Strategy & Problems
What if there are no solutions?
I hope 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.
Quick updates before we go-go
With merely a bit of bronchitis remaining, the week that has been has actually been productive for once; I have managed to do client work, keynote speeches, book writing and, well, what you are currently reading. Business as usual, when it becomes business as unusual, sure can be lovely.
Speaking of lovely, I was on Julie McCarthy’s podcast recently. Julie, who took over my Twitter feed during international women’s day, is an amazing woman, so it was a privilege to get to sit down with her and talk about matters such as masculinity, inclusivity, and fatherhood.
In the news
The UK has decided to block Microsoft’s acquisition of Activision, and while the EU and US have yet to make their final verdicts, the outcome will not help the software giant’s case. Somewhat ironically, the legislation currently blocking the merger was strongly lobbied for by Microsoft’s president Brad Smith.
Peloton is relaunching its brand in order to get the company back on its wheels. Given that it recently settled with Dish Technologies to the tune of a $75M payout, which will put “significantly pressure” on its free cash flow, the nature of said rebrand rollout will be interesting to see.
Shopify is pivoting again, offloading logistics firm Deliverr (acquired less than a year ago for $2.1B) along with 6 River Systems (bought for $450M in 2019) to Flexport for a 13% stake in the private company. Flexport was valued at $8B last year, though recent stock bids have it closer to $4-5B. That makes the deal currently worth somewhere between $1B at best, and $520M at worst. Flexport has upside, as James and I have pointed out elsewhere, but a $2B hit still has to hurt.
Item of the week
Normally, this space is devoted to a research paper, article or presentation of particular importance. This week, however, I want to use it to announce an exciting change to the Strategy in Praxis summer schedule.
This year, for the first time ever, I have invited a number of immensely impressive people to guest write a newsletter each. This is for two reasons. Firstly, they are all much smarter than I, so there will be plenty of value added – including something special for premium subscribers. Secondly, it gives me time to finish my book.
The holiday episodes, as I have decided to call them, will begin in June. The authors and the setup will be presented shortly.
The Problem Problem
Strategy is about managing, not solving, problems
Not content with establishing that planning and strategy are two different things, I thought we would today discuss another age-old delusion, namely that strategy is about problem solving.
Yes, you read that correctly.
I am obviously aware that this will cause a fair few eyebrows to be raised, so I want to stress that I am not making the argument merely to cause controversy or provoke. On the contrary, I genuinely think that the suggestion that the raison d’être of strategy should be to find solutions to specific problems – as if all the pieces of the proverbial puzzle were to be found on a table in front of us, waiting to be assembled in the right order – fundamentally misunderstands what strategy is and should accomplish.
I am, of course, equally aware that my opinion is an outlier. In the grand theatre of strategic management, strategy as a solutions provider is a foundational belief that connects most actors.
Take Richard Rumelt, for example. With a CV that will make your jaw drop, he is a legend within the field. His seminal work, Good Strategy, Bad Strategy (2011), remains an essential read for anyone looking to become a serious strategist. By comparison, I am but a fart in space.
In Rumelt’s words, strategy is a set of actions “designed to surmount a high-stakes challenge”. At the core of the strategic exercise, in other words, is the identification of the solution to a particular problem; one should diagnose the situation, establish the solution, and design the appropriate response. Most strategists will be familiar with the approach, and those that are not can join his “Strategy Foundries” to learn more; two-day workshops aimed at “identifying the key barriers to improvement and designing action steps to overcome those barriers”. The idea of the Foundry came, by the way, after he realized that most organizations “did not need further analysis” to do strategy work. Instead, they needed to “focus on challenge and action”.
But that is not necessarily true.
The traditional notion of diagnosis presupposes that one is dealing with an ordered system in which there is linear material causality. In strategy, this is rarely the case. Most strategic contexts are complex, as we know, and this means that they lack such causal relationships. Trying to find a single cause and a single solution, therefore, is a fool’s errand.
A better approach is to, as Brian Arthur has noted, look at interacting elements, identify patterns, and consider how the patterns might unfold. While it may appear a branch off the same tree, it is not. Patterns may never be finished, meaning that there may be no solution to find.
Even if one were nonetheless able to somehow identify both a problem that is solvable and its solution, the best path forward would not be a strategy, but a plan. After all, if we have successfully identified what to do, we should just go ahead and do it. Strategy, by contrast, comes into play when we do not know what to do; when we cannot identify the problems or their solutions because they remain hidden from view; when we have to try things out so as to see what patterns might emerge. The strategy then sets the boundaries in-between which we may coherently act, the outer limits of what we do, and the direction in which we move.
Now, certainly, some might argue that I am taking his words too literally. A strategic problem, they may counter, is at its core about a customer problem that one might solve in some unique way. Although Rumelt is explicit in that not being the case, the same weakness remains. Customer problems evolve over time. Believing that one has found an everlasting solution thus invariably leads to strategic drift and eventual corporate demise.
At the end of the
proverbial clichéd day, we live in an ever-changing world. It may change slower than some would have you believe, but change it does. And the reason why so many companies do not need “further analysis” is precisely because they are dealing with this change. No matter how much of yesterday’s data we collect, tomorrow may yet look different (this also follows from an adjacent possible that is impossible to predict a priori). Collecting more data to analyze, then, merely equates to stalling – though one should also recognize that it is significantly easier to claim, as Rumelt does, that a company has collected “enough” than it is for the company to know whether it has.
My point is that strategy is not about solving problems that already have been defined, but managing those that have yet to be. Its purpose is not to inform employees of what specific actions to take in one particular context, for they will be lost outside of it, but to enable them to act as contexts continuously change. Strategy is about journeys, not destinations; evolution, not final forms.
Comedian Dara O’Brian once quipped, in response to the popular claim that “science does not know everything”, that science knows it does not know everything, otherwise it would stop. In a way, it echoes what I wrote a fortnight ago – strategy is about movement; planning is about stopping – but also the present situation. Strategy defined as problem solving implies an achievable end, a point at which the solution has been found and implemented; a panacea for the diagnosed situation. The problem would be no more, but nor would the strategy. Then what?
The answer, you soon realize, is another workshop. Another problem. Another strategy. Another few billable hours.
Best for the company buying it or the person selling it?
Next week, more on the topic of planning. Until then, have the loveliest of weekends.
Onwards and upwards,
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