Eddielogic

– Thoughts on Strategy and Management

How many companies have a strategy?

How many companies have a strategy?

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How many companies have a strategy?

Some years ago I spent half of my weekends with my studies of Real Estate Investment Banking. I clearly remember one lecture about Exit Strategies (for real estate investors). The excellent tutor managed to keep us awake during this wonderful summery Saturday afternoon when he asked the question

“Who of you works in a company that does have a strategy?”

The answer was laughter, but nobody raised his hand. Isn’t this disappointing?

Our tutor was not overly surprised by this result. He claimed that according to his experience, about 98 % of all businesses don’t really have a strategy. Forget about the nice statements you can read in every annual report. The business community today expects that companies write something about their strategy in their annual report, and sometimes it is even required by law (e.g. banks under the Basle II regulation). However, statements like “enhancing our global reach”, “building on our specific capabilities” or “delivering superior customer value” are not strategies. At the best this are very top-level descriptions of what a company intends to do.
To my personal experience, most of the want-to-be strategies fall under one or more of the following categories of pitfalls:

  • They are too general. “to enter to Asian market” needs more clarification and direction. Otherwise it will open the door for a flood of unrelated (if not conflicting) activities, half of them not leading to any substantial result.
  • They are too micro-level. This phenomenon occurs mainly in internal strategy papers. Business units suggest strategies that consist of things like “to invest in new production equipment” or “to add two more sales engineers”.
  • They are too short-lived. Businesses today are all too willing to adapt their strategies as soon as something new happens. This relieves them from any pressure to develop a strategy that might actually help them through some anticipated or unanticipated changes in their field of business.

To be honest, these critical words neglect the fact that companies can be quite successful without any strategy at all. For them it is sufficient to have a clear vision about

  • the purpose for which they are in business and
  • what they want to be in the long term (and I really mean long).

Such visions can be ideas like to stay independent, to provide a steady stream of income for the owner-family or to develop the business around a particular and well defined core capability. With such a vision the company has a guideline against which it can measure any business opportunity, investment or other activity – does it support the overall vision or not?

Although this won’t work for every business, I am convinced that it actually can work for many. However, those businesses should be honest enough not publish any elaborate strategy statements if they don’t need them and don’t really care about them.

Except, those businesses don’t want the market to know about their overall guiding principle – this actually would be what Mintzberg calls “strategy as a ploy”. Does that mean that the strategy not to have a strategy is a strategic move in itself?

Well, I get lost in my own thoughts. The borderline between strategy and some other concepts of corporate decision-making is really fuzzy ….

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