5 Essential Books for Strategic Thinkers by Mark Rhodes

Good Strategy Bad Strategy

good strategy bad strategy book

This fresh approach to strategic thinking, just published in 2011, begins with tales of battles at sea in the days of Napoleon and continues to explain what kinds of strategies have made the difference for modern companies like Apple, Wal-Mart, Cisco, Starbucks and Wells Fargo.  Author Richard Rumelt shows that many recent high profile failures such as those of Lehman Brothers and Enron resulted not just from a poor strategy or a poorly defined strategy, but from a misunderstanding of what strategy is in the first place!  One acquaintance showed incredible ignorance by saying to Rumelt "“Strategy is never quitting until you win.”  Attitudes like that, of course, can only lead to wasted resources and eventual failure.

As Rumelt says, "The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors."

Strategy Safari

Strategy Safari Book, Mintzberg

I have often been asked what book I would suggest to someone wanting an introduction to the world of strategy.  This is always the book I suggest, the eminent strategist Henry Mintzberg and his associates Ahlstrand and Lampel do a masterful job of explaining, in plain language, the various approaches to strategy.  My favorite section is the authors' treatment of Michael Porter's "Positioning School" of strategic thought.  While staying "fair and balanced" in explaining Porter's methodology, you can almost taste Mintzberg's poor regard for such a deliberate and plodding approach, which stands antithetical to Mintzberg's own bent to strategy: the Emergent Approach.

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Strategy, by B.H. Liddell Hart

strategy by liddell hart

The book now called, simply, Strategy, is essential reading for any student of the art and science of strategy-making.  Author B.H. Liddell Hart is the best example I know of who not only chronicled history, but shaped it.  In 1929, he published The Decisive Wars of History. Although Hart was a Briton, it is known that his work had greater impact on the pre-WWII military thinking among the German military than on his own countrymen. Among others, the German general Hans Guderian read and digested Hart’s work, which influenced his designs for employing tank (panzer) warfare in execution of the “blitzkrieg” strikes that quickly took the European lowland countries and France.

Erwin Rommel, the “Desert Fox” is known to have read and savored Hart's books.  Rommel's tank battles with the Allies in northern Africa are often seen as the prototypical Hartian strategic confrontation.  Applications of Hart's insights for modern business are quite evident upon reading Hart's historical accounts and analyses. For example, to truly understand the art of strategic thinking, it is essential to consider Hart’s notion of the indirect approach.

The Lords of Strategy

Until the 1960s, there were few books or business courses available that focused on the notion of business strategy.  Gradually, as the importance of the topic dawned on MBA providers and the business public alike, Strategy evolved as an important discipline of thought for leaders of corporate, organizational and government leaders.  As the field evolved, not surprisingly, so did the cadre of people seeking to make their living teaching and consulting with others in need of better approaches and strategies.  With time, the modern consulting inustry was born.  The Lords of Strategy is the story of the four men who invented corporate strategy as we know it and set in motion the modern, multibillion-dollar consulting industry: Bruce Henderson, founder of Boston Consulting Group Bill Bain, creator of Bain & Company Fred Gluck, longtime Managing Director of McKinsey & Company, and Michael Porter, Harvard Business School professor.

lords of strategy book

The publisher explains that "this book is a revealing account of how these iconoclasts and the organizations they led revolutionized the way we think about business, changed the very soul of the corporation, and transformed the way we work."  Well, it's a little more sickening and depressing than that, if you ask me.  I have personally seen, for example, PPT slides that an eminent strategy consulting firm used to goad Enron into "out-of-the box" and "break-through thinking."  We all learned, of course, that simply thinking out-of-the-box can lead people into "breaking through" ethics and morals. Enron paid for this "anything goes" approach with its very existence.  The consulting company that egged them on, though, is not only still at it, but is doing quite well for themselves.

Nonetheless, if you'd like to learn how today's consulting industry came to be the way it is, then I am sure you will find The Lords of Strategy to be compelling, if disturbing, reading.

