Friday, 12 April 2013

Strategy is Necessary but not Sufficient

For those of you out there who like to gleefully smirk about “strategy”; let me explain it immediately here at the start (and hopefully once and for all): Strategy is a necessary condition for success. But it is not a sufficient condition – we (strategy professors) are not that stupid.

I’ll explain in a sec exactly what we mean by that – a necessary but not sufficient condition – but let me first explain the gleeful smirk.

I again saw it last November, when the Monitor Group went bankrupt. The Monitor Group was a strategy consulting firm founded by Harvard Business School’s Michael Porter; seen by many as the founding father of the field of business strategy.

When it went bankrupt I was gleefully approached by various people in various corridors making gleeful remarks that this strategy consultant’s strategy could not even save itself, and the famous strategy guru Michael Porter couldn’t even put together a company that made enough money to pay the rent. With the underlying ergo: see, this strategy stuff does not really work.

Let me now move on to the necessary but not sufficient condition thing: When a company has a good strategy – even a great strategy – it can still fail. Yes, fail. It can still fail because to be a success in business you need lots of other things besides a good strategy: you still need to be able to get the technology you envisioned, to motivate your people, forge and nurture customer relations, get the right financing, and so on and so on. There are lots of other things you need to be good at, in addition to strategy, before your company will become a success. You can have an excellent strategy in mind but if you mess up in these other areas you will go down nonetheless.

Hence, having a good strategy is not sufficient to becoming a success.

But it is a necessary condition. What we mean by that is that even if you’re good at absolutely everything – developing technology, motivate your people, forge and nurture customer relations, and get the right financing – but your strategy sucks, in terms of what you are actually trying to accomplish in the market place, you will be (to use a good English expression) flogging a dead horse.

You can flog all you want, but without the right strategy it is all wasted energy and other resources; it ain’t going to work. The beast isn’t going to jump up and run.

I have seen various CEOs who were really great business leaders, in the sense that they were charismatic, structured, genuine people-managers, politically astute, and so on, but who were trying to build a company on what was basically a flawed idea: a strategy that was never going to work. They were still great CEOs – nobody can be good at everything – but without a great strategy no CEO can build a great company. In which case you’re better off outsourcing your strategy development to someone else; even if that someone else is the Monitor Group or Michael Porter.

I like strategy, and I think it is really important. But I am not daft enough to think that all you need is a good strategy and all will be well. But at least your horse will be running.