Welcome to the Strategy Toolkit
Introductory edition (April 2020)
Excerpt: Introduction to “A Study in Strategy”
“What then is to be our war?” (Archidamus, King of Sparta, in Thucydides’ Peloponnesian War)
A Study of Strategy was inspired by Arnold Toynbee’s A Study of History (Oxford University Press), a sweeping review and analysis of the history of empires over time. In his multiple volume work, entailing 33 years of effort from conception to completion, Toynbee uncovered a pattern of civilisations growing, peaking, and declining that informed his worldview and launched decades of debate and subsequent research. Toynbee held forth that each successful dominant civilisation sowed the seeds of its own decline during its development, and this insight rightfully demanded that the United States and other great powers of the time take a critical look at their own histories, socio-political structures and dynamics. On a wider scale, many organisations (an organisation representing a smaller version of a civilisation), including political movements, reflected on the implications of Toynbee’s conclusions for their own prospects and longevity.
A Study of Strategy is not a ten volume work. It does not claim to be exhaustive. It is however ambitious, ambitious in the style of Toynbee (and Gibbons before him), in that this work, for the first time, asserts that the scope of academic study of strategy must include all disciplines of human endeavour and thought. This is new.
What was the impetus for this work? Throughout his graduate education and life as a strategist, the author was frustrated by the collective constraints and norms placed on strategic thought, behaviour, and ideas. If one looks carefully, one will observe that coursework, references, metaphors, and examples are situated almost exclusively within the realms of economics, the military, and sport. These constraints beg the question: why?
Strategy exists wherever and whenever human beings interact. This simple statement implies that every area of human activity and learning must hold insights into strategy. For strategy requires some degree of intelligence, in the least instinctive. The more the author has looked at various disciplines, texts, and events, the more insights into strategic thought and behaviour he has gathered and categorised by subject matter.
The categories overlap, for example history and the military, or biology and psychology. That is the nature of human behaviour and experience. At times, as a result, the author has placed discussions and observations into categories arbitrarily, addressing the overlaps.
Strategy is the means of surviving and the means of improving one’s life. This work is thus an account of strategies for survival – at the individual, the communal, and the organisational level. From the moment each person is born, from the moment the first families and the first tribes were formed, human beings have thought and behaved strategically. Initially, the impulses were subconscious, and over time, the impulses became conscious efforts, to be recorded in history, imitated, codified, and competed against.
What makes a response strategic? What determines its potential for success?
Whether it is a machine-tools factory in Darmstadt, Germany, one of the highly successful mittelstände, that reluctantly begins to respond to changes stemming from the next wave of European Union and global integration…
Whether it is a young immunology graduate student in St. Louis, USA, who performs intricate DNA-splicing experiments in pursuit of genetic explanations for disease, and who is compelled to change her area of academic specialisation…
Whether it is a middle-aged illiterate subsistence farmer in the Guangxi countryside in China, who wonders where to go next: Shenzhen, or Hanoi, or perhaps overseas to Australia, and how, in order to create opportunities for his children…
Strategy needs to be understood in the complete context of human life. All human activities involve more than one person, whether in families, in organisations, in businesses, or in the routine of an ordinary day. A strategy is a set of choices, choices of what to do, and what not to do. Strategic behaviours are driven by needs and desires to survive, and pressures brought to bear when the strategies of individuals come into conflict, most acutely in the context of perceived or real scarcity.
A person or organisation may choose to define itself independently, with distinct attributes, or define itself comparatively, in relative terms. How does such a choice lead to tribalism? Or lead to that sense of in-group vs out-group? Or to the sense of comfort with that which is familiar? Or to sexual attraction towards that which is different or exotic? Or to the willingness to attribute blame to the other, the eagerness to demonise or lionise?
What makes a person act competitively, for example with the tendency to cut a corner on foot to get a step ahead of another pedestrian, or the tendency to shift a car over to the side lane at a stoplight and then accelerate in front of a slower-moving vehicle? What are the dynamics at play when a person pushes to the front of a queue or instead chooses to allow someone else to go first? How do these choices lead to the Tragedy of the Commons?