Wired for Thought

wired for thought book

If you are interested in the notion of strategic thinking, then you are certainly interested in the brain, the organ that allows you to think about things, strategic or otherwise.  Author Jeffrey Stibel applied his life-long fascination with neurology and brain science in order to  found a series of highly successful businesses.  In each case, he applied knowledge about how the brain works to thinking about how the internet should work, since, as he writes "the internet is a brain."

Stibel explains his fascination with the brain and neurology as a metaphor for thinking about the future of the internet:  "When I began to study the emergent internet as a whole, I had trouble fining areas where there were not analogies to the brain.  It finally dawned on me that if I wanted to build internet companies, I needed to know everything I could about the brain."

The Rise and Fall of Strategy and Planning by Mark Rhodes

Imagine that you could dump all the words of a million books from the past 500 years into a giant database, and look to see how various words have waxed and waned in usage over the centuries.  You could look and see when archaic words like thou and yon disappeared from popular usage.  You could identify the year the word internet first appeared, and when people started saying garbage instead of rubbish. Oh… You can do that now?!  Yes, the Google Monolith has indeed scanned more than a million books into a searchable soup, and we can now play with this facility using something called the Google Books Ngram Viewer.  Let’s put the thing to work and examine our favorite topic: Strategic Planning.  In the graph below, we can see the degree of usage of the words planning (in red) and strategy (in blue) since 1860.

Doesn’t that picture tell a story!?  As you see, planning took off just after the turn of the 20^th century.  In the world of business theory, a notion called “scientific management” was proffered by one of the first management consultants, Frederick Winslow Taylor. This approach, now referred to as “Taylorism,” sought to apply a scientific discipline to management practice.  During this same era, the field of Psychology was dominated by an equally mechanistic view of mankind, called Behaviorism. In 1913, John B. Watson published what is known as “the Bahaviorist Manifesto,” and said that “the behaviorist… recognizes no dividing line between man and brute.”  There was no need to consider a concept such as “consciousness,” said the behaviorists, as human behavior could be understood as a sequence of cause and effect, of stimulus and response.  With enough control over the variables in our environment, it was thought, we could predict the future… and we could plan for success!

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A funny thing seems to have happened, as you see in the graph, at about 1976.  Planning peaked and began to fall in favor, while strategy began a triumphant rise. My hypothesis?  That’s when one of our most original management thinkers, Henry Mintzberg, started writing and publishing his observations on what does and does not work in the real world of business and organization.  Mintzberg shows that strategy cannot be planned because planning is about analysis and strategy is about synthesis. This is why, he asserts, the process has failed so often and so dramatically.

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Strategic planning is an oxymoron.  Strategic thinking does not lead to a plan, it leads to a strategy.  Rather, planning must follow strategy.  If you don’t want to call it operational planning, call it “Planning that Follows Strategy."

Henry Mintzberg, The Rise and Fall of Strategic Planning 

Mintzberg argues that organizational strategy is often “emergent.” That is, answers to strategic questions do not arrive like the result at the bottom of a math equation.  Rather, strategy emerges and changes as the strategist observes the world and reflects upon the dynamics of the competitive environment. 

Of course, there is debate among experts as to what exactly constitutes strategic thinking.  Michael Porter, perhaps the most widely cited expert on organizational strategy, says that “strategic thinking rarely occurs spontaneously.” As if to prove his point, Porter provides a dry, methodological approach to the quest for competitive advantage and organizational strategy.  Porter provides a set of strategic analysis tools that are serious and rational enough to make any Taylorist or Behaviorist proud.  And granted, I have often found Porter’s framework and methodology useful in understanding the competitive dynamics of an industry.

But a quick study of the History of Strategy provides a blinding flash of the obvious:  Successful strategy-making is most often an "emergent" process.  Employing the emergent approach, the strategist maintains an open mind as to the future direction of the organization, and seizes the moment when opportunity matches organizational capability. 

In the end, strategy-making must be thought of as a creative process, as rich in spontaneity and magic as any other art.  To apply these notions to our own decision-making , remember that strategic thinking is a yin and yang of left and right brain thinking.  To engage in strategic thought, think and reflect on the big picture – the diverse players and forces in your environment.  Think about the future.  Use your left brain’s capacity to generate rational questions and answers.  Use your right brain for intuition and wisdom.

