Positive & Negative

Inverting the old model

Friends,

I hope that all is well with you and yours.

The past seven days have been, shall we say, interesting. Not the part that involves packing one’s entire life into a billion different boxes (while our nine-month-old daughter is sick with what a certain kind of person would label man flu), but because a number of arguments that I have made for years is starting to make it into the broader public discourse.

To illustrate, more and more fellow practitioners are waking up to the commercial reality of eCommerce that James and I have been highlighting for a very long time. One might wonder what took them so long, but at least they are moving past the silliness of digital FOMO. Armchair academics, though, remain sound asleep; many of the conclusions of late have been of unacceptably poor intellectual standard.

Meanwhile, Byron Sharp recently made the headlines for pointing out that Binet and Field’s research is far from as robust as popularly believed. I pointed these (and more) flaws out in a subchapter in Strategy in Polemy written together with Andrew Willshire in the early months of 2020. Although ours was by no means the first, I do believe that it remains the most thorough by some margin – and the only one to date to address the fundamental issue with their core premise of emotional priming. To Byron’s credit, he saw the same issues. I know because he very graciously provided feedback on the piece before it went public.

Then there is the amiable Roger Martin’s discovery of complex adaptive systems, and his inevitable critique of traditional planning that has followed in its wake. Although I believe he occasionally draws the wrong conclusions, the importance of having someone of Martin’s undeniable stature point out the complexity-ignorance of modern strategic management should not be understated. Even Alexander Osterwalder, whose reductionist work is almost entirely contradicted by the implications, appears to have changed his ways. (It might also be, of course, that he fails to grasp the implications as they concern himself, a rather common mistake).

Either way, as someone who has spent most of his career critically examining the status quo in search for better ways of doing things, I find it all very encouraging.

Today’s topic, at least applied to strategy, follows a similar pattern. When I first began publicly arguing for the inversion of the old model, more than a few people scoffed at me (Gary Forss and Paul Bailey being notable and supportive exceptions). Today, as companies scramble to mitigate cost structures, they also begin to see the undeniable importance of strategic resilience.

What on earth is he on about?

In May last year, I wrote a newsletter on the difference between robustness and resilience. To sum the piece up in very simple terms, one might see it as that between making a big bet and ensuring that one can make another bet tomorrow; robustness is the ability to withstand a hit, resilience is the ability to stand up again once you have been knocked on your ass.

“In essence, it means that 100 people each falling one meter is not the same thing as one person falling 100 meters. The probability of success for a large sample does not apply to the individual if there are potential points of no return; a person going bust does not affect the game for other players, but it eliminates the game for the individual.

In strategy, we often forget about the ensemble and focus on the one-time. It is, admittedly, easy enough to do – an external agent such as consultancy or agency usually does not have to carry the cost of error. In analogous terms, we get to play the house odds using someone else’s money. Thus, no matter the result, the game carries on, and we can continue to promote focus, sacrifice and big bets.

For the client that goes bust, however, it is an entirely different matter.”

My point was that exposure to risk varies, but also that in order to thrive, one must first survive. Elimination of all else to focus on the one is a much easier proposition for those without skin in the game.

So, what is the alternative?

Inversion.

The negative one

The traditional view, with its clichéd belief that the essence of strategy is sacrifice, is centered around explicitly saying what one should do and thereby implicitly saying what one should not do. My view has long been the opposite: one should explicitly say what one should not do, and thereby implicitly say what one should do. It is the negative, or apophatic, approach.

Indeed, when I first began developing the ABCDE framework, my working title was “apophatic strategy”. The term comes from the Latinized form of the Greek word apophasis, i.e., denial or negation, and has long been used in philosophy and religion as a process of so-called subtractive epistemology; even if we cannot express what something is, we can often state what it is not.

Just as how you might live your life not by who you want to be, but who you do not want to be, businesses can make a lot of good decisions by eliminating, or at least limiting, bad ones. In fact, to paraphrase Charlie Munger, long-term advantage can typically be gained by trying to be consistently not stupid, instead of trying to be very intelligent. Good is the absence of bad; success is the absence of failure.

In practice, apophatic strategy means that one defines the outer boundaries (the B in ABCDE) of what is allowed. As I have explained before, instead of drawing the traditional planning line in the sand and telling people to stand on it in the name of alignment (which not only tends to become highly inefficient but invariably leads to success becoming less important than sticking to the plan), one draws two lines in the sand outside of which employees are not allowed to venture. Between them, however, they are encouraged to adapt and trusted to take appropriate action as long as it moves the company in the right direction, toward the shared understanding of success.

It might seem a slight shift, but the implications are profound. The positive approach assumes knowledge of an unknowable future; the negative approach assumes only that there will be unknowns. It is the difference between foresight and insight, between the ability to seize only opportunities seen in advance and the capacity to make the most of them as they emerge.

What the boundaries involve for any particular context will, of course, differ. For a corporate strategist, it could entail not acquiring a certain kind of company; for a brand strategist it could involve not being inconsistent with distinctive brand assets. The point is that by inverting the traditional approach, one can create adaptability and flexibility while still maintaining a sense of identity, direction, and momentum.

Next week, we will further expound on this premise and begin looking at some practical tools that one might use. Until then, have the loveliest of weekends.

Onwards and upwards,
JP

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