Strategy on the Morph

In 1966, Time magazine published a cover article posing the question, "Is God Dead?" Asked about the possibility, former President Eisenhower reportedly responded, "That's funny. I was just talking with Him this morning." Some of us are beginning to feel the same way about trendy assertions that strategy is dead.

You may have read one such proclamation in the Jan. 25 Wall Street Journal. "Strategy, as we knew it, is dead," argued Walt Shill, who leads Accenture's North American consulting practice. An article titled "Strategic Plans Lose Favor" goes on to quote him saying, "Corporate clients decided that increased flexibility and accelerated decision making are much more important than simply predicting the future."

If you believe strategy consists of predicting the future, or making plans, please feel free to take a chair next to Mr. Shill in the front row of mourners. On your seat you'll find a copy of Henry Mintzberg's 1994 book, The Rise and Fall of Strategic Planning, which should completely disabuse you of any residual hope you may have held out for the corporate planning process.

Meanwhile, a few of us who didn't get the sad news will be sitting around the roaring hearth, sipping wine and talking, not about strategy's death but about its future. Or so we did one evening last week in Manhattan under the auspices of the Association of Management Consulting Firms, sans hearth actually, but not sans wine. The conclusion there was that strategy was going to need to be faster of foot, smarter about picking its shots, and in general more "adaptive," to use my favorite new descriptor (which of course I cribbed from people smarter than myself, some of whom were at the event).

But it was not going to be dead. Darrell Rigby, a longtime partner at Bain & Co. and author of Winning in Turbulence, pointed out that we've gone through periods before when people said the world was moving so fast that companies didn't have the need for, or time to do, strategy. Like in the late 1990s. Something like 90% of the high-tech outfits from that era that thought they could do without the big S are no more. Rigby, who has been surveying companies on their use of management tools since 1994, also reported that strategic planning has ranked first or second on the list every year since then. (Maybe they didn't get the memo on the difference between planning and strategy, either, but it's also true that "have a strategy" isn't by itself a choice on the survey.)

As moderator of the discussion, without wine glass, let me try to distill what I heard into a few calls to action. By way of context I'd note that Accenture's Shill isn't wrong about companies wanting increased flexibility and accelerated decision making. Part of what these experts are wrestling with is how to root both of those in strategy, or, looked at from the other direction, how to rethink strategy to make it quicker and more dexterous.

1. Consider distributing the right to make strategy more widely throughout your organization. Martin Reeves, head of the Boston Consulting Group's Strategy Institute, had a wonderful phrase for what strategy will increasingly consist of: iterative empiricism. You learn something about a fast-changing market, reflect it in the actions you take, learn from how the market responds to that, boil that into your next steps, and so on. "But we've been saying that for years," partisans of the emergent, or learn-from-doing school of strategy may complain. True, but nowadays the action on the front-lines is moving so fast that you probably have to entrust the people there with decisions that heretofore would have been sent back to the company H.Q., where the great strategic wisdom supposedly was stored.

2. Understand that one process does not fit all decisions. Uta Werner, in a past life a partner at Marakon, now head of strategy at Xerox, noted that some strategy calls are of a scale that they can be left with folks out there in the organization. Others are so big, long term, and momentous in their potential implications that top management has to be involved. Knowing which is which, and having that knowledge widespread throughout the company, is critical to making strategy "adaptive." Such wisdom also does wonders for your flexibility.

3. Resources — corporate money and talent — will need to move as fast as decision making. Tom Stewart, chief marketing and knowledge officer for Booz & Co. — and a former editor of Harvard Business Review — has the banner inscription for this imperative: Fluidity. Don't think hydraulics. Think rather of the relentless, ever-morphing villains of the Terminator movies, the cinematic series where James Cameron made his bones (you should pardon the expression) as a director. Cameron may have lost out in the Oscar race this week, but his earlier creation could provide an image of what adaptive strategy — comin' at ya — will look like.

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.

Source: Harvard Business Publishing

Big Think In the Boardroom

As a business journalist and former editorial director of the Harvard Business Review, Walter Kiechel has had the unenviable task of spending much of his life hanging around with management theorists. These are the folks who bring out book after book of business advice that readers find unreadable and managers find unmanageable. Yet by some miracle Mr. Kiechel has remained immune to the maladies of the genre. His "The Lords of Strategy" is a clear, deft and cogent portrait of what the author calls the most powerful business idea of the past half-century: the realization that corporate leaders needed to abandon their go-it-alone focus on their company's fortunes and instead pursue policies based on a detailed study of the competitive environment and of broader business trends.

