed, senior management should be increasing the skills of the middle managers (and likewise, the middle managers…) as well as looking externally and setting direction

  13. Noelle Turdo October 2, 2014 / 2:34 pm

    I completely agree with what you had said about the future not being what it used to be. With the rapid development of technology, there is no way to even forecast what could happen a year from now. I think that each of these topics correlate with one another. The future being unpredictable and the abundance of information versus it’s scarcity go hand in hand. Businesses are evolving with the technology being developed. With that said, information is easier to get a hold of, via internet, email, blogs, etc. Technology is eliminating some of the competitive advantages companies once had. There is no way of telling what information will be released ten minutes from now. Strategic planning becomes difficult in these situations due to multiple curve balls. However, it is not dead.

    • Prof Goeltz October 4, 2014 / 8:42 am

      Indeed. In keeping with your post and the sports season, then the thing to do is learn to hit curve balls?

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