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4.22.2010

'Strategy by Any Other' Name by Walter Kiechel

A friend who books speakers for business events tells me strategy experts aren't much in demand these days; indeed, they haven't been for years. (Except in Japan.) Until recently audiences still sought out thinker/talkers on innovation or leadership. Of late, though, the rabble has ears only for economists or the occasional journalist who can shed light on the Global Financial Crisis (and perhaps wave a pitchfork in Wall Street's direction).
So much for us who wear the big "S" on our sandwich-boards. You may, if you're so inclined, shed a tear for us wallflowers, but weep not for our underlying subject. While I'm thoroughly biased, it strikes me that strategy shows up all over the place in contemporary management literature, albeit sometimes under different cover. It's not exactly a case, per Jerry Lee Lewis, of "He's walking in my tracks, but he can't fill my shoes." More that the latest marching bands are parading down strategy's road, and lengthening it, but under banners bearing new devices, not the tattered regimental colors of old.

Take Mark Johnson's Seizing the White Space or the precursor, McKinsey-Award-winning article in HBR, "Reinventing Your Business Model," by Johnson, Clay Christensen, and Henning Kagermann. Johnson's four-box framework for a business model contains all the key elements of a strategy — customers, costs, and competitors — plus some features that look like a recapitulation of strategy's history.
The "customer value proposition" analyzes the job your product or service will be doing for your customers. Johnson's "profit formula" squarely addresses your "cost structure" but also has, in its "revenue model" subcomponent, a nod to market share, which means thinking about your competition. To any student of strategy's history, Johnson's "key resources" quadrant will immediately recall Birger Wernerfelt's resource-based view of the firm, and maybe its more popularized incarnation, core competences, courtesy of Gary Hamel and C.K. Prahalad. And if those weren't flashbacks enough, the fourth box in Johnson's framework, core processes, should evoke lots of memories of the late 1980s and early 1990s when strategy seemed all about competing on capabilities.
None of this is to take away from the originality of Johnson's work, but only to say that he and his HBR co-authors are building on the original paradigm of strategy. Which is what you're supposed to do with a paradigm. In a few pages of his book, Johnson invokes the glorious history of strategy, including Alfred Chandler's famous observation that strategy follows structure. And this in service to reminding us of an ever-important piece of wisdom, namely, not to confuse a mechanical strategic-planning process with the actual creation of strategy. Modern strategy has always been disruptive; its partisans will applaud the ambition to reinvent one's business model.
Some of us believe that almost as important as the invention of strategy was the accompanying creation of Greater Taylorism, the sharp-penciled approach to every aspect of a company's operations. For our small, slightly squirrely band of brothers and sisters, Competing on Analytics provides an almost pornographic thrill, as in "beyond one's wildest dreams." Or maybe the thrill an online gamer would get making the hyperspace leap from, say, Donkey Kong to Halo 3 or God of War.
Co-authors Tom Davenport and Jeanne G. Harris define analytics as "the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions." They recount how companies ranging from Harrah's to BestBuy to Procter & Gamble put such magic to work deriving deeper and deeper insights into their costs, customers, and competitive situation.
Somewhere in heaven, Bruce Henderson, founder of the Boston Consulting Group, is cheering. Analytics represents the latest version of precisely what he and the other original lords of strategy were trying to do: gather and interpret facts in a way that helps clients achieve a competitive advantage. The pioneers, who used slide rules and, when they became available, early electronic calculators, would drool with envy at the information technology their successors can command, not just the hardware but the computerized spreadsheets and statistical software.
The protean Tom Davenport knows from strategy, as they say in the greater New York area; he had major speaking parts in its unfolding history. As he and his co-author note, "Analytics themselves don't constitute a strategy, but using them to optimize a distinctive business capability" (that would be your competitive advantage) "certainly constitutes a strategy."
Earlier this week I sat in an audience listening to John Hagel and John Seely Brown discuss their new book, The Power of Pull. The luminaries' basic idea — I'm probably oversimplifying horribly — is that the old, now disappearing economy was based on "push," forecasting what would be needed or what would sell and then mustering resources to fulfill that demand.
The new world is one of "pull" — find people and resources exactly when you need them, attract them to you even before you know they exist, and then pull the best from within them, and yourself, to achieve your potential. Celestial music to those of us who harp on the power of the Maslovian hierarchy, the idea that, as we become more affluent, we can pay more attention to ever-higher things, like the need for self-actualization.
Hagel, Brown, and their co-author Lang Davison dismiss strategy-classic concepts like the experience curve as outdated relics of the push world. But they also emphasize that their pullish way of thinking is essential if companies today are to forge growth strategies.
Particularly resonant for this strategy-besotted listener was the Hagel-Brown idea that companies needed to find ways to pull talented people from the core of their operations to get them onto the corporate periphery, where new markets, opportunities, and challenges lie. This sounds remarkably like what Martin Reeves, head of BCG's Strategy Institute, stresses when he talks about making strategy more "adaptive." Stand by for further harmonic convergence as new waves of thinking set strategy's old armada sailing into the future.

Walter Kiechel III is the former Editorial Director of Harvard Business Publishing, former Managing Editor at Fortune magazine, and author of The Lords of Strategy: The Secret Intellectual History of the New Corporate World. He is based in New York City and Boston.

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