Strategy: A History

by Lawrence Freedman

a “dubious and dangerous philosophical concept of an elite which has a monopoly on esoteric knowledge entitling it to manipulate the unwashed peasantry.”

Drucker’s philosophy was therefore rationalist—set ends, find means—but took due account of the complexities of both organizational structures and business environments.

The planning model could never be about coping with crisis; it was about avoiding crisis, maintaining a strong position by paying attention to the total environment and ensuring that resources were used to maximum effect.

Welch embraced this approach at General Electric, using von Moltke’s aphorism about plans not surviving the first contact with the enemy to explain why the company did not need a rigid plan but instead a central idea that could be adapted to circumstances.40

The real skill was in creating new products and developing new services—even new markets that the most likely competitors had missed.

As a contrast, Tom Schelling demonstrated the possibilities of using abstract forms of reasoning to illuminate real issues faced by states, organizations, and individuals. He encouraged people to think of strategy as an aid to bargaining, and he explored with great insight the awful paradoxes of the nuclear age. But he explicitly eschewed mathematical solutions and drew on a range of disciplines, thus abandoning any attempt to develop a pure, general theory. Mirowski found Nash’s non-cooperative rationalism wanting but also found Schelling’s more playful, allusive mode of analysis exasperating because of its lack of rigor.

Just because a theory had elegance and simplicity did not “guarantee sanity in its use.”

This uncertainty was a major problem for the strategist, as what might seem acceptable behavior at one moment became unacceptable the next.

Managers being trained in this theory would offer no loyalty and expect none in return. Their task was to interpret the markets and respond to incentives. Little scope was left for the exercise of judgment and responsibility.

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. The Japanese managed to combine lower cost and superior quality and then imitated each other. But that approach, he noted, was bound to be subject to diminishing marginal returns as it became harder to squeeze more productivity out of existing factories and others caught up by improving the efficiency of their operations.

They argued that the “strategic move” should be the unit of analysis rather than the company although they did not suggest that blue oceans were only found by new companies.

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.”

distinction between strategy as a relationship to the environment and strategy as decision-making with imperfect information.

A strategy could never really be considered a settled product, a fixed reference point for all decision-making, but rather a continuing activity, with important moments of decision.

In this respect, strategy was the basis for getting from one state of affairs to another, hopefully better, state of affairs.

Drucker, who came to be retrospectively described as the first of this class, disliked the term, observing sniffily that “guru” was used “because ‘charlatan’ is too long to fit into a headline.”20

This was not so much about doing one thing well but about coordinating diverse skills and integrating streams of technology.

“Strategy is revolution. Everything else is tactics.”

But this was always a strange revolution, certainly more bourgeois than proletarian. As it was never a real movement, it lacked institutional expression. It reflected the counterculture’s revolt against rationalism and bureaucracy, a yearning for passion and the play of imagination, and the urge to trust in feelings and experience, assuming that the best things happened spontaneously. But, as with the counterculture, this was a false prospectus.

Another was that organizational life should be an uplifting social and collective experience, “a group of people working together to collectively enhance their capacities to create results that they truly care about.”

Charles Handy, a British management consultant and another enthusiast for this approach, described a learning organization as being about “curiosity, forgiveness, trust, togetherness.”

It was about legitimizing the elite as much as deciding upon a course of action.

As it grew in confidence and assertiveness, economics offered itself as the master discipline of the social sciences. There were no obvious boundaries to its imperialism.

Heresthetics was about structuring the way the world was viewed so as to create political advantage.

Within the complex social networks of everyday life, truly egotistical and self-regarding behavior was, in a basic sense, irrational.

Damning!

the importance of considering strategy as starting from an existing situation rather than a distant goal.

Simply put, strategy as commonly represented was System 2 thinking par excellence, capable of controlling the illogical forms of reasoning—often described as emotional—that emerged out of System 1. The reality turned out to be much more complicated and intriguing, for in many respects System 1 was more powerful and could overwhelm System 2 unless a determined effort was made to counter its impact.

One way to think of strategy, therefore, was as a System 2 process engaged in a tussle with System 1 thinking, seeking to correct for feelings, prejudices, and stereotypes; recognizing what was unique and unusual about the situation; and seeking to plot a sensible and effective way forward.

It may well be that in a broadly stable and satisfactory environment, in which goals are being realized with relative ease, there may be little need for anything sharper and bolder.

So what turns something that is not quite strategy into strategy is a sense of actual or imminent instability, a changing context that induces a sense of conflict. Strategy therefore starts with an existing state of affairs and only gains meaning by an awareness of how, for better or worse, it could be different.

The ability to think ahead is therefore a valuable attribute in a strategist, but the starting point will still be the challenges of the present rather than the promise of the future.

“Power is actualized only where word and deed have not parted company,” observed Hannah Arendt, “where words are not empty and deeds not brutal, where words are not used to veil intentions but to disclose realities, and deeds are not used to violate and destroy but to establish relations and create new realities.

“sequences of challenges to be addressed rather than as initiatives which have already happened.”

Strictly speaking, the concept refers to stereotypical situations which set expectations for appropriate behavior.

Scripts may be a natural way of responding to new situations, but they can also be seriously misleading. Thus, if people need to behave abnormally, they need to know that they are in an abnormal situation.

System 1 scripts may be a natural starting point, but they may benefit from a System 2 appraisal that considers why the normal script might not work this time. In this respect, following established scripts risks strategic failure.

When we seek to understand the present it is unwise to assume that things are the way they are solely because strong actors wished them to be thus, but when we look forward to the future we have little choice but to identify a way forward dependent upon human agency which might lead to a good outcome.

That i think is key

The features of a good plot are therefore shared between drama and strategy: conflict, convincing characters and credible interactions, sensitivity to the impact of chance, and a whole set of factors that no plan can anticipate or accommodate in advance.

This takes us back to the observation that much strategy is about getting to the next stage rather than some ultimate destination. Rather than think of strategy as a three-act play, it is better to think of it as a soap opera with a continuing cast of characters and plot lines that unfold over a series of episodes.