Strategy First… Then Structure by Mark Rhodes

The historian Alfred Chandler of Harvard Business School wrote a seminal book published in 1977 on the history of strategic decision making at the highest levels of Corporate America , including DuPont, General Motors, Standard Oil and Sears Roebuck.  The book was called The Visible Hand:  The Managerial Revolution in American Business.  In this work Chandler proclaimed a maxim for the ages that has been followed as doctrine by strategists and consultants alike ever since.  The maxim:

“Structure follows Strategy.”

That is to say, all aspects of an organization’s structure, from the creation of divisions and departments to the designation of reporting relationships, should be made while keeping the organization’s strategic intent in mind.

Strategy, of course, lines up the arenas and markets in which a company will compete, proclaims a targeted customer base, and asserts the matters by which the company will seek to differentiate itself.  Chandler described how the successful progress of mid-twentieth century General Motors can be attributed to the strategic foresight of Alfred P. Sloan, who laid out the famous divisions of GM:  Chevrolet, Pontiac, Oldsmobile Buick, Cadillac – listed here in order of pricing segment and lined up with market segments --  so that each division could seek to please an intended customer segment. 

This is structure following strategy. Chandler showed that the need to reorganize --  or to “restructure” --  is triggered by a strategic shift driven by new technologies or market changes.

The way that you organize your company or organization to optimize the pursuit of strategic objectives is an important part of organizational design.  Other design elements, such as hiring and personnel development practices, communication and decision-making systems, reward, recognition and renewal systems, all must be aligned around the chosen structure, but first you must decide upon the optimal structure for attaining your strategic objectives.

When considering a change in organizational structure, keep in mind the following criteria for a good structure:

• Aligns the organization to best follow strategic direction
• Allows for clearly defined roles and responsibilities
• Clarifies who makes what decisions.
• Enables clear accountability.
• Minimizes handoffs that affect the customer experience.  Minimizes the customer “runaround.”
• Minimizes handoffs that create confusion over who is responsible for what outcomes.
• Pulls together the people who most need to work closely with each other.
• Allows information to flow unrestricted to those who need it.
• Creates manageable spans of control.
• Is augmented by informal channels of cross boundary communication.

Generally, there are five ways to structure a company or corporation:  Organize by Function, Product, Customer Segment, Business Process, or Matrix.  Here are the pros and cons of each:

Functional Structure (e.g. Operations, HR, Finance, Marketing Departments):

Pro:

• People with a common profession work together so standards of performance are well understood
• People in a unit “talk the same language”
• Easy to maintain stability

Con: 

• Conflicts arise between organizations/departments since priorities and objectives often conflict
• Decision making must be done at the top, where a cross-functional team sits together at the same table

 Organizing around Product Lines or Programs

Pro:

• Strong identification with products
• High degree of coordination between functions
• Can allow rapid response to market changes affecting a class of product
• Employees can see big picture and relate to a common outcome
• Opportunity for employees to learn other functions
• Decisions can be made closest to those working on product, more bottom-up decision making

 Con: 

• Can be lack of coordination between product lines
• Functional or professional development can suffer as functional experts are isolated from each other
• Can be duplication of efforts across product groups.  R&D can be parochial, only focused on present clustering of products

 Organizing around Customers or Market Segments

Pro:

• Deeper understanding of customer needs.
• High coordination among functions aimed at meeting customer needs.
• More responsive to customers.  Greater flexibility within business units for purpose of adapting to needs of a particular customer segment.
• Team members see the big picture.
• Innovation is customer-driven.
• Can be more satisfying for workers, as mission of customer focus is clear. 
• Opportunity to learn new functional skills.

 Con: 

• Can be lack of coordination between business units.
• Functional or professional development can suffer as functional experts are isolated from each other.
• Can be duplication of efforts across product groups.  Team members cannot relate to disparate customer segments.