The "strategy revolution" began in the 1960s when the Boston Consulting Group upended the industry. Rather than take the usual tack of just cozying up to individual chief executives for a bit of corporate kibitzing and calling it consulting, BCG produced a series of elegant intellectual models that could be broadly applied across the business world. BCG's model for the "experience curve," for instance, taught companies that they could reduce their costs as they expanded their market share, thanks to the accumulation of know-how. The "growth share matrix" encouraged companies to view themselves not as an undifferentiated whole but as a portfolio of businesses that make different contributions to the bottom line ("cash cows" vs. "dogs," for example). Nowadays that sort of thinking might be unexceptional, but it was a radical development in the stagnant, inward-looking world of 1960s corporate America.

The 1970s and the decades that followed saw the institutionalization of the revolution. One of BCG's main competitors, McKinsey & Co., shook itself out of a complacent torpor and began enthusiastically running out its own management-strategy models. Bill Bain and several other BCG executives left the company in the 1970s and started a rival enterprise, Bain & Co. Meanwhile, Michael Porter brought strategy to the heart of the business establishment, the Harvard Business School. He added a powerful tool to the discipline's arsenal, the notion of the "value chain," which helped managers break down a business into its component parts, from raw materials to finished products, and then subject those parts to the rigors of cost-benefit analysis.

Yet success brought intense scrutiny and self-examination. In 1982, Tom Peters and Robert Waterman—McKinsey stars at the time—argued in the best-selling "In Search of Excellence" that the obsession with strategy was leading managers to ignore the human side of things. The year before, Richard Pascale, another McKinseyian, said in "The Art of Japanese Management" that the Japanese, who were then sweeping all before them, regarded the West's newfound passion for strategy as strange, much "as we might regard their enthusiasm for kabuki or sumo wrestling." And an army of young thinkers began shifting attention to more nuts-and-bolts matters, such as business processes (which could be re-engineered) and "core competencies" (which needed to be cultivated).

Today the status of strategic thinking in the business world is somewhat confused: An idea that owed its appeal to the seemingly hard truths presented by models is becoming ever more nebulous. The lords of strategy are now given to happy talk about "people"—on the grounds that people are the key to innovation and innovation is the key to long-term success. Such concerns can easily degenerate into bromides about the need to treat employees well. Perhaps it is no coincidence that, at least before the current financial crisis wreaked its havoc, young business hotshots were turning their attention to financial engineering. About a third of former McKinsey and BCG consultants currently work in the private-equity business.

"The Lords of Strategy" is at its best describing and explaining the evolution of an influential idea in American business. The book is less successful as the "secret history" it claims to be. Mr. Kiechel has the habit of pulling aside the veil on the darker side of the management business only to pull it back again. He says that management gurus are known to hire ghost-writing outfits such as Wordworks to produce their books—but he refrains from telling us the gritty ( perhaps disgraceful) details of the marketing and packaging process. He notes that a worrying number of consulting engagements end in tears—McKinsey had a long-term relationship with Enron, for example—but he skimps on evidence.

Mr. Kiechel makes up for this coyness, though, with his enthusiasm for telling the bigger story at the heart of his book: the intellectualization of business. Back in the days of the "organization man" in the 1950s, business people tended to be affable types—pleasant, easy to get along with, but hardly rocket scientists. Since then an ever greater amount of brain power has been applied to business as more and more graduate students pursue MBAs (150,000 annually in the U.S., up from 3,000 a year in 1948), and the brightest MBAs often go on to become business consultants.

The story that Mr. Kiechel tells does not have a particularly happy ending: The "quants" who would supposedly take business to a new level of intellectual sophistication designed financial tools such as the credit default swap that instead took the world economy to the brink of catastrophe. But Mr. Kiechel is surely right that we cannot begin to understand the world that we live in unless we grasp how corporate intellectuals came to have such a dramatic influence on the business world—and how old-fashioned virtues, such as judgment and common sense, were side-lined in the process.

Mr. Wooldridge is The Economist's management editor and the author of its Schumpeter column.

Source: WSJ