Old school strategy is dead; involvement engagement, entrepreneurship, is the new school strategy

This idea is an offshoot of reading Leafrogging the Competition by Oren Harari  Ph.D.  From 1984 to 1996, he was senior consultant of Tom Peters Group (author of books like Passion for Excellence)

1.  Old School Strategy

Old school strategy is dead or obsolete.  And yet they continue to dominate the agenda of board rooms and the curriculum of business schools. In the school where I teach, strama paper is the capstone of the graduate school

Here is what others say on old school strategy: ( page 50 Leapfrogging the Competition)

"All strategy melt in the face of battle"

"No battle plan survives contact with the enemy -  Gen. Colin Powell

"A good deal of corporate planning is like ritual rain dance, it has no effect on the weather that follows, but those who engage in it think it does"   -  Brian Quinn, Darmouth

"Strategic plans are forecasts of past historical trends and rarely anticipate new opportunities " - Arthur Andersen director.

How does this relate to Peter Drucker's teaching that we must focus on results;  and that means focussing on the future;  we rarely see that in strama.   (What must consult seers, or crystal ball experts?}

Thus says Harari, traditional old school strategy planning:

      l.  is harmful

     2.  is static

     3.  rigid

     4. complicated

     5.  uninspiring

     6.  is arrogant.

Thus in GSB, we see a lot of students fail, or get confused with the mechanics of Strama tools:  the grand strategy, IFE, EFE.  The conclusions are usually stale and generic:    market penetration, market development, divestment, concentric diversification, and hardly are students able to come up with new, differentiated, unique plan.  Business plans for entrepreneurship elective are more exciting and  innovative.

2.  Rearview mindset

The strategic planning now practiced,  is predicated on the assumption that looking at past data will give you insight into the future, like driving a car by looking at the rearview mirror.

What? Predicting in linear fashion the future which could be disruptive.?  Frederick Hayek in the American Economic Review calls this "fatal conceit" of managers.  He is a Nobel Laureate.  He says that the no one can fully know or measure the complex nature of the market.

Corporate intelligence expert Herbert Meyer supports this conclusion saying that your conclusion about the business/environment suddenly lose validity.  The premises/observation on technology, markety, society, geopolitics, etc, may be valid/appropiate today, but tomorrow may be irrelevant because of the rapid change

Strategic planning as understood in the past, is a sacred cow and can be outright dangerous to business health

3  Me too strategies

Predicting the future of the company from a set of same data usually results in "me too" product or strategies.  Fagan from Harvard says that most strategies would have its objective defeating the competition with a unique differentiated product. So with Seth Godin.  Be the purple cow (unique product) or be ignoreable

4.  Mergers and acquisition

     Many big businesses have gone on merger and acquisition spree.  This is true for many banks in Japan and US.  This is to grow the branch network and reach market, achieve economies of scale, based on the assumption of synergy.  But many mergers fail.

    Why are mergers part of many corporate strategies?

    1. Assumption is bigger is better

    2.  Synergy

    3.  Bigger market share, sales, profits.

    4.  Peter Drucker, the management guru says because it easier.  Growing the business organically is harder;  buying an existing business is faster and easier.  Overnight, you have more branches more staff

   5.  Freudian, ego of management -  mine is bigger than yours.

   Why do mergers fail?

   It is like asking two Godzillas to mate and produce a gazelle

   1.  Too big means that there is too much inertia for the large companies to serve customers and defeat the competition;

   2.  Clash of cultures and internal wranglings as to who will head a unit or be downsized.

   3.  The big problems of two big companies are doubled/compounded.

   4.  According to Warren Buffet, he observes that the stock price of the acquiring companies suffer.

     Thus past mergers saw failures, eventual divestment of the acquiring companies.  Bigger is not necessarily better

5. Spread sheet mentality

   CEOs and top guys who have nothing but ROI in their mind eventually lose out.  Those who watch out Wall St. eventually find themselves off the wall but at the gutter.  They neglect markets, products, customers.  The numbers are the results rather than the end of all business activities.

