Wednesday, December 2, 2015

Science and Strategy

In the vein of evidence-based medicine and evidence-based management, Lafley et al encourage us to bring the scientific method to choosing strategies. Lafley describes 7 steps that can take us from objective to selecting the best strategy to achieving that objective.

I would go one step farther than the application to strategy selection. Steps 3-7 described in Bringing Science to the Art of Strategy are potentially applicable to the entire direction of a company or business unit. Proctor and Gamble already knew that it wanted to be a major player in prestige beauty products, it had already set its direction. Management had their objective and just needed to determine how best to get there. But if there is a choice of objectives, working through the later steps of described in the article can lead to better decisions.

Using the Back Bay simulation as an example, one must determine their objective early. Will you go for optimizing ultra-capacitors and increase that product as the proportion of sales? Or will you try to increase sales on NiMH batteries. Will you try to corner one market segment or attempt to play well in all three? Before making any decisions, a player can identify the conditions under which they could achieve their objective by looking at the ‘Desired Features’ (Step 3). By comparing the current level of functionality with the desired levels and how important each domain is to each customer segment, we can identify the barriers (step 4). Designing and conducting tests would be to estimate the time and expense of increasing the functionality of the products in the most important domains (steps 5 and 6). For example, it is pretty cheap to improve the processes of NiMH batteries, but really expensive in ultra-capacitors.

After choosing the simulation objective, one can begin at step 1 and look at what strategy they will employ to obtain that objective (e.g., For the objective of cornering the power tool market, will you focus resources on 1 or 2 features, widely distribute the R&D, or change the price in order to drive sales which in turn increase the R&D budget, etc.).

Following the steps described in the Lafley et al article can give one the ability to achieve what Collins in his article tell us we should—describe the strategy of the company in 35 words or less. Using the scientific steps to strategy selection can bring us to a concise strategy with detailed scope and advantage that can be disseminated to the entire company. In fact it is interesting to note that 2 of the 3 aspects that strategic possibilities according to Lafley are essential parts of any strategic statement—Scope and Advantage.

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