Strategy: A History

by Lawrence Freedman

Interpretations of what Foucault really meant can reach special levels of paradox as arguably, by his own account, he never “really meant” anything at all.

Initially the major interest appears to have been among radical groups and others who were seeking to compensate for a lack of material resources. It was another way the weak could take on the strong: less muscle but better stories. A battle of narratives was to be preferred to a real battle.

Lutz’s own guide to the use of language acknowledged the importance of framing issues, but his stress was on more basic rules of communication. He aimed for simplicity and brevity; short words and short sentences; attention to consistency, imagery, sound, and texture; and language that was aspirational and offered novelty.

There was therefore nothing automatic about a new political realignment in the United States. It required an ability to relate to the shifting demographic and socioeconomic trends with messages that were both appealing and credible.

This group, which we will call the managers, has been the recipient of more strategic advice than any other group, including generals.

The diversity of relationships, activities, and structures meant that management strategy struggled more with theory than did the military and political spheres.

There developed a relationship with the social sciences as intense as it was unsatisfactory. The interactions with economics, largely in the form of game theory, and sociology, largely in the form of organization theory, demonstrated both the possibilities and the limitations of the social sciences.

The derivation of the verb “to manage” is found in late thirteenth-century Italian. Maneggiare referred to the ability to handle a horse, drawn from manus, the Latin for “hand.”

The sense of less than total control remained important. Managing implied coping, dealing with a state of affairs that could never fully be controlled.

A quarter of a century passed before the Harvard Business School opened in 1908. It followed an endowment to promote an “applied science,” initially assumed to be engineering. Eventually the university opted for business, raising at once the tension between what many supposed to be vocational training and the university’s true purpose of disinterested scholarship. As the first dean, Edwin Gay, searched for a way to resolve this tension he came across the ideas of Frederick Winslow Taylor. Taylor himself was skeptical, to say the least, about the value of a university education. He declined to join the faculty, but he did give regular lectures to the new school, and more importantly, his philosophy permeated the early curriculum.

Dean Harlow Person of the Dartmouth Business School, which had been founded in 1900, described Taylorism as the “only system of management which was coherent and logical, and therefore was teachable.”

Taylor’s claims about the efficiency improvements he had achieved in the steel industry were exaggerated. Those for which he took credit could often be attributed to other sources.

The hostility to Taylorism in the labor movement makes its adoption by the Soviet Union even more significant. Before the revolution, Lenin studied Taylor and pronounced his methods exploitative—at least so long as they were being applied within capitalism.

The business of business is business. —Alfred P. Sloan

Though a great innovator, Ford was a terrible strategist. He was absolutely sure in his own views and put himself beyond challenge in the running of his company. So long as others agreed then all was fine, but he expected business to be undertaken on his terms and showed no flexibility when he faced resistance, whether from his own executives, workers, the government, or even consumers.

“If ever I wanted to kill opposition by unfair means I would endow the opposition with experts.”

As a result of Tony Soprano’s endorsement, Sun Tzu became Amazon’s bestseller in New Jersey.

His approach, in stark contrast to the complexity of Ansoff, was to apply micro-economic methodology, to develop what he called “powerful oversimplifications,” which BCG then sold to companies.15 The oversimplification that established his reputation was the “experience curve.” Based on early studies of the aircraft industry, the core idea was that the more units produced, the lower the costs and the higher the profits.

As Ford’s Model T experience demonstrated, even the master of a product with costs kept down to a minimum can still be caught out by a better product.

Again the imagery had a capacity to mislead. As one critic, John Seeger, noted, “The dogs may be friendly, the cows may need a bull now and then to remain productive, and the stars may have burned themselves out.” Seeger warned of the dangers of allowing management models to “substitute for analysis and common sense.” Just because a theory had elegance and simplicity did not “guarantee sanity in its use.”

Hampered by a lack of capital and technical capacity and by a strike-prone, radicalized work force, Toyota would probably have gone bankrupt were it not for the Korean War and large orders to supply the American military with vehicles. It then began to put together what became known as the Toyota Production System.

Thomas Davenport, who had been director of research at the Boston-based Index Group, which was eventually turned into the CSC Index, was one of those closely associated with the development of the original concept. He later described how a “modest idea had become a monster” as it created a “Reengineering Industrial Complex.” This was an “iron triangle of powerful interest groups: top managers at big companies, big-time management consultants, and big-league information technology vendors.”

This was why Michael Porter questioned whether Japanese firms had any strategy at all—at least as he understood the term, that is, as a means to a unique competitive position. The Japanese advance during the 1970s and 1980s, he argued, was not the result of superior strategy but of superior operations.

Kim and Mauborgne contrasted business with military strategy. The military was bound to focus in a fight “over a given piece of land that is both limited and constant,” while in the case of industry the “market universe” was never constant. Confusing their metaphors somewhat, they therefore argued that accepting red oceans meant accepting “the key constraining factors of war,” which were “limited terrain and the need to beat an enemy to succeed,” while failing to capitalize on the special advantage the business world offered of being able to “create new market space that is uncontested.”

Though Kim and Mauborgne acknowledged that red oceans were sometimes unavoidable, and that even blue oceans might eventually turn red, they made it clear that they found red ocean strategy fundamentally uninteresting. And here they fell exactly in line with the tradition in military strategy that sought to escape the brutal logic of battle and urged the application of superior intelligence to achieve political objectives while avoiding slaughter.

In a later article, Kim and Mauborgne developed the distinction further, identifying the importance of not only a value proposition that would attract buyers but also a profit proposition so that money could be made, and lastly a people proposition to motivate those within the organization to work for or with the company. From this they defined strategy as “the development and alignment of the three propositions to either exploit or reconstruct the industrial and economic environment in which an organization operates.”

Such theories still lacked a formulation as compelling as Clausewitz’s portrayal of the dynamic interaction of politics, violence, and chance. There was not even a concept comparable to Clausewitz’s friction, although executives were always likely to experience their own versions of the fog of war.

An article by Eric Beinhocker pointed to the challenge. An open system constantly in flux, shaped and reshaped by many agents acting independently, could seem more relevant to companies than a closed system tending to equilibrium. For example, a characteristic of complex adaptive systems was described as “punctuated equilibrium,” referring to when times of relative calm and stability are interrupted by stormy restructuring periods. At such time, those whose strategies and skills were geared to the stable periods risked sudden obsolescence.

I learned a great deal about military history and Confucian metaphors. But the only practical advice that we were given was that every company should send teams of people from different disciplines to country hotels every year to think about the future. —Participant in a fifteen-part course on business strategy given by a leading name in the field, quoted by John Micklethwait and Adrian Wooldridge.

Out of this they distilled eight shared keys to excellence: a bias for action, customer focus, entrepreneurship, productivity through people, value-oriented CEOs, sticking to the knitting (that is, do what you know well), keeping things simple and lean, and simultaneously centralized and decentralized (that is, tight centralized control combined with maximum individual autonomy).

Their audiences were averse to “numbers, charts and graphs,” and also to “mid-level abstraction.”

Mintzberg’s careful conclusion was that “strategy formation walks on two feet, one deliberate, the other emergent.”

Axelrod came up with four rules to establish cooperation. First, do not be envious. Be satisfied with absolute rather than relative gains, so that if you are doing nicely, do not worry is someone is doing even better. Second, do not be the first to defect, because you need to establish the logic of cooperation. Third, if another player defects, reciprocate in order to establish confidence in your retaliation. Last, do not be too clever, as others will not be sure what you are up to.

Heresthetics was about structuring the way the world was viewed so as to create political advantage. Riker identified a number of heresthetic strategies: setting the agenda, strategic voting (supporting a less favored outcome to avoid something even worse), trading votes, altering the sequence of decisions, and redefining a situation.

So important was trust that even when clues were arriving thick and fast that they were being deceived, individuals could stay in denial for a surprising time. A confidence trickster might be vulnerable to intensive probing and so would rely on those who were inclined to accept his story: the woman yearning for love or the greedy looking for a get-rich-quick proposition. Research showed that people were “poor deception-detectors and yet are overconfident of their ability to detect deception.”30 “Cognitive laziness” led to shortcuts that resulted in misapprehending people and situations, failing to explore context, ignoring contradictions, and sticking with an early judgment of another’s trustworthiness.

Yet studies of individuals described as “Machiavellian”—used in psychological studies to refer to somewhat callous and selfish personalities largely influenced by rewards and punishments—suggested that both their hot and cold cognition were limited.

A key finding from experiments was that individuals were not naturally strategic. When they understood that they were taking part in a competitive strategic game and were told the rules, the criteria, and the rewards for success, then they acted strategically.

In all three cases, experience undermined the foundations of this confidence. Victory in battle did not necessarily lead to victory in war. The ruling classes found ways to meet popular demands for political and economic rights that diverted revolutionary pressures. The comfortable position of American manufacturers was rocked by international competition, notably—but not solely—from Japan.

They encourage the view that strategic thinking can and often does start in the subconscious before it breaks into conscious thought. It can originate as apparently intuitive judgments, reflecting what can now be labeled System 1 thinking. System 1 strategies draw on an ability to read situations and see possibilities that less-strategic intelligences would miss. This form of strategic reasoning has been appreciated since classical times. It was manifested as mētis, exemplified by Odysseus, who was resourceful, coped with ambiguity, and used artful language to lead the in-group and disorient the out-group. Napoleon spoke of the coup d’œil as the “gift of being able to see at a glance the possibilities offered by the terrain.” It was at the heart of Clausewitz’s belief in military genius, a “highly developed mental aptitude” that allowed the great general to pick the right moment and place for attack.

Thus, for the most part, strategy must be in the realm of System 2, but that may only be in terms of turning what are essentially System 1 judgments into persuasive arguments.

Business historians have come to warn of accepting at face value narratives, such as Sloan’s My Life with General Motors, that suggest that challenging decisions were matters of purely rational choice. Whether or not such narratives exaggerate the role of senior managers they leave the impression of inevitability, understating the possibility of different decisions leading to alternative outcomes.

Yet Taleb also acknowledges a contradiction in his method, for although he points to forms of narrative fallacy he also uses stories “to illustrate our gullibility about stories and our preference for the dangerous compression of narratives.” This is because metaphors and stories are “far more potent (alas) than ideas; they are also easier to remember and more fun to read.” As a result: “You need a story to displace a story.”

strategy really kicks in when there is something different and unfamiliar about the situation.

The strategist must also stick closely to what McKee calls the “archplot,” in which “motivated actions cause effects that in turn become the causes of yet other effects, thereby interlinking the various levels of conflict in a chain reaction of episodes to the story climax, expressing the interconnectedness of reality.”

Both the dramatist and strategist must think about their audiences, but the problem of multiple audiences is more challenging for the strategist. If those who need to follow the plot are confused, they will be unable to play their parts. At the same time there may be others who are best kept in the dark, following false trails and deliberately ambiguous signals.

The dramatist knows from the start whether she is writing comedy or a tragedy: the strategist aims for comedy but risks tragedy.