 Organizing as a Business Process (as championed by many experts on corporate “reengineering”)

Pro:

• Clarifies business outcomes at every stage of value delivery
• Organizes people in such a way that problems do not fall between the cracks or go unattended
• Enables people with a common language across the organization, making it easier to identify and reinforce accountability
• Facilitates cross-functional understanding of the business

 Con: 

• Can diminish focus on the customer unless customer-facing processes are truly prioritized
• Experts in functional areas such as Finance, HR, Marketing, etc. can be devalued and unheeded
• Can be duplication of efforts across process groups.

 Organizing as a Matrix (e.g. customer segment groups crossed in matrix form by functional, supporting departments.

Pro:

• Simultaneous focus on external and internal business requirements. Can lead to more integrated, holistic decision-making.
• Employees can be reminded of the needs of the whole business enterprise.
• Functional expertise can be directly and immediately applied to needs of program, product or customer issues.

Con: 

• Can lead to diffusion of accountability. 
• Can be difficult to locate cause of organizational issues.
• Can mean doing more with less people, and result in individual frustrations.
• Can lead to confusion among customers who wish for a single point of contact.
• Requires a very high level of competent lateral communication capability

Metaphors Be With You: The Strategist as Poet by Mark Rhodes

Strategy-making begins with an idea.  Without a guiding idea there can be no sense of direction.  Yet many articles and books about strategy do not address a most important matter:  how to generate ideas.  To conceive the essential set of ideas that we call strategy, the strategist must understand and master the art of the metaphor.  As Aristotle said in Poetics, “the greatest thing by far is to be a master of metaphor.” It is “a sign of genius, since a good metaphor implies an intuitive perception of the similarity in dissimilars.” Effective strategic thinkers display openness to new and different ideas, and one way to generate ideas is through the use of metaphor, or its close relative analogy, perhaps the most advanced form of human thinking.

Good strategy does not fall out at the bottom of an equation.  Yes, analysis is necessary… Yes critical thinking is essential… But in the end, great ideas about “what to do” come to us through inspiration.

In a wonderfully insightful book called An Alchemy of Mind  Diane Ackerman says that “Metaphor is one of the brain’s favorite ways of understanding the ‘this and that’ of our surroundings, and reminds us that we discover the world by engaging it and seeing what happens next.  The art of the brain is to find what seemingly unrelated things may have in common, and be able to apply that insight to something else it urgently needs to unpuzzle.”

In their Harvard Business Review article entitled “How Strategists Really Think,” Giovanni Gavetti and Jan W. Rivkin show that reasoning by analogy plays a major role in the thinking of successful strategists. As an example, these writers point to Intel chairman Andy Grove’s story of how he came up with an important business strategy. Attending a management seminar, Grove heard the story of how fledgling “mini-mills” in the steel industry began in the 1970s to offer a low-end product—inexpensive concrete-reinforcing bars known as rebar. Establishing market share with the low-end products, these steel companies then began to migrate up the hierarchy of products toward the higher-end, more lucrative steel products. U.S. Steel, which had ceded the low-end products to the smaller and seemingly insignificant players, was caught unawares by the companies attacking the market for their core business and lost market share over a number of years.

An epiphany struck Andy Grove as he sat in that management seminar, thinking about the steel industry. Using what Gavetti and Rivkin call “analogical thinking,” Grove saw that Intel was sitting in a similar situation to that of U.S. Steel in the 1970s. Intel had theretofore leaned toward ceding low-end computer chips to niche players, a strategy that, Grove now realized, would put Intel in a dangerous situation. He began to see low-end computers as “digital rebar,” a metaphorical image that helped him in articulating his strategy to Intel management. “If we lose the low end today,” Grove said, “ we could lose the high end tomorrow.” As a result of this thinking, and the deliberations that followed, Intel redoubled its efforts to market the low-end “Celeron processor” for low-end personal computers.

As Diane Ackermans says “… the brain forms metaphors in order to understand ‘one kind of experience in terms of another,’ as new metaphors create new realities…”  It is the leap of thought from one set of conditions to an analogous one, that brings us that truly great idea for action.   As Ackerman concludes, this is “what metaphor does so well:  illuminate some of what can’t be wholly understood. “

Kenichi Ohmae says in The Mind of the Strategist, “In business as on the battlefield, the object of strategy is to bring about the conditions most favorable to one’s own side, judging precisely the right moment to attack or withdraw and always assessing the limits of compromise correctly.  Besides the habit of analysis, what marks the mind of the strategist is an intellectual elasticity or flexibility that enables him to come up with realistic responses to changing situations, not simply to discriminate with great precision among different shades of gray. 

