Strategy
One of the greatest strategists of the 2nd World War complained that strategy was undervalued. It is often misunderstood and, more often than not, the label "Strategy" is misused.
Last week, as nations all over Europe celebrated VE-Day, each in their own fashion, I re-read Field Marshal Sir Alan Brooke’s diary entry for the original day in 1945. As British Chief of the Imperial General Staff (CIGS), Brooke had been the architect of a significant part of the strategy that had led the Allies to victory over Germany. He committed to his diary that he was a little frustrated that battlefield commanders had become celebrities while the importance of strategy and its gestation were not appreciated.[i] I tend to agree that strategy is, at least, poorly understood.
On the first occasion that I was asked to give a talk on “Strategy” to a meeting of managers, I looked up “Strategy” in a 19th-century encyclopedia. I found a wonderful quote attributed to Field Marshal Blücher (he whose timely arrival on the French right flank sealed Napoleons fate at Waterloo). Blücher, himself no great strategist, supposedly said: “Strategy is the art of the general in the absence of hostile armies.” You clearly cannot beat that for conciseness and elegance.
Over the years, I struggled to find a civilian or universal equivalent. I feel that I have failed. “Creation of value through dispositions and resource allocations not imposed or justified by manifest stakeholder requirement” was as close as I got. It is, therefore, always best, when in doubt, to go back to the military original to check if an initiative is truly strategic.
A few examples may help to illustrate how this definition is useful in deciding if certain management activities are strategic or not. Reacting to a competitor’s price reduction by extending your warranty period is possibly clever, but it is certainly not a strategy. It is a reaction to a manifest stakeholder requirement, customers’ expectation to get the same perceived value for money as is on offer from the competition. A business plan is not a strategy. A business plan is a simplified illustration of how a perceived customer demand can be met at a cost covered by expected revenue with a margin sufficient for financing the required assets. It is commonplace, but wrong, to see plans, or answers to competitors’ initiatives, presented as the “such-and-such-strategy”. A plan to build a dozen wind energy parks in the North Sea is not a strategy. The list would be easy to extend.
It should be quite obvious that most leadership activities in a non-military environment are likely not to be strategic, because “manifest stakeholder requirement” had better be dealt with in a timely and reliable fashion. A military leader, at least in a modern, democratic state will normally work under a mandate to “prepare for war in order to preserve the peace”. Under such mandate, it is easy to see how the lion’s share of a general’s work might be strategic, building capabilities against potential adversaries that are possibly never even named and will, hopefully, never, ever, attack.
In the civilian sphere, private or public, strategic value is created by creating options. To be more specific, options to fulfill stakeholder requirements in case they arise, under the circumstances possibly prevailing at that point in time. If an initiative is not driven by immediate stakeholder concern, clearly feels akin to something a general might do “in the absence of hostile armies” and gives an organization extra options, it might well deserve the attribute “strategic”.
The trouble is that options are frightfully expensive. A view that does not become quite clear without understanding that the currency required for financing options is opportunity cost. Opportunity cost is not a widely understood concept. It is the value of what else could have been created out of the same resources. As a clever investment can multiply in value, the opportunity cost of creating certain options may be much more than the apparent expense at the time of its incurrence.
Implementing a successful strategy, therefore, is the art of withstanding strong stakeholder pressure in order not to create options that the organization cannot afford while at the same time stubbornly defending the creation of options that the organization cannot afford not to have. It is all pretty nerve-wrecking stuff. The best that can ever be achieved is to get it right more often than getting it wrong. A brilliant strategist is someone who understands this and creates a bundle of options with a high probability of leaving the organization better of on balance after various wins and losses.
Brilliant strategists are rare creatures. But persistently asking about options is a mere acquired habit and will go a long way towards nudging an organization from drifting to pursuing a reasonably sound strategy.
[i] Field Marshal Lord Alanbrooke, War Diaries 1939 – 1945, Edited by Alex Danchev and Daniel Todman, Phoenix Press, London, 2002, pp 688-689