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Why strategy is dead in the water Add to ...

Rick Smith has an MBA, has worked as a strategy consultant and, as an entrepreneur, has set up several organizations, including World 50, which brings together the top senior executives in various fields to network. So he knows a lot about strategy. But these days, he believes strategy is dead.

He points to the Merriam-Webster definition of strategy: “A careful plan or method for achieving a particular goal usually over a long period of time.” In the past, a long period of time might be 10 years. These days, he asks, is it even nine months? Well-thought-out plans are revisited every quarter or six months, given how tumultuous the business world is. Being too methodical can leave you wide open to be overtaken by somebody who is agile.

Much of our current understanding of strategy is based on the thinking of Harvard Business School professor Michael Porter, which essentially assumes your competitors today will be your competitors forever, Mr. Smith argues. It also assumes that companies can control distribution and send out targeted marketing messages to prospects and customers. These days, competition can come at you from all directions – witness, for example, the many companies with which Amazon.com, once just a book seller, competes. Distribution is wild and woolly, and in an era of social media, companies no longer control the messages about their offerings.

“Control and predictability have been greatly diminished,” he said in an interview.

In a recent Forbes.com article, he broke that down into seven factors that prevent you from being classically strategic:

1. Incrementalism has been disrupted

While managers love to talk about “out-of-the-box thinking” and grand, paradigm-shifting innovations, most companies choose small, incremental changes. But incrementalism is simply not good enough today. What taxi company saw the possibility of Uber, a mobile app that organizes ride-sharing in more than 45 cities worldwide? The Internet of Things looms as a gigantic disruptor.

2. Outcomes are unpredictable

In planning for the future, companies used to set out the four most likely competitive or market outcomes and create a plan for each. It was nice and simple. But these days, as innovations are crushing entire markets, that old, ordered approach is ineffective. The variations in outcomes from innovations can be huge – and you can be left behind.

3. The past is no longer a predictor

We used to think we were doomed to repeat history. But these days, the future looks nothing like the past, so it’s difficult to conceive, let alone plan for. Babies leave hospitals, he says wryly in the Forbes article, with a blanket, an iPhone, a Facebook account, and a Twitter handle. That’s an exaggeration, of course – but extrapolating from the past to build future scenarios is a shaky proposition.

4. Competitive lines have dissolved

Strategists have long benefited from developing organized, narrow views of competitive sectors, with a discrete group of companies whose strengths and weaknesses can be catalogued. Not any more. Tech companies are trying to disrupt every industry in the marketplace. And even existing industries are shifting territory, he notes, pointing to GE taking on IBM in its attempt to control data. “You don’t know who will get into your marketplace. Your competitors can come from any direction. So it’s hard to plan what you want to be,” he said in the interview.

5. Information is abundant

Consultants and other strategists have thrived by being able to share information that only they have gleaned from their research and insider knowledge of various companies. But now information is not scarce; it’s so abundant as to be overwhelming, and available to all. “It’s what you do with it – how you translate that information into actionable activities that is critical,” he said.

6. It’s hard to forecast value

Traditionally, if a Canadian company was investing in a factory in a foreign market, it would estimate the revenues and costs over time, and discount those to today’s value to gauge profitability. But he notes that such an investment may open up other opportunities simply by virtue of being in that market, and that “option value” must be calculated as well. Trouble is, you don’t know what those opportunities are, or their value, until you enter that market. Indeed, much of the value of the investment might accrue from those unseen opportunities.

7. Fast trumps long-term

In recent decades, organizations would roll out programs like Six Sigma to improve processes, learning what was effective or ineffective in a deliberate, staged fashion over a number of years. These days, it’s a whirlwind, and you must be learning all the time. “Today’s game of business looks a lot less like chess, and a lot more like hockey. Don’t worry about planning four or five moves out, just get quickly to where the puck is going. Sorry, there are no timeouts,” he writes.

Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column, Balance. E-mail Harvey Schachter

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