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– Thoughts on Strategy and Management

Is not having a strategy a viable strategy?

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Not to have a strategy is an oxymoron. Of course, there are businesses that seem to have no strategy at all. Some even have declared that they will operate without one. But do these businesses really have no strategy? The answer probably depends on what you define as strategy. One way or the other, each and every business once had taken the decisions to do business a particular way. This actually is the strategy, intended or not.

How do you define strategy?

You may define strategy as a deliberate statement that explains what you do and how you do it. Seen from this point of view, you will actually find a lot of businesses that do not have one. These are mostly smaller businesses. They simply buy things, produce a product or service and sell it to their customer base – or whatever their business model is. Contrary to common believe, many of these companies are really successful with their non-existing strategies. Their owners and managers know their business. They keep things running and fix problems as they occur.

But haven’t these managers and owners made a decision to do things that way and no other at some point back in the past? This decision may have been an implicit one or the result of deliberate thought. This is the way I understand strategy in its simplest form: The decision to do things a particular way; to have a particular product and to sell in a particular market. Every business had taken this decision at some time in their past, deliberately or non-deliberately.

Does really every business have a strategy?

Hence, every business has at least a very simple strategy. You may now think of a very small mom-and-pop business. They have never in their life bothered to think about strategy, product features, value propositions, target markets and so on. They had just started to make money with something they felt comfortable with. Probably they went through a process of trial and error until they finally ended with a more or less profitable business.

Many such entrepreneurs could not describe their strategy. However, that does not mean they do not have one. If you would analyze their business, you would find out what resources they deploy in what way in order to achieve an objective that you can describe. You can also determine, in which market the business operates and how it competes, i.e. how the business makes customers buy their stuff and not the offerings of others.

Implicit strategies

What I have described here, is an implicit strategy. An implicit strategy does not result from a deliberate process and it is not explicitly formulated. Nevertheless, it is something that can be observed. It is the basis on which some businesses operate.

That does not necessarily mean that an implicit strategy is a good strategy, but it is one. Implicit strategies can lead to excellent results. I guess this is mainly by pure chance. Many implicit strategies could be significantly improved by a bit of strategic thinking about product features, customer expectations, and target markets and so on.

When you research literature for this concept, you almost immediately come across this flaw of implicit strategies, too. Here are some references that not only describe the idea of implicit strategies, but indicate that it is not without risk.

  • A McKinsey Quarterly article Thinking strategically from June 2000 states Many firms that lack a sophisticated formal planning process make up for it with an informal “implicit strategy” worked out by the chief executive officer and a few top managers. … [Such companies] do have strategies, even though such companies often lack a formal system for planning them. The quality of the strategy of such a company depends largely on the entrepreneurial vigor of its CEO and other top executives. Do they have a good feel for the competition? Do they know their own cost structures? If the answer to such questions is yes, there may be little advantage to formal strategic planning. … Still, most large enterprises are too complex to be managed with only an implicit strategy.
  • An Article from Three Sigma states Every business has a competitive strategy.  However many strategies are implicit, having evolved over time, rather than explicitly formulated from a thinking and planning process.  Implicit strategies lack focus. produce inconsistent decisions, and unknowingly become obsolete.  Without a well-defined strategy, organizations will be driven by current operational issues rather than by a planned future vision.
  • Out of Mintzbergs ten schools of strategic planning, implicit strategies are best explained by the entrepreneurial school. This school of thought … stressed the most innate of mental states and processes – intuition, judgment, wisdom, experience, insight. … The most central concept of this school is vision. … That vision serves as both an inspiration and a sense of what needs to be done – a guiding idea, if you like. Mintzberg too states that this type of strategy strongly depends on a visionary leader, often a single person. (from Strategy Safari: A Guided Tour Through The Wilds of Strategic Management)

Other ways of not having a strategy

As mentioned above, not to have a strategy is an oxymoron. To maneuver through the business world without an explicit decision to do things in a particular way, actually is the strategy. In other words: If you decide that your business should not have a strategy at all, this actually is your strategy. There are some situations in which companies deliberately decide not to bother much about strategy.

Innovative companies in turbulent environments

There are companies, especially in high tech industries that choose not to have an explicit strategy. Typically, they operate in highly turbulent environments, and have products or markets that are in very early stages of their lifecycle. These companies feel that they have to be able to react extremely quickly to changing circumstances – be it to exploit emerging opportunities or to abandon ideas that did not live up to expectations. A formulated strategy would hinder them in their necessary quick reactions. More than that, it would narrow their thinking to a pre-determined route. Thus, they would risk missing attractive opportunities outside their strategic focus.

As stated above, such a strategic approach works best for startups and small entrepreneurial companies. Still, most large enterprises are too complex to be managed with only an implicit strategy.

No-growth companies

There are companies that have decided not to grow at all. Their objective is to operate at the current level for all time. These are mostly small and medium sized companies. Typical examples are the neighborhood bakery or the local attorney who does not want to take on more assignments than he can handle with his existing team.

No-growth companies either have a strong regional (mostly local) focus or they operate in a specific market niche. This niche may even be a global market. It is, however, very small and often very stable for a long time. This niche protects the business from competition. But it does not provide any growth opportunities.  The business can successfully operate in its market without any growth – as long as the market environment does not change in an unfavorable way.

A no-growth strategy also is a temporary option for companies held by financial investors. The investor has restructured the business and now holds it for sale. Hence, the current strategy was chosen because it best supports a fast and profitable exit of the financial investor. It does not necessarily support strong growth and it is not intended to do so. In this stage it would not be helpful if management would start a strategic planning process that might lead to completely different results.

Of course, no-growth companies do have an explicit strategy. However, once they have taken this decision, they do not bother much about strategy any more. All they have to do is to regularly check that their strategy still fits the external conditions.

Summary

There are different ways for businesses to operate without an explicit strategy or deliberate strategic planning. Some of them just have an implicit way of doing things. Others have very simple strategies which they do not want to change for as long as it gets. Businesses can get along very well with this No-strategy. Nevertheless, this way has its risks. These businesses may not notice gradual changes in their environment that steadily undermine their business model. When they finally realize that their strategy is not working any more, it may be too late for adjustments.

Hence, not having a strategy can be a viable strategy. But this is a long-term option only if the business continuously makes sure that its way of doing things still is well aligned to market conditions, customer expectations, technological developments and all the other external forces at work in its niche.

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One Comment

  1. Pingback: How many companies have a strategy? | Eddielogic

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