In strategic thinking, one first seeks a clear understanding of the particular character of each element of a situation that makes the fullest possible use of human brainpower to restructure the elements in the most advantageous way. “

To conclude?  Perhaps a poem…

We’re coming to the edge

running on the water

coming through the fog

your sons and daughters...

Let the river run

let all the dreamers

wake the nation

come, the new Jerusalem

... by Carly Simon

For more thinking about strategic thinking, see Mark's website;  http://strategybydesign.org

What is a Strategic Decision? by Mark Rhodes

Eisenhower led the strategic decision-making process for the Allies

What is a strategic decision, and how is it different from an operational or tactical decision? Strategic decisions determine the grand direction upon which an entity will embark.  Always, strategy precedes action. The object of strategy is to bring about advantageous conditions within which action will occur.  In the military context, this means positioning forces for best advantage and judging precisely the right moment to attack or withdraw.  Strategic decisions prior to D-Day in 1944, for example, included setting the day and time of the invasion of the European mainland as well as the choice of battleground. The campaign and each battle were conducted within the boundaries of time and space as set forth by strategy.

Strategy is more, though, than laying out a plan—long-term or short—of what you are going to do.  Continuing with the D-Day analogy, the triumph of strategy at Normandy was the deliberate framing of the mindset of the enemy.  For example, the German army was forced to spread itself across a wide swath of the western coast of the European continent because of strategic positioning and deception staged by the Allies.

Once strategy is determined, second tier or operational decisions can be made in the proper context.  By definition, operational decisions are those pertinent to the broad execution of strategy. In the realm of business, operational planning is usually conducted with a one-year time horizon, fitting into the context of a longer-range strategic plan. 

In the military, endeavors resulting from operational decisions are often called campaigns.  A campaign is a series of military operations or battles carried out over a large geographical area—such as Normandy in World War II—in order to achieve a large-scale objective during a war. Operational plans for D-Day, for example, set the stage for landing hundreds of thousands of men and significant amounts of equipment and materials on five Normandy-area beaches as part of the overall strategy for taking back France and ending the war in Europe.  Other famous military campaigns include Sherman’s march through the Civil War South, Napoleon’s incursion into Russia, and Schwarzkopf’s Desert Storm conflict in Iraq.

Of course, we talk about campaigns all the time in the context of political elections or a series of television ads.  The dictionary tells us that a campaign is “an operation or series of operations energetically pursued to accomplish a purpose.”  Generally, a campaign has an identifiable objective and expected time of completion. 

On the personal level, operational decisions relate to the “campaigns" that we conduct in pursuit of our life goals.  A college course is a campaign toward a degree.  A job that we take for a year or so is a campaign toward a more fulfilling career.  Setting up a lifestyle in an apartment or condo might be seen as a campaign toward an eventual house.

After operational decisions come tactical decisions, those third-tier decisions made “in the heat of battle.” Military tactical decisions are made on the ground during battle when, inevitably, things do not go as planned, and officers and soldiers must improvise as they adjust to changing circumstances. Tactical decisions must be aligned with strategic and operational decisions.  Despite the exhaustive operational planning prior to D-Day, countless tactical decisions were made once soldiers arrived on the scene and took stock of the situation.

As the Chinese general and famed strategist Sun Tzu said 2,500 years ago, “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”  Decisions at any level, of course, are a matter of choosing among options.  But strategic decisions differ from operational and tactical decisions in matters of scope, authority and timeframe.

For more consideration of the history of strategy, visit Mark's website called Strategic Thinking.