What is boredom? What value does change provide – entertainment, stimulus, or training? Why does a person make these choices and how does society reward or punish such choices?
All of these questions, and more, are addressed in this book from the vantagepoint of strategy.
Granted, this work looks to the past, and any reader who forecasts the future from prior trends does take a risk. Even riskier, however, is to proceed unaided by knowledge of the past. It has been attributed to Churchill that those who fail to learn history are doomed to repeat it. (The author adds: not only are they doomed to repeat it, they won’t even recognise what occurred, setting the stage for further misfortune.)
A Study of Strategy offers the reader an opportunity to begin an intellectual journey, across time and across disciplines, an opportunity to expand their awareness of how strategy initiates within a person’s mind, the role of signals of environmental change, how such awareness manifests as action, and how such actions have evolved over history. May this journey continue throughout the reader’s lifetime and serve them well in the constant challenge of survival.
Insights: Love in the time of cholera
The Captain looked at Florentino Ariza, and he was overwhelmed by the belated suspicion that it is life, more than death, that has no limits…
Garcia Marquez understood the psychology of fear, and how fear, as one of the primary emotions, acts upon human behaviour and strategy.
The novel coronavirus, and its inherent risks, has unleashed novel fears and not-so-novel behaviours such as panicking and hoarding and scapegoating. Psychologists have observed that people tend to exaggerate spectacular but low probability risks, while underestimating more common risks (for example, airplane accidents versus automobile accidents). When confronted with a risk new-to-them or unknown, in this case the coronavirus, people do not know how to evaluate it and in fact overestimate the risk. Economists refer to this tendency as risk-ambiguity aversion.
Such aversion is amplified by the media, which by the year 2020 have become caught in feedback loops of growing amounts of information and disinformation. In addition, the coronavirus risk is an involuntary risk, not one that anyone has taken on willingly for the opportunity of a reward (such as driving a bit recklessly to save time). When one chooses a risk, one worries less about it. The inner voice whispers: “The coronavirus originated ‘over there’ because ‘they’ took a risk not chosen by ‘me’.”
To compound it all, there is the disorienting feeling that the risk is difficult to mitigate. How exactly does one change behaviour, to what extent and at what cost, to lessen the risk? In such a time, fear is easily exaggerated. And it is not irrational to be afraid and uncertain what to do.
One alluring path is nonconformism, a heroic value dating back at least to Socrates. Yet nonconformism is not a simple virtue, and in unstable times can lead to sedition, subversion and even cruelty. Psychologists suggest that people make trade-offs in social settings between their individual notion of truth and the stability of society. They sometimes feel compelled to dissent or rebel in defence of truth and virtue, even when there are moments when the survival and protection of society may take precedence, demanding conformity.
All of which nudges us towards the nascent field of evolutionary psychology and its implications for understanding strategy. Authors such as Matt Ridley (The Origin of Virtue) explore the “nature versus nurture” dichotomy, in light of recent advances in genomics, medicine, and the social sciences. Experimental results are helping us to better understand the driving factors behind behaviours such as altruism and to assess the implications for areas such as game theory.
Ridley described how political scientists were surprised when Anatol Rapoport, of the University of Toronto, won top honours in a global competition of The Prisoner’s Dilemma. Rapoport deployed the nicest and simplest strategy of the lot, “Tit-for-tat”, in which he began by cooperating with his co-player and then did whatever the other player did the previous time. Biologists remarked that Tit-for-tat displayed reciprocity, triggering reciprocal altruism. And that humans, like other animals, evolved the mental capacity to discriminate a sense of altruism in others. Such discrimination has served societies well through times of war, sectarianism, and financial disasters.
Why do I make this digression?
My family, like perhaps yours, has a story related to the Spanish Flu pandemic of 1918. Of lives cut short, and what-might-have-been-if-only.
They say that those who neglect their history are doomed to repeat it, but what they really mean is that it has proven wise over the centuries to learn from the past. Yes, we are in the midst of a new pandemic. And yes, many people have been harmed and more are at risk of harm. But this is not 1918. We are not an exhausted set of civilisations, worn out by years of war. We are at the tail end of an unprecedented period of economic growth and well-being.
Yet we are a set of civilisations on edge from a growing sense of unease, of mutual distrust, and isolation. And these feelings are obstacles to responding effectively to the new pandemic. As a result, the news amplifies and, for some, validates, actions to protect oneself from the threat of harm, even if at the expense of others.
For certain people have always profited in times of fear, taking advantage of real and perceived scarcities, asymmetries of information, and the spread of hearsay and misinformation. Just look at the large-scale wars of the past century, or the Great Depression, or, more recently, the immediate aftermath of 9-11 or the financial crisis of 2008.
Given the circumstances of March-April 2020, what can businesses do? A clear priority is the safety of employees and the company as a whole. Once assured, the next priority is to look for new opportunities. As much as a crisis is a time of danger, it can also serve as the signal of a turning point or major change. By thinking carefully about the implications of the change, anyone who is strategy-minded can re-evaluate and make new business decisions.
For example, ironically, the pandemic is an incredible stress-test for your organisation. How are your command lines functioning? Your workflows, your supply chains, and your backup plans? How resilient is the company, actually? This is an ideal time to monitor, measure, and compare actual outcomes to your simulations and hypotheses.
Another example: if your company has embraced a “just-in-time” or JIT approach to supply chain management, then it is probably optimised for leanness and efficiency. How well do your systems sense spikes in demand and what response measures do you have in place, including the equivalent of a circuit breaker (as is the case with major stock exchanges)? If your company is a retailer, your data will tell you which SKU’s are being surge-purchased, by whom, and why. Build contingencies for the next waves of panic buying.
In another example, the dramatic shifts in demand and in asset valuations present opportunities to grow both vertically and horizontally, at a relatively low cost of acquisition. How prepared are you to grab share, as Amazon is doing by ramping up their warehouse and delivery system capacity? How much more of any attractive market can you win (like the tech giants are doing in global advertising)?
Don’t get me wrong. Yes, this is a time of fear, a time of risks that are new to most, if not all, of us. At the same time, this is a time to draw upon our understanding of the psychology of fear, in order to inform our strategies and actions for survival, both in our personal lives and our businesses.
And to recognise, during any rare and welcome moment of respite, one other prized saying from long ago:
This too shall pass.
Learnings: Strategy at the Business Unit Level
What was the challenge?
A new business unit strategy, formed over a short timeframe (3 months from start to finish)
Within a very technical context: the semiconductor industry, requiring leading-edge knowledge of material science, physics, chemistry, and applied sciences and engineering
A large, very global firm, situated in highly competitive markets with a combination of manufacturing and supply chain logistics resources
Corporate priorities / constraints ranging from industry leadership across business units, aggressive gross margin targets, and demands for innovation
Given the above, there was no time or resources for R&D innovation, instead business model / commercial innovation
The business unit executive team was talented, opinionated, diverse, and accessible
The output from the strategy work was a report with recommendations, to be taken to corporate leadership
What did it take to complete the work successfully?
We used a structured approach to strategic option identification and analysis
We agreed on the need for evidence / high threshold of proof, but there was little budget for de novo data gathering, resulting in a mix of internal sources (interviews, company databases) supplemented by minimal external industry reports
The workflow included a weekly iteration of activities across upfront situational analysis (industry, competition, customers, drivers of change and value creation, economics, uncertainties), goals and aspirations alignment, option delineation and comparative assessment, through both independent and facilitated work sessions, leading to a ranked set of strategic recommendations
The team consisted of a cross-functional executive team of a dozen people (internal), supplemented by a half dozen consultants (partners, managers, analysts)
Tip
If you remember just one thing from this edition…
“Strategy needs to be understood in the complete context of human life.”
Until next month.