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The Strategy Delusion

August 30, 2017

He has come to represent a lot of things for our generation, there is no doubt about it. For some, he is God. For others, he is pure evil. Yet, one cannot deny the ferocious passions that Francis Underwood has awakened in many. In Beau Willimon’s epic House of Cards (2013), the main character Francis Underwood –interpreted by Kevin Spacey– incarnates the greatest phantom of our epoch: the strategist, the ultimate puppet master who is able to anticipate almost every move ahead of him/her. Underwood, is a Congressman who is possessed by the ideal of power, and in partnership with his mischievous wife, plans a pathway for him to take over the White House. His plan is not necessarily perfect, yet his wisdom is sufficient for him to adapt to any eventuality. So that his pathway from his office at the Capitol to the Oval, is carefully orchestrated by almighty Francis. The sensation that his character has produced worldwide is the result of the ways in which the character resonates with one of people’s inner and most powerful fantasies: strategy and the strategist.

            Originally a term from the military (Freedman, 2013), strategy has been seen conventionally as a grand plan to accomplish long-term objectives in organizations. This grand plan is naturally associated with a grand person –the strategist or leader– who is supposed to know what s/he is doing, almost as if s/he was the mastermind behind strategy (Mintzberg et al., 2002). This standard mode of strategy is what Mintzberg calls the Planning Mode:‘a highly ordered, neatly integrated… [process], with strategies explicated on schedule by a purposeful organization' (1978: 934). In spite of its popularity, the planning mode has had –at some point– to face the mirror and realize that far from depicting reality it is merely an unrealized fantasy. There is no doubt, indeed, that people –especially senior managers– in organizations, attempt to materialize the planning mode of strategy. They supposedly scan the environment, define the goals of the organization, and find, within such an environment, the best ways to accomplish their goals. It is this, then, how they formulate strategies: blueprints to take them to their promised land (i.e. deliberate strategies (Mintzberg and Waters, 1985)). Yet, the problem is that in the so-called ‘real world’, cognitively bounded humans can only try to plan, but their planning is ‘necessarily incomplete or [emerges from a] partial understanding of the situation faced and hence the possibility of unintended consequences’ is almost inevitable (MacKay and Chia, 2013: 211). Thus, deliberate strategies turn into unrealized strategies (i.e. they never materialize as planned), with a final outcome that might not have been intended. Examples of the latter abound. Or, did not Napoleon embarked into a great conquest of Russia only to realize that he could not feed his troops and horses as the Russians had unexpectedly destroyed everything on their way? The same goes for successful stories. Or, did not Blackberry emerged from a company which original intention was to work on wireless technology, especially credit card payment terminals?

            Managers do make decisions and plans, but these tend to be incomplete decisions, where unintended consequences emerge, and also, unimagined opportunities. Yet, the question is, why can’t people plan for the future as the fiction of planned strategy says they are supposed to? The answer is simple: complexity. To the business student, the concept of the organization as a system is probably not new. However, what might be new is that organizations are specifically complex systems. These type of systems are made of a plethora of interacting, and most importantly, interdependent elements, all of which together define the future of the system; without any particular element or actor having full control over it (Haynes, 2008; Teisman and Klijn, 2008). Just as organizations are complex systems, so the economic, social and political environments in which they are embedded are too. The economy certainly behaves as a complex system (Arthur, 1999), and thus, from time to time it evidences one of the key eventual and likely –although not necessary– features of complexity: chaos. Chaos means that tiny things could end up making gigantic differences. Perhaps, the reader would recognize this term much better through the so-called butterfly effect.  In short, the idea that ‘a butterfly flapping its wings in Peking today may cause a storm in New York in the future’ (Gabriel, 1998: 9). And, thus, for instance, the Wall-Street ambitious and devouring practices of some firms in the early 2000s, once circulated throughout the very intricate circuits of interconnections of the complex system of the global economy, ended up almost bringing the global economy down in 2008/09.          

