Monday, November 4, 2013

No Guarantees

Week 2 (No Guarantees)
Ethan Hayes

In the words of Dwight D. Eisenhower, “In preparing for battle I have always found that plans are useless, but planning is indispensable.”  Following this logic, the “Company Vision,” the “Company Mission” and the “Corporate Strategy” are useless in that they encode a static doctrine that intentionally discourages adaptation to changing conditions.  These three factors align the activities of a corporation and guide behavior, but do not guarantee that the Vision, Mission and Strategy will lead to success. 

The Balanced Scorecard is a doctrinal approach that suffers from this same drawback.  It expands the narrow focus on short-term financial goals, but only incorporates a slightly larger set of “strategic” metrics.  Any allowance for “Learning and Growth” is also limited because any newly adopted metric is inseparably linked to the company’s predetermined focus.  The only certainty in this doctrinal approach is that a highly formulized and widespread strategy will make it more difficult to adapt to changing conditions and to adopt a new strategy when needed.

This point is clearly explained in Richard Rumelt’s book Good Strategy Bad Strategy.[i]  In it he argues that good strategies are rare and that many organizations that claim to have a strategy do not.  Companies have replaced strategy with a set of performance goals or vague aspirations that frustrate realignment and the concentration of action and resources.   Gary Hamel, co-author of Competing for the Future agrees: “companies have strategies that are quixotic, muddled and undifferentiated.  This is hardly surprising since in recent years the very idea of “strategy” has been dumbed-down by a deluge of naive advice and simplistic frameworks.”[ii]   

From Jeff Bezos leaving D.E. Shaw & Co to start to Steve Jobs using Xerox’s technology to start the personal computer revolution, an incalculable number of missed opportunities have been the result of overly restrictive company directives.  With no allowance for new ideas, these rigid strategies stifle innovation.  As a result, corporations are forced to buy innovation through acquisitions.  The same doctrinal strategies that prohibited innovation in the acquiring company then stifle innovation in the newly acquired company.  The $160 billion AOL-Time Warner merger is poignant example of this.  In the Cola Wars Continue article, both Pepsi and the Coca-Cola Company needed to expand their product base beyond the market for Carbonated Soft Drinks.[iii]  It was this expansion of their strategy and a need to move beyond their primary product line that allowed these companies to re-envision their future strategy and overcome the transformation in consumer preferences.

The effectiveness of an organization to implement its strategy is no guarantee of success.  Simple frameworks, like the Balance Scorecard approach, serve to refine operational consensus, but do not support the comprehensive development of strategy.  This is only achieved through more fully understanding the true nature of a competitive market and then repeatedly adapting and implementing those means and methods that most efficiently lead to the desired outcome.

[i] Rumelt, Richard. Good Strategy Bad Strategy: The Difference and Why It Matters. New York: Crown Business, 2011. Print.
[ii] Hamel, Gary.  Competing for the Future.  Cambridge: Harvard University Press, 1994. Print.
[iii] Yoffie, David.  Cola Wars Continue: Coke and Pepsi in 2010.  Cambridge: Harvard Business School. 2011. Print.

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