Strategies founder on fluff and buzzwords

Few terms of corporate art are more abused than “strategy” and its cousins. Put “strategic” ahead of simple decisions (strategic acquisition, strategic initiative, strategic hiring) and the people carrying them out can feel more important, while those advising can charge a higher fee.

Since January, the Financial Times has reported that more than 30 organisations – from Abertis, the Spanish airports operator, to Zenergy Power, the superconductor developer – are carrying out, will carry out or have carried out some sort of “strategy review”. In principle, this should be a good thing. In the face of clear evidence of the dangers of complacency or inertia (Blockbuster ambushed by Netflix; Nokia surprised by Apple), all companies ought to revisit more frequently the threats they face and what they must do to neutralise them. The act of reviewing strategy should at least lead over time to improvements in making and pursuing it, shouldn’t it?

Not so. In 216BC, Hannibal, dubbed the father of strategy, beat a larger Roman army at Cannae with what has become a classic military outflanking manoeuvre. Yet, 22 centuries later, says Richard Rumelt of UCLA, organisations have not really built on the superiority established by the Carthaginians. Far from having evolved to a higher level of strategic thinking, most leaders are still winging it and, as he drily points out in his new book, “winging it is not a strategy”.

Despite Prof Rumelt’s lofty reputation in this crowded field, Good Strategy/Bad Strategy is his first book aimed at a general audience and only his second as a sole author since 1974. While he has vented about strategy in articles, in lectures and in advisory work for companies, he has bottled up plenty of frustration over the past decades. As he explained to me last week: “Most of the world isn’t intending to get [strategy] wrong: they aren’t getting it at all.”

In fact, it is worse than that. Many companies are actively pursuing bad strategies. A bad strategy is not the same as a strategy that founders because of miscalculations or mistaken choices (I suspect Prof Rumelt has a soft spot for these decisive failures) but it is the antithesis of good strategy. Its all too familiar hallmarks are: fluff – a “superficial restatement of the obvious combined with a generous sprinkling of buzzwords”; failure to face the problem; mistaking goals for strategy; and bad strategic objectives.

Prof Rumelt’s explanations of where companies are going wrong are bracing and his prescriptions for good strategy – for example: diagnose critical challenges, set a guiding policy to deal with them, then take coherent action to accomplish your goals – have a simple force. But I fear few executives will take his medicine.

One reason is that they fear the accusation of inconsistency. Incumbents, unwilling to be dubbed flip-floppers, tend to stick with their bad strategy. Shareholders, instead of allowing an established chief executive to change his or her mind, change the chief executive, heralding the inevitable strategic review and potentially doubling the disruption.

A second reason for strategic failure is that leaders grow obsessed with dealmaking. Companies are brought to the public markets too soon and, once listed, pursue growth by acquisition – an option that should always be considered guilty until proved innocent, according to Prof Rumelt. My remedial starting point would be to outlaw the term “strategic review” when the exercise is conducted by a friendly investment bank with an interest in recommending a fee-generating deal at the end of the process.

Last, executives succumb to leadership by “vision”. This is the kind of missionary zeal – “our strategic goal is to win” – that Lou Gerstner seemed to have consigned to the strategy-shredder in 1993, when he told reporters that “the last thing IBM needs right now is a vision”.

In his book, Prof Rumelt dismisses “ritual recitations [that] tap into a deep human capacity to believe that intensely focused desire is magically rewarded”. In person, he sounds more depressed about the trend. He recently asked his students to write down why companies were successful. Eight out of 10 offered a version of the answer that it was because those companies’ leaders had vision. “Where is this coming from?” he grumbles. Certainly not from the clear strategic thinking that won victory for Hannibal at Cannae two millennia ago.

andrew.hill@ft.com

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