Strategy & Life
Friends,
I hope that all is well with you and yours, and that this e-mail finds you on a boat with shoddy connection, in the tropics, three months after I sent it.
Now accepting keynotes for 23Q4-24Q2
Every year, I create three main presentations. For 2024, they are:
What to Do When You Don’t Know What to Do: Adaptive strategy in an age of uncertainty.
Regression Toward the Meme: Why modern leadership falls into old traps - and what to do about it.
The Efficiency Illusion: Uncovering the hidden costs of digital commerce.
If you want to book me for your event, workshop, or corporate speaking slot, just send me an email. To make sure I am available, however, please do so at your earliest convenience; my schedule is filling up fast - and I will be raising my prices on January 1.
More information can be found here.
A couple of updates before we go-go
For those who missed it, the second webinar on the new book took place last week. The recording may be found here.
A quick update on The Cardboard Mansion: with the exception of the upstairs bathroom and sauna (our equivalent of the rug under which all crap is swept), it is finally no more. To say that it feels good to again see walls, sideboards, artworks, etc., would be putting it very mildly indeed.
Moving on.
Strategy defines the life of a firm
So why does it so often fail to reflect reality?
I was recently asked by a journalist how it came to be that I ended up a strategic management consultant. Surely nobody, she said with ill-disguised lack of comprehension, dreams of that when they are a child?
Perhaps not. I did not, admittedly. But I also do not believe that many of you who read this newsletter became what you thought when, in the early years of your lives, you pondered the adventure that lay ahead. Life has a habit of getting in its own way. But here we are.
The days that we experience rarely follow preconceived plans. Therefore, we adapt and we evolve, through the ins and outs, the ups and downs, the expected and the unexpected. And eventually, indeed, there we are.
The same can be said for the firms that we work for in our various capacities. They all exist on a time continuum between inception and demise. Along the way, every day, things happen that the company did not foresee, forecast or plan for. How they managed to adapt and evolve, through the ins and outs, the ups and downs, the expected and the unexpected, led to them today and where they are.
I would imagine that it is all rather self-evident. The key question, therefore, is why we still insist on building strategies as if it is not. Why is life not reflected in strategy?
Even though we know, most only too well, that all kinds of things get in the way of strategic plans becoming realized as they were intended, the most common modus operandi is to act as if these things do not.
I strongly suspect that a reason lies in our human unwillingness to face uncertainty. For lucid evolutionary reasons, our brains are constantly making judgements about what is and is not safe. To our minds, uncertainty equals danger; if we do not know what lurks around the corner, they cannot keep us out of harm’s way.
As Steve mentioned in the last webinar (building upon the work of leading neuroscientist Karl Friston), we have three fundamental ways in which we may deal with surprise:
we may suppress it,
we may ignore it, or
we may adapt to it.
In organizations, suppression of surprise tends to take the form of rules, procedures, processes, and plans. By explicitly telling employees what to do (and naïvely expecting them to actually do it), we believe that we may control our environment. The problem, of course, is that even if they do, it does not enable us to somehow control external actors or contextual shifts.
The act of ignoring surprise, meanwhile, is habitually performed through traditional management systems and so-called risk appetite frameworks. Establishing how much uncertainty we are willing to accept, the reasoning appears to go, causes any supposedly unacceptable uncertainty to disappear. Needless to say, even if it were to work, it only does so for a while; when the inevitable surprise comes, it is ever larger and more shocking to the system.
Lastly, we may minimize surprise by interacting with the environment and adapting to it; what we call parallel safe-to-fail experimentation. Importantly, that is not to say that we devote our entire budget to the endeavor. Every organization that has managed to survive beyond its first years will have a few things that it knows to work (or there would be no revenue). The key lies in setting aside a small part of the budget to prod environments where the company does not know whether something will work - because the old ways do not work. Not to “pivot”, but to add resilience.
While some may counter-argue that time horizons achieve the same effect, it is only at best partially true for particular contexts and notoriously dangerous in others. A marketing plan, for example, typically lasts one year (following the budget year, which in turn follows the accounting year). After the plan has ended, the marketer will evaluate the results and adjust accordingly. In theory, anyway. I rarely see it in practice, but perhaps your experiences differ.
The problem is that faulty assumptions may have serious ramifications, and waiting a full year to adjust may cause substantial harm. Certainly, some market effects take time to develop, but waiting indisputably carries risk: it also means that we may take too long to realize they never will.
When we move from marketing plans to business strategy, the situation becomes unattainable. Five years is more than enough time to strategically drift beyond a point of no competitive return. And although companies regularly abandon strategic plans that they realize will never work, far from all change their approach as a result. Instead, they favor a variation on the previously set theme; an evolution of a broken strategic model.
Inertia follows. Companies become slow to move, brittle, and incapable of adapting to change. They learn what works, but remain oblivious to what else might, clinging on to a single idea as if their life depended on it. Over time, it becomes a self-fulfilling prophecy.
For the lucky few, it may create a temporary business advantage, but it is mathematically guaranteed never to lead to a sustainable one: there is simply too much inherent uncertainty and too many unforeseen consequences in the complex environment that we call, and is, life.
Strategy must begin to reflect it, or it will forever be an artificial construct defined not by the possibilities but the limitations of its existence.
Until next time, have the loveliest of weekends.
Onwards and upwards,
JP
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