    Drucker correctly notes that the primary purpose is to create customers

    Those who come to the business with just $ dollars in their mind, end up like pirates and robber barons.  Profit maximization is no longer the name of the game,  CSV corporate shared value is the new replacement for obscene capitalism, says the Harvard Guru himself  -  Michael Porter

Alternatives to old school strategic planning

       1.  Creativite synthesis, collabaroration  and entrepreneurship

McGraw University  Henry Mintzberg espoused that  creative synthesis as the key to business success.  Creative synthesis consist  of:

     1.  information

     2.  resources

     3.  peoples creativity

     4. commitment

Other translation:   collaboration, teamwork, and collective entrepreneurship ensure business success. 

Alternatives to old school strategic planning

     2.  Business Model Improvement by Alex Osterwalder

     Changing the business model (revenue, cost model, primary target market, key resources, activities and partners, customer link and customer bond) enables many companies to meet competition head on change products and processes rapidly.  The BMI enable multinationals wishing to compete in emerging markets adjust.

     3.  Collaboration instead of competition

      Collaboration among suppliers and companies even with competition enable  filling in the demand, the supply chain requirements like the bolt in bolt out Voltes 5 cartoons.  They combine and then uncouple after the supply contract is over.  And thus save on large fixed asset and infrastructure.  The world is flat enablers allow this to happen.

Coopetition is now the name of the game;  price war with the competition, being motivated by number and number 2 paradigm is the thing of the past.  Coopetition, cooperation, collaboration works and is now the name of the game.

     4.  Focusing on opportunities (entrepreneurship)

     Opportunity seeking, screening and seizing are important topics on entrepreneurship elective.  They should be important topic in strategy.  They are:

    External:   products, market, customer, customer satisffaction

    Internal:    business process, materials, manpower, productivity quality service enhancement,

    5.  Strategic conversations

          "Making kuwento" handing down stories are important and powerful tools in communicating values, vision, and mental models.  I have heard this often from TMC CEO Dr. Bengzon, and AdeMU President Fr. Ben

          Harari prescribes constant conversations but more on hard issues by top management with their people;

         These questions can be asked:

         1.  Why are we here?

         2.  What is our purpose,

        3.  Who are our customers and how do we serve them?

        4. What makes our organization unique;  How do we maintain and even improve that uniqueness.

        5.  What makes our product and service unique?  How do we maintain that uniqueness?

        5.  Who are our competitors?  How do we beat them?  How do we utilize them to serve the market better

       6.  What if any,  prevent us to be successful?

       7.  How do we remove the hindrances?

       8.  What are our definition of success?

       9.  How do we become successful

      10. What is our mission?

      11. What are our beliefs?  (norms and values)

      12. What are our principles?

      Areas to be probed by strategic conversations:

     l.  commitments

     2. new ideas,

     3. critique of decisions

     4.  alternatives,

     5.  sharing learning

     6.  implementation problems

6.  Mental models

       

       According to Peter Senge in his book, Fifth Discipline. the first step towards strategy is changing the mental models.  Without this, you can not force commitment nor action  towards the direction set.

     According to Arie de Geus, former chief planner of Royal Dutch Shell, the purpose of strategy is not to make plans but to change mental models, to provide a template to quickly evaluate opportunities and opportunities and make strategic right choices everyday.  

7.  Role of leadership

     Leadership, according to Harold Geneen, the ertswhile boss at ITT says that leadership contributes to 70% of the bottom line.  Therefore leadership must be enlightened, passionate, and creative.

    Harari prescribes leadership to be: 

    l.  Exciting  (world class)

    2.  Cohesive  (promotes unity)

    3.  Ever evolving (innovating, alive with new ideas)

8.  Always organize around your customers 

      1.  Always have someone report on what the customer wants and needs are;

      2.  Monitor customer complaints;  you can learn zillions from them.

      3.  The starting and end point of all processes and resources is to serve the custmers.

      4.  What to do with abusive customers who are dishonest and make unreasonable demands, and are disruptive;   they are no longer customers.  Harari advise to get rid  of them and have the law deal with them

What do you think of these new ideas? 

Are they disruptive?

Do you agree with HBR that traditional strategy is dead?

Nilofer Merchant - disconnect between MBA strategy and business reality 

--

Jorge Saguinsin

"Getting higher and stronger"