The Strategic Advantage of the Upstart Competitor by Mark Rhodes

From the days of ancient warfare, large armies have struggled with an inherent disadvantage: Sheer size presents an easy target for a quick and nimble attack force. The red-coated, regimented British struggled to fend off undisciplined American revolutionaries. The Vietnam era Americans could not defend themselves adequately from the pesky, unpredictable Viet Cong. In the modern strategic arena, an upstart company can gain advantage over larger and well established rivals by identifying an attractive and profitable niche of their rival’s customers. “Cherry picking” initiatives seek to snatch away the most profitable customers from a market leader, while leaving the other company with the more cumbersome and less profitable dregs among their customers.

Have you seen the Progressive Insurance commercials touting the way their service people will provide you not just with a quote from Progressive, but also with sometimes even more desirable quotes you might receive from their competitors?

Altruistic? Hardly. Because of their superior information technology, Progressive is able to sort the customers they do want from the ones they don’t. That is, if you as an automobile driver are likely to drain off more money in claims than you’ll restore by paying premiums, Progressive will gladly help you find a nice insurance provider down the street… one who’ll give you a lower fee than will Progressive. If you are recognized by the company as a safe driver – meaning Progressive is safe from the risk of having to pay you for a claim – then Progressive wants you and will compete aggressively to get you. For Progressive as the smaller attacker, that’s cherry picking the profitable customers while saddling the larger opponent with an ever more needy and draining customer base.

In recent years, Progressive has reinforced the notion of the insurance business as a free wheeling “marketplace,” as characterized by their “store lady” hosting a grocery market of insurance products, encouraging us all to “shop” for the best deal. Allstate’s notion of “good hands”? The comfort of a long and trusting relationship as touted by State Farm? Well, that’s defensive strategy as the insurance behemoths of old urge us to stay in place. By way of contrast, the Progressive lady wants us out shopping for new and exciting relationships so the company can pry loose the most desirable customers.

What to do? Let’s look to the ancients for advice… The most influential treatise on military strategy between the age of the Romans and the Napoleonic era was written by the Roman citizen known as Vegetius in the fourth century A.D. His writing was cherished as the Bible of Strategy by Charlemagne, Richard the Lion Hearted, and England’s Henry II. Vegetius’ De Re Militari contains insight into strategic and operational planning that are relevant still.

By Vegetius’ time, the great empire of Rome was in its waning days, its once mighty military descending into atrophy and decay. The days of Julius and Augustus Caesar were a vague memory, having passed four hundred years earlier. Vegetius wrote about “the ancients,” the generals and leaders of Rome a centuries before his time, and sought to capture and share concepts of strategy that had put Rome civilization into its long-held position of dominance. Despite his aspiration to help restore Rome to its days of glory, Vegetius came along too late to make an impact, and he was little noticed by Romans of the time. In the centuries to come, though, his work became a staple for strategists and leaders throughout Europe.

Among the key advice we receive from Vegetius: Avoid unnecessary impedimenta. Impedimenta, the encumbrance of supply trains and support people and materiel, impedes the ability of an army or organization to move about the strategic space in a nimble, flexible manner. Clearly, for example, Southwest Airlines has sustained its success for decades in competition with the so-called “major” air carriers because its leaders have minimized impedimenta, while American, Delta, United and the others remain encumbered by large “hub” airports, a variety of planes and equipment requiring redundant teams of pilots and technicians, and large, entrenched, and increasingly inflexible workforces.

Vegetius said this: “An army too numerous is subject to many dangers and inconveniences. Its bulk makes it slow and unwieldy in its motions; and as it is obliged to march in columns of great length, it is exposed to the risk of being continually harassed and insulted by inconsiderable parties of the enemy. The encumbrance of the baggage is an occasion of its being surprised in its passage through difficult places or over rivers. The difficulty of providing forage for such numbers of horses and other beasts is very great.”

Advice for the strategist: heed the direction of Vegetius. Smaller, ambitious businesses should and will identify desirable niche markets and pursue them aggressively and precisely. You cannot take on the established competitor full force to full force. But you can win a niche and establish a beachhead from which to pursue future expansion.

If you are the entrenched but wary player, then as strategist you must slow the erosion of advantages, and continually seek new high ground representing future competitive advantage. Good strategic thinking for established businesses means scanning the competitive environment for unwanted challenges, and staying nimble enough to do battle in the niches that count. Moreover, the strategist must erect “barriers to entry” to protect present advantages.