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 / Spring 2010 / Issue 58(originally published by Booz & Company)


Seven Chapters of Strategic Wisdom

Grove and Moore persisted, even though the effort entailed shutting down plants, laying off thousands of employees, and giving up what many thought of as the company’s birthright. Intel’s subsequent success in microprocessors, beginning with its celebrated “386” model, would soon make it the world’s largest semiconductor company. Read over the tale of what it took to get there if, in a delusional moment, you’re ever tempted to think that putting strategy into practice is easy, even a seemingly emergent strategy.

The emergent school did get one huge point exactly right: You can’t predict the future, no matter how many studies you amass or alternative scenarios you gin up. Critics have used this sad fact to bash the whole idea of strategy. Why should companies go to the trouble if the future isn’t going to turn out the way anyone expected? In this they miss a crucial distinction. Figuring out and having a strategy for your company isn’t the same thing as so-called strategic planning, which almost never works.

You need to know who your customers are, who you compete against, and how your costs and capabilities stack up against those of your rivals. (At the beginning of the strategy revolution, a surprising proportion of companies didn’t have much grasp of the last two.) Most important, you have to understand, the more viscerally the better, what your competitive advantage is and how it is to be tended and enlarged. Arriving at such an understanding is not the same as spending weeks each year concocting projections of what toaster sales will be in northwest Brazil three years hence. This is one reason firms such as BCG and Bain & Company vastly prefer to work with the line executive in charge rather than with the corporate planners who labor over such projections. Some pioneers of strategy consulting have told me with great pride that over the course of 30-year careers they never wrote, or helped write, a single strategic plan.

The Evolving Irrationalists

Should you or your company get the urge to write such a plan, merely consult Chapter 5 (“Fundamental Fallacies of Strategic Planning”) of Henry Mintzberg’s The Rise and Fall of Strategic Planning, published in 1994. In it the Canadian scholar — author of half a dozen other books on strategy — recounts and demolishes the reasoning behind three fundamental fallacies of strategic planning. He starts with the fallacy of predetermination, describing why most forecasts are nonsense (they almost inevitably fall prey to unanticipated developments thrown at companies by the real world). He then proceeds to the fallacy of detachment: Why would anyone think that the people making strategy could or should be isolated from the legions charged with carrying it out? Finally, as probably the head druid of the emergent school, Mintzberg beats up on the fallacy of formalization, the idea that any detached analytic process could capture all that needs to go into charting the corporate destiny. No planning drill, however rich, can capture all the intuitions and nuanced judgments of the experienced manager responding to ever-changing business reality. As a bonus, Mintzberg debunks the concept of “marketing myopia” as presented by economist and Harvard Business School professor Theodore Levitt. Thinking of yourself as a “transportation provider” rather than as a railroad company inevitably results in your taking your eye off the ball of what you need to run a good railroad.

For all the fun he has exposing the folly of planning, Mintzberg recognizes that a company must have a strategy, albeit a living, breathing, in-the-heads-of-everybody and ever-ready-to-be-modified version of the thing. How else, he asks, will it be ready to meet all the uncertainties that await it?

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Strategy Resources:
Works mentioned in this review.

  1. Alfred D. Chandler Jr., Strategy and Structure: Chapters in the History of the American Industrial Enterprise (MIT Press, 1962), 478 pages: Introduction
  2. Kenneth R. Andrews, The Concept of Corporate Strategy (Dow Jones-Irwin, 1971), 264 pages: Chapter 2, “The Concept of Corporate Strategy”
  3. Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (Free Press, 1980), 416 pages: Chapter 2, “Generic Competitive Strategies”
  4. Thomas J. Peters and Robert H. Waterman Jr., In Search of Excellence: Lessons from America’s Best-Run Companies (Harper & Row, 1982), 386 pages: Chapter 2, “The Rational Model”
  5. Richard N. Foster, Innovation: The Attacker’s Advantage (Summit Books, 1986), 316 pages: Chapter 4, “The S-Curve: A New Forecasting Tool”
  6. Andrew S. Grove, Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company (Currency Doubleday, 1996), 222 pages: Chapter 5, “‘Why Not Do It Ourselves?’”
  7. Henry Mintzberg, The Rise and Fall of Strategic Planning (Free Press, 1994), 478 pages: Chapter 5, “Fundamental Fallacies of Strategic Planning”
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