In today’s corporate world, one would be hard pressed to find a word more frequently used and abused than strategy.
Corporate executives (with support from their consulting partners) love to talk about, think about and pay for strategic advice. In Lords of Strategy, Walter Kiechel III chronicles the rise of strategy in corporate America. Since the BCG-led “strategy revolution” of the 1970s, companies have grown enamored with strategy as a means to improve their business.
Given the rise of strategy and its many derivatives (e.g. planning, strategic planning, multi-generational planning, etc.), a casual observer could be forgiven for posing a few obvious questions. Do businesses really need so much strategy? Has the increase in strategy resulted in improved business results? With so many thinkers, where are all of the doers? Some level of planning and direction might be required, but have things gone too far? To use a football analogy (I know, very sorry), at what point do you have too many quarterbacks and not enough linemen? To make matters worse, those in the corporate world are typically of the armchair variety, speaking with an air of authority without actually playing the game.
While the value of strategy may be questioned on its own merits, there is an often missed point in the standard critique of strategy: the impact on innovation. Although not quite as in vogue or pervasive as strategy, innovation ranks a close second in the eyes of many executives as a means of business improvement. Strategy and innovation are commonly cited as related, or even the same. Nothing could be further from the truth. As will be discussed in this paper, not only is strategy the opposite of innovation, it is directly responsible for the death of honest innovation. If the 1970s ushered in a strategy revolution, the time for an anti-strategy revolution is now.
Strategy is the philosophical opposite of innovation
Although often spoken in the same breath by some executives, strategy and innovation are philosophical and practical opposites. There is irony in phrases like “strategic innovation” and other nonsensical consultant speak spouted in the halls of corporate America. The use of buzzwords aside, in any appropriate sense, these two ideas are diametrically opposed. Prior to the adoption of the word for business use, the word “strategy” referred exclusively to the planning of combat operations with the goal of creating an asymmetrical advantage. In other words, strategy was implemented to skew the odds in your favor before contact with the enemy. Once engaged in battle, tactics referred to actions taken to defeat an opponent, including those executed to adapt to an opponent’s plan. Prussian military strategist, Helmuth von Moltke, famously wrote that “no plan of operations extends with any certainty beyond the first contact with the main hostile force.” While not as eloquent as the subsequent paraphrasing of his idea that “no battle plan survives contact with the enemy,” the implicit message in this statement is clear. Strategy is important, but being ready to adapt your tactics to the fight is equally critical. To call someone a “tactician” was high praise indeed. Even in the process of stealing from the language of combat for application in business, it was done imperfectly. In combat, tactics are not defined in opposition to or in some way inferior to strategy. They go hand in hand and are both viewed as crucial. The corporate obsession with strategy has turned anything “tactical” into a four-letter word.
Although innovation maintains many verbal champions, a true champion of innovation would stand in strong opposition to strategy. As the discipline of strategy is about planning, it is fundamentally an exercise in forecasting. In theory, a superior strategy should improve the odds of success. This process typically involves assessing a range of possible outcomes, including both the likelihood and impact of occurrence. Factoring in contingencies and counter-measures adds to the complexity, work and difficulty in predicting a successful outcome. Confidence is increased by thoroughness and a rigorous analytical framework.
Innovation is the opposite of strategy in nearly every aspect. Innovation is not about what will work, but what has worked. It is not theoretical, but rather empirical. How often do we see a divergence in what works on paper versus the real world (cough, state planning)? For the strategist, the burden of proof is plausibility. For the innovator, the burden of proof is efficacy. Talk is cheap in the absence of results. Strategy involves assumptions and models to approximate reality. Innovation uses reality to test assumptions and models. The strategist is often one of broad perspective in a plush office. The innovator is often one of a narrow focus in a dark garage. Innovators use the failure of their actions as a data point for future revisions; strategists look for ways to explain the failure of their models. Planning is an attempt to insulate against randomness; innovation benefits from it. The number of accidental innovations is too numerous to count. Strategy is Queensbury rules; innovation is no holds barred. Strategy is entrusting change in the hands of those who speak; innovation is entrusting change in the hands of those who do. Strategy is a white oxford and platinum card; innovation is a black ski-mask and a duffle bag.