            Cognitively bounded human beings, living in a complex world, are incapable –so far– to (truly) predict their environments and what the future will bring. Hence, contrary to Francis Underwood, most people will eventually find it increasingly harder to be always one move ahead of everyone. Yet, this feeling of impotence is not one that warms hearts or motivates leaders. Thus, people have developed one key mechanism to cope with complexity: stories. Because the human mind is not built to think about the world as the intricate bouncing of countless factors that results –sometimes– in unexpected events. By contrast, ‘THE HUMAN MIND is built to think in terms of narratives, of sequences of events with an internal logic and dynamic that appear as a unified whole’ (Akerlof and Shiller, 2009: 68). A story is precisely what strategy is: an epic of grand heroes thinking ahead and planning in order to protect us from all harm that could come to us in the future. Like I said earlier, there is no question that most senior managers in organizations try to behave like their character indicates in this story. In short, they do attempt to be grand strategists, and many times, they do accomplish a lot by playing this character; there is no question about this: a lot that a person accomplishes could be planned. But, in the end, most –if not all– people will come sooner or later to face their limitations and their incapacity to cope with complexity. However, this is not always bad news in terms of strategy.

            Sometimes things in organizations do work, despite managers not understanding why or how, and when that happens, organizations actually get a source of competitive advantage: causal ambiguity (Reed and Defillippi, 1990). For instance, people nowadays are amazed by the Apple miracle, and propose all kinds of theories about what was the key element of its success. Nonetheless, it would be difficult to isolate exactly what makes Apple so successful, especially when in the past it failed many times. Is it its user-friendly designs? Is it its capacity to turn its products into fashion icons? Is it the people that have led the company? It is it something fortuitous? Most likely, Apple’s success is a combination of all these elements and more. And, thus, a simplistic recipe for the key source of Apple’s success does not exist. In short, complexity also gets in our way when trying to understand the fate of an organization. The good thing is that as a company’s competitive advantage is impossible to properly disentangle, its success, then, might be harder to imitate, because people do not fully know what made it so successful. The cherry on top of this cake, is when organizations reach great success and not even their senior managers fully understand why. The latter is a scenario that might seem like a dream come true, because if not even your own people understand what made your company so successful, then how could others copy you, right? Yet, this can also quickly turn sour, as when the context of the organization changes, and its senior managers are incapable of changing the organization while protecting its competitive advantage, because they simply never truly and fully understood what gave them such a competitive advantage in the first place.

 

 

 

References:

 

Akerlof G and Shiller R (2009) Animal Spirits. United States of America: Princeton University Press.

 

Arthur WB (1999) Complexity and the Economy. Science 284(5411): 107–109.

 

Freedman L (2013) Strategy: A History. Oxford: Oxford University Press.

 

Gabriel Y (1998) The Hubris of Management. Administrative Theory and Praxis 20(3): 257–273.

 

Haynes P (2008) Complexity Theory and Evaluation in Public Management. Public Management Review 10(3): 401–419.

 

MacKay RB and Chia R (2013) Choice, chance, and unintended consequences in strategic change: a process understanding of the rise and fall of Northco Automotive. Academy of Management Journal 56(1): 208–230.

 

Mintzberg H (1978) Patterns in strategy formation. Management Science 24(9): 934–948.

 

Mintzberg H and Waters JA (1985) Of Strategies, Deliberate and Emergent. Strategic Management Journal 6(3): 257–272.

 

Mintzberg H, Simons R and Basu K (2002) Beyond selfishness. Mit Sloan Management Review 44(1): 67–74.

 

Reed R and Defillippi R (1990) Causal Ambiguity, Barriers to Imitation, and Sustainable Competitive Advantage. Academy Of Management Review 15(1): 88–102.

 

Teisman G and Klijn E-H (2008) Complexity Theory and Public Management. Public Management Review 10(3): 287–297.

 

Willimon B (2013) House of Cards. US: Netflix.

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