Features
Rebirth of the corporate strategists
Des Dearlove

10/12/2000
The Times of London
News International
1F3
7
(Copyright Times Newspapers Ltd, 2000)

To many in the business world strategy formulation remains the pinnacle of corporate endeavour. But as the business world moves ever faster, strategy appears increasingly disconnected from events. What use is strategy in a business world where the rules of the game are being reinvented on a daily basis?

The arrival of the Internet has thrown strategic plans up in the air. The strategic preoccupations of just a few years ago have been abandoned in the scramble to take businesses online. Companies may talk about e-business strategies, but most have been forced to make it up as they go along. That is the trouble with strategy: while the CEO is busy staring at the big picture, the canvas has a nasty habit of unraveling.

Ricardo Semler is one of the few prepared to admit it. Mr Semler's 1993 book Maverick launched his career on the international speaking circuit. In it he shared his experiences of worker participation at his Brazilian manufacturing company Semco. The company's latest feat is to expand the business from manufacturing to Internet services.

In the early 1990s, Semco employees were selling cooling towers for large commercial buildings. When customers lamented the high cost of maintaining the towers, the salespeople saw an opportunity to launch a new business. This became a $30 million property maintenance business, and led to the creation of an online exchange for the management of commercial construction projects. Mr Semler recounts how this was achieved without recourse to a strategy.

"We expect that more than a quarter of our revenues next year will come from Internet initiatives, up from nothing just one year ago," he says. "We never planned to go digital, but we're going digital nonetheless."

This should concern the strategy industry, especially the traditional consulting firms. The strategy powerhouses such as McKinsey & Company, the Boston Consulting Group and Bain & Company built multi-million dollar businesses from doing clients' strategic thinking for them. But the Internet seems to have caught them napping. They have trailed along in its wake and are only now beginning to reassert themselves. When strategy is your business this is not a good sign.

According to Will White, deputy dir- ector of the Management Consultants' Association (MCA), the UK trade body, the established consulting firms have now made the e-turn. But it took a while. "If you look at firms like McKinsey, Bain and BCG, they have traditionally offered only a very high level strategic advice at board level. Anything that smelt of IT or technology was felt to be, if not beneath them, then not their concern," says Mr White. "That's now changed. Bain and BCG in particular have woken up to the fact that e-business is a threat and an opportunity. Even McKinsey, which had an attitude that technology was something the Big Five did, has realised now that e-consulting is potentially all."

When it comes to e-business, the feeling is that the cerebral strategists lost the plot. Traditional consulting firms have struggled to keep up with the Internet speed factor.

For the strategy industry, however, the current concerns are just the latest setback in a long and often chequered career. In 1965, Igor Ansoff published the first book specifically devoted to the topic. It was called, appropriately enough, Corporate Strategy. For the first time, it recognised the role of strategic decision-making by senior management as an explicit activity. Strategy was born.

The 1960s and 1970s were a golden age for business strategists. Regiments of bright young graduates were paid large salaries to sit in corporate strategic planning departments removed from the cut and thrust of day-to-day operations and gaze into the future.

But then in the 1980s it all seemed to go wrong. One after another, the strategists in a string of seemingly unassailable companies were wrong-footed by new competition. Strategic planning departments were dismantled. Strategy looked to be in trouble. But into the breach stepped Harvard's Michael Porter, with his Five Forces framework. Professor Porter's model provided a wider view of competitive pressures and opportunities and quickly became the new strategists' bible. By the early 1990s, however, strategy was back on the ropes. In many companies, strategists had been replaced by downsizers. In his 1994 book, The Rise and Fall of Strategic Planning, Professor Henry Mintzberg seemed to sound the death knell of the professional strategist. Strategy, he said, cannot be planned but must emerge by 'synthesis' from chan- ges taking place inside and outside the company. But once again, new thinking reinvigorated the discipline.

In the same year, Competing for the Future was published. The book established the term 'core competencies' in the business lexicon. Professors Gary Hamel and CK Prahalad's tome helped redefine how companies thought about strategy.

Today, the established strategy thinkers are having to make way for a crop of newcomers.

Professor Porter's Five Forces framework may still be required reading for MBA students and consultants, but an outpouring of books and articles is reinventing strategy for the new economy. The name of the new game is to develop strategies which redefine the rules. Curiously, much of the current crop of strategic thinking comes from outside the US.

Attention is now increasingly focused on the process of strategy formulation within organisations. "The traditional strategy process in large companies is not up to the speed required in today's fast moving environment," says Professor Paul Strebel, at the international business school IMD in Switzerland. "It is usually too slow, being based on annual planning cycles; backward looking, trying to explain what went wrong; and too static, reflecting industry conditions and company competencies. By contrast, small high-tech companies in the new economy make and implement strategic decisions much more rapidly."

In Professor Strebel's view companies now need to practice "high speed strategy". Speed is all.

Rather than driving initiatives from the top down, senior managers should encourage and nurture initiatives on the frontline, from the bottom up. Their role is to collect real time data and make decisions about which initiatives to invest in, based wherever possible, not on opinion or models, but on hard facts.

Other commentators point to new strategic imperatives. Based at Insead, another business school just outside Paris, the Korean academic W Chan Kim and Renee Mauborgne are responsible for some of the most interesting work on strategy of recent years. Their research indicates that a key difference between companies that achieve sustained high growth and those that do not lies in the way the two groups approach strategy. They advocate a switch from thinking about strategy in terms of existing competitors to creating entirely new markets, or redefining existing markets.

"The less successful companies took a conventional approach: their strategic thinking was dominated by the idea of staying ahead of the competition," they note.

"In stark contrast, the high-growth companies paid little attention to matching or beating their rivals. Instead, they sought to make their competitors irrelevant through a strategic logic we call 'value innovation'."

They claim value innovators typically challenge conventional competitive thinking. They identify new market space and position themselves to exploit it, even if this means moving beyond the traditional boundaries of their business. Mr Semler's Semco fits this profile.

Meanwhile, Professor Hamel's recent polemics examine the lessons from Silicon Valley.

Strategy, in his view, is now less about marshalling existing resources, and more about becoming a magnet for new wealth creating opportunities.

Strategy is reinventing itself. 2000 TCL