THE ESSENCE OF STRATEGY IS CHOOSING WHAT NOT TO DO

IN CONTEXT FOCUS Strategic thinking KEY DATES 1960s Strategic planning grows in popularity, and is enthusiastically adopted in the new field of management consultancy. 1962 Alfred Chandler’s Strategy and Structure sets out a model in which a company’s structure matches its strategy, not vice versa. 1985 Michael Porter’s Competitive Advantage redefines business thinking on competition, repopularizing the ailing field of strategic thinking in the process. 1990s/2000s Strategy is increasingly practiced as a continuous process by all in a business, not just by those at boardroom level. Nokia says that strategy should be “a daily part of a manager’s activity.” Strategy is a concept with its roots in military history, when army generals planned campaigns of war. Today, it is an overused and often misunderstood word in business theory. Put simply, strategy is the way a business gets from where it is to where it wants to be; it involves identifying the choices that must be made to overcome the obstacles that lie in the way. Often, choosing what not to do is as important as what to do. Strategy guru Michael Porter first drew attention to this in 1985, then specifically explored it in his 1996 article “What is Strategy?” For businesses, it is just as possible to follow bad strategy as good. Richard Rumelt’s Good Strategy/Bad Strategy (2012) explained that good strategy should emerge out of an analysis of the company itself, and its goals. SWOT analysis (strengths, weaknesses, opportunities, and threats) is one of the most popular systems for such audits, and to be effective it should be conducted among middle managers and people across the organization, not just those at the top. Good strategy requires analysis of the competition and any threats to the organization, and may involve painful decisions. It should result in a strategy based on clear goals that capitalizes on the company’s strengths and can be flexible if external factors change. Bad strategy often goes hand in hand with setting a simplistic goal or vision. Leaders in organizations may use powerful rhetoric about “winning” to motivate staff, but empty goals are easy to set— formulating the strategy required to achieve them is much more difficult. Executives bent on pursuing a bad strategy will ignore problems and be blinded to the choices available. Rather than making tough decisions, they will try to accommodate a multitude of conflicting demands and interests to