Strategy increases the price, and delays the occurrence, of failure
At the center of virtually every story of innovation is a list of failures, or non-successes, which preceded the breakthrough. After numerous attempts to create the light bulb, Thomas Edison famously stated, “I have not failed. I’ve just found 10,000 ways that won’t work.” Economists and historians point to “fail-friendly” bankruptcy laws as a key element of entrepreneurship and innovation in America. If a failed venture will result in ostracism from the community (e.g. some Asian cultures), prison (e.g. debtors’ prisons), or even physical harm (e.g. Hammurabi’s Code), fear of failure may be understood. Although a strong case can be made that man-made distortions have corrupted this notion, creating a “heads I win, tails you lose” situation (see Antifragile), the only way to prevent failure in innovation is to prevent innovation, period.
Not only is the existence of failure important, the types of failure are equally, if not more, important. Experiencing small failures early on (recoverable) can avoid large failures in the future (catastrophic). Innovation requires the ability to tinker, test, break and repeat. Hitters hone their swings through many at bats. High-cost failures destroy innovation. This is the reason behind the use of fleas and mice in experiments and medical trials. Setting aside the ethical legitimacy of the practice, the fact that both species are rapid and prolific breeders, as well as having relatively short life spans, enables many “at bats” for those in the research fields. The absence of large-scale testing on pandas has less to do with their cuddly appearance than it does to do with the high cost of failure involved with each subject (long-lived, slow, infrequent breeders).
Innovation is best fostered in an environment in which the price of a failed experiment is low and success/failure can be determined rapidly. In other words, high frequency and rapid feedback. Cheap prototypes can be tested, broken and improved without breaking the bank. But what of strategy? Surely the same brilliant minds, or other ones, could improve the odds of success through a more analytical approach? This is wishful thinking, at best. Strategy and its close derivatives increase and delay the cost of failure. Business cases, focus groups, market analysis, roadshows, etc. divert resources (financial and human) and defer action.
Imagine the invention of the light bulb in the age of strategy. A young, brilliant mind named Edison approaches his bosses with a revolutionary product idea, the light bulb. After months of pushing his idea down the throat of any one who will listen, the higher-ups eventually understand his vision and pour the full support of the company behind him. Scores of consultants are engaged in assessing costs, locations and suppliers for each material. Marketers analyze customer satisfaction in whale oil, assess likely user adoption of the bulbs, explore pricing and design the packaging of the new product. Finance and strategy teams begin assessing the potential upside (surprise, another hockey stick!) of each option. As the number of failures mount and costs continue to creep up, the executives start to get nervous. “I thought you said this thing would work, Edison? You want to try another material? Your last nine ideas didn’t work and I’m not sticking my neck out for you again.” Eventually a program management office (PMO) is established to “get things on track.” A new consulting firm is brought in to examine what went wrong. Edison is fired. The project is scrapped. After years of cost overruns, delays and failed attempts, the light bulb, like alchemy, is no more than footnote in the history of human folly.
Strategy is starving and smothering innovation
Strategy might deserve a pass, if the difference were merely a theoretical opposition to innovation. The practical reality since the “strategy revolution” has been an increased diversion of resources from innovation and execution to strategy and planning. In the corporate world, there are few areas that confer the same level of automatic prestige, authority and often compensation, as strategy. The best and brightest are rewarded with a position in a strategic planning or consulting role, leaving those lesser talents to focus on “execution.” MBA students flock to strategy firms in order to provide high-priced opinions to paranoid executives, leaving the mere mortals to implement them. The impact is both qualitative as well as quantitative as a larger percentage of management teams and consultants focus on strategy. Anyone who has spent time working with large, “strategic change” programs has seen this movie play out firsthand. While the rapid growth of the consulting industry is the result of a number of factors, the obsession with strategy is certainly part of the explanation.