Some Thoughts on Strategy and Strategic Thinking
Understanding strategy can help us cope with a fast-changing world, as well as deepening our understanding of current affairs
"Strategy" by Got Credit is licensed under CC BY 2.0.
“Everyone has plans until they get hit for the first time” - Mike Tyson in 1987
Recent essays in Sharpen Your Axe have touched upon issues relating to strategy. We have seen how conspiracy theorists fail to factor friction (a concept developed by Prussian military strategist Carl von Clausewitz) into their model of the world; and we have discussed an ancient Chinese text on strategy and how it relates to Ukraine and Gaza. In Spain, we have provided some advice on better strategic positioning for the leader of the opposition and discussed a fundamental flaw in the strategic positioning that lies behind behind the coalition government’s dealmaking.
Strategy is an important piece of the puzzle for those of us who want to deepen our understanding of current affairs through open-source intelligence (OSINT). What, however, is strategy? The Cambridge Dictionary defines it as “a detailed plan for achieving success in situations such as war, politics, business, industry, or sport, or the skill of planning for such situations.” Strategy is normally contrasted with tactics, defined as “the organization and use of soldiers and equipment in war.”
Operations - defined as the plural of operation, or “the way that parts of a machine or system work together, or the process of making parts of a machine or system work together” - are usually seen as sitting between strategy and tactics. In other words, strategy involves planning, operations create systems to make the plan feasible and tactics focus on implementing the plan in the real world.
Unfortunately, the dictionary definition of strategy, based on making a plan and then executing it, is a little simple-minded, as heavyweight boxing champion Mike Tyson realised back in the 1980s. His quote on plans falling apart after getting punched echoes a much earlier observation from Prussian military strategist Helmuth von Moltke the Elder in 1871. He wrote: “No plan of operations extends with any certainty beyond the first encounter with the main enemy forces.” This was sjmplified in the 20th century to a pithier version: “No plan survives first contact with the enemy.”
Dwight Eisenhower learnt the same lesson as Supreme Commander of the Allied Expeditionary Force in World War II. He said in 1950: “I always remember the observation of a very successful soldier who said, ‘Peace-time plans are of no particular value, but peace-time planning is indispensable.’” By 1957, when he was President of the US, he had simplified the saying to: “Plans are worthless, but planning is everything.”
Eisenhower’s simplified version of the saying came on the cusp of a revolution in the way strategy is conceptualised by academics. Theorists Henry Mintzberg, Bruce Ahlstrand and Joseph B. Lampel say that economist Charles Lindblom blew the starting whistle on the coming revolution on strategic thinking in 1959 with a provocative article on “muddling through” by policymakers who are struggling to cope with a world that is too complicated for them.
Lindblom’s observation struck a chord. Other authors began to study the interaction between plans and contact with reality across different fields. This developed into a school of thought that emphasised the role of learning in strategy. It is often called the school of emergent strategy. We have already touched on some of the issues raised by this school in the essays on double-loop learning. This week’s essay will take a deeper dive into emergent strategy.
Honda’s entry into the US from the late 1950s and early 1960s is a classic case study in emergent strategy. The British government hired a consultancy firm to explain Honda’s success in the 1970s. Its report, published in 1975, exemplified the “make plan, execute plan” model of strategy that is familiar to the people who write dictionaries. The report spun a yarn based on managers deliberately keeping costs low while attacking vulnerable market segments.
In the early 1980s, though, management theorist Richard Pascale flew to Japan and interviewed the Honda managers who had broken the American market. What he heard was very different. Soichiro Hondo, who had founded the firm in 1948 to produce motorised bicycles, was confident about his 250cc and 305cc motorbikes, which he felt would be competitive in the macho US market. His managers, who were based in Los Angeles (LA), rode around town on 50cc motorbikes, which were just for errands. They weren’t meant to sell the smaller machines, which were unlikely to appeal to the black-leather crowd.
The initial results of the strategy were a disaster. The larger motorbikes were ridden for longer than the same models had been in Japan and began to break down. However, the managers’ smaller motorbikes attracted a lot of attention in LA. They changed their minds about not selling them as the larger motorbikes ran into issues. Sales took off as middle-class Americans adopted 50cc motorbikes.
A university student invented a slogan - “you meet the nicest people on a Honda” - which found its way to the managers, who were initially worried about alienating hard men in black leather. They somewhat reluctantly ended up adopting the slogan and the rest is history. By 1966, Honda had captured 63% of the entire US market.
Regular readers will unsurprised by the failure of the consultants hired by the British government to understand the true dynamics. Intentionality bias is hardwired in our brains. When something happens, our intuitive reaction is to assume that it happened because someone wanted it to happen.
This assumption underlies most conspiratorial speculation. Thinking about unintended consequences is more sophisticated, but it is also harder for us. It is no coincide that strong belief in conspiracy theories negatively correlates with education. Over-emphasising intentionality is part of our factory settings and it needs a large amount of axe sharpening to overcome it. Even highly educated and well-paid consultants can make the mistake, as this example shows.
The Honda story also captures the essence of emergent strategy: make a plan, try to implement it, fail, receive new information, come up with a new plan, rinse, repeat. In the slightly more formal language of Mintzberg and his colleagues: “strategies emerge as people, sometimes acting individually but more often collectively, come to learn about a situation as well as their organization’s capability of dealing with it. Eventually they converge on patterns of behavior that work.”
There are parallels with the military. In the 19th century, the Prussian military developed a concept called Auftragstaktik, normally translated as mission command. Field Marshall Moltke the Elder laid the groundwork after the Prussian defeat at Jena. Clausewitz’s work on friction was an important part of the theoretical framework. Mission command is based on decentralised leadership, which lets subordinates exploit opportunities that their commanders might not have expected when they were making a plan. It was rediscovered by the US, British and Israeli military in the 1980s and is now seen as “best practice” by armed services around the world.
Emergent strategy has also boomed in Silicon Valley in the years after the co-inventor of the transistor moved to Mountain View in 1956. The one big advantage that startups have over larger companies is that they can run experiments, fail, receive new information and then run slightly more sophisticated experiments, which will also fail in interesting ways. Once in a while, an experiment will succeed. Once startups have found something that works, they can run many more experiments to see if it can be optimised. After countless failures, once in a while a new iteration will succeed.
By moving very fast, some startups are able to build very successful businesses out of the handful of successes in a sea of failures; and then incrementally improve the findings that work. The whole approach is based on feedback loops.
Entrepreneur and blogger Eric Ries has popularised this approach in a book called The Lean Startup. He introduced jargon like “MVP” or “pivots” to the innovation scene. MVP stands for “minimum viable product” and refers to the worst product or service that a startup can persuade one customer to pay for. The idea is then to improve the MVP through constant experimentation until it becomes a world-beating blockbuster. Of course, there is always a risk that an MVP will die an ugly death. Failure is ever-present in the startup world.
Pivoting refers to a sudden change of strategy based on new information. Honda’s US managers pivoted in the early 1960s when they realised that the smaller motorbikes, which they weren’t meant to sell to the public, would be popular with middle-class customers, who had never ridden a motorbike in the past.
Established companies find it hard to cope with the disruptive forces unleashed by experimental startups that stumble onto a winning formula. The corporate world can be bureaucratic, with a conservative culture and lots of committees preventing experimentation. Large companies are often more worried about potential downside risks from sudden moves than they are with the potential upside of finding a new and hopefully better way of operating. What can slow-moving companies do to cope with awkward startups stealing their customers with products and services that emerge from experimentation?
Entrepreneur and investor Salim Ismael, author and investor Michael S. Malone and engineer and entrepreneur Peter H. Diamandis have presented an answer in a book called Exponential Organizations 2.0. The idea of the book is how to help large companies create an operational structure that will help them grow exponentially. At the strategic level, the authors recommend having what they call a “massive transformation purpose” or MTP.
Google offers a great example of a large company with an MTP. Instead of defining itself as a search engine (its first offering), it says its mission is to “organize the world’s information.” This is broad enough to encompass new areas like the Android operating system, the Chrome web browser, Gmail, Google Maps and YouTube. Ismael, Malone and Diamandis contrast this with camera firm Kodak, which defined its mission too narrowly and came late to digital cameras. It filed for Chapter 11 bankruptcy protection in 2012, but found a way to survive, if not thrive, in a world where we all have a powerful camera in our pockets.
In a world awash with data that is changing incredibly fast, ordinary human beings can copy Google’s approach too. Doing so is similar to trying to separate your values from your worldview. Both ideas are designed to create a strategic position that is flexible and adaptive in an uncertain world, one which is very different from the vision that gurus will try to sell to you.
Let me give you a modest example from my own life. I spent 21 years as a full-time investigative journalist, focusing on mergers and acquisitions (M&A) involving listed companies, mainly in Spain. Towards the end of this period, I accepted a project involving data storytelling. Last year, I was promoted to a new role as an editor, which largely involves combining data storytelling, predictive algorithms and showcasing scoops instead of breaking news myself. By defining my mission as “trying to work out what will happen next” instead of “investigative journalism,” I have been able to adapt algorithms into my work rather than seeing them as some kind of threat.
Generative artificial intelligence (GenAI) is going to be a force for disruption in the years ahead for all of us. I have already mentioned how educators can use the new tool here. How can you define your work in a way that will allow you to incorporate GenAI instead of being too slow to adapt to it? This is a strategic challenge for all of us, except those who have already retired or who are about to retire.
I’d love to see your thoughts in the comments, which are open this week. Also, if you’d like an invite code to Bluesky (a new social media platform where users can customise their own algorithmic settings), please let me know.
Finally, if anyone wants to learn more about strategic thinking, as well as the reading list at the bottom, I have another suggestion: learn to play chess! The game contains many lessons about strategic positioning, trying to understand the other side’s strategy and developing your own strategy in uncertain circumstances. It is easy to download chess apps on your smartphone, which will offer you increasingly difficult challenges as your skills develop. See you next week!
Further Reading
Chess Theory by Phillip Duke
Exponential Organizations 2.0: The New Playbook for 10x Growth and Impact by Salim Ismael, Peter H. Diamandis, Michael S. Malone
Strategy Safari: The Complete Guide through the Wilds of Strategic Management by Henry Mintzberg, Bruce Ahlstrand, Joseph B. Lampel
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries
Transforming Command: The Pursuit of Mission Command in the U.S., British and Israeli Armies by Eitan Shamir
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