Is Strategy Useless?

Understanding what it stands for might hold the answer, says Balaji Pasumarthy Mentor at MentorSquare.

An entrepreneur was exasperated at the very mention of ‘strategy.' “I do not believe in it!” He proceeded to tell me how their company had spent a lot of time and money in developing a strategy for investing in the stock market. “You know what the consultants recommended? ‘Random walk theory.' So why do you need consultants, why read books on strategy and why listen to successful people on what their strategy was. ‘Strategy' is post facto, it is something that people say they had after they are successful.”

My friend's apathy towards strategy, though extreme, is shared by many. In part because people expect that once a strategy is unveiled in a presentation or a glossy report it needs to pan out exactly as intended. In today's unpredictable world, this is an unrealistic expectation. The other day a venture capitalist friend was telling me that in all of the investee companies the plans had undergone complete transformation from when they had invested in the company. Plans and strategies do not remain sacrosanct, especially in dynamic environments such as those faced by start-ups and those in new arenas.

I think a lot of debate on the usefulness of strategy happens because of what different people think it stands for. If people think it is the panacea for everything, that a strategy from a management guru is the sole ingredient for success, the end result would be disappointment.

In its simplest form, strategy is a long-term direction and an understanding of what the sources of advantage are. This simple definition does not involve reports, management consultants or MBA degrees. If you know where you want to go and what will take you there, that is strategy.

There are those who will ask, “Why should one know where to go?” and will say that where one reaches is a chance event. This reminds me about the famous Alice in Wonderland anecdote where Alice at a crossroad asks the Cheshire Cat, “Which road shall I take?” The Cat asks, “Where do you want to go?” Alice says, “I don't know,” and the Cat says, “Then both will take you there.”

I will rest my case by saying that if you choose to not take a view on ‘where to go,' that in itself is a strategy, because there is a conscious choice about the final destination ‘anywhere.' But is it a good strategy?

So the debate really is not whether you believe in strategy or not, it really is on whether you have a good strategy or a bad strategy, and perhaps on how to go about getting a great strategy. They do not necessarily come in nicely bound reports. Warren Buffet certainly does not follow the ‘Random walk theory.'

The importance of strategy is aptly put by the management guru Peter Drucker: “Objectives are not fate; they are direction. They are not commands; they are commitments. They do not determine the future, they are the means to mobilise the resources and energies of the business for the making of the future.”

Once you have a strategy, your commitment to it is what makes it work. It provides direction to the organisation. Strategy needs commitment but does not mean that it needs to be cast in stone. Today's dynamic environment requires flexibility and the ability to make full use of opportunities that come along the way.

So which strategy is likely to give better returns? In a competitive environment, especially when there are other dominant players in the industry, one can only win if one is different. “I can do better,” or an efficiency driven strategy will only work if the competition is extremely lazy, not a comfortable assumption to make. For instance, if one is in the software industry, it will be difficult to beat Infosys in its own game by copying what Infosys does.

To have a superior strategy, two things are essential: first is to be really different, and to be really different one must actually do things differently. So this rules out the copying strategy.

We can get useful insights from what others have done. Even Einstein said that he could see further than others because he was standing on the shoulders of giants.

It is precisely for getting different perspectives that one needs to learn about what others have done, what management gurus have to say and what consultants have to offer.

One still has the responsibility of making the right choices, rejecting ideas that are not applicable to one's context and selecting the right strategy. One does not have the luxury of putting the blame for poor strategy on others. Drucker says, “Whenever you see a successful business, someone once made a courageous decision.”

Do send your queries to >hindubusinessline@mentorsquare.com.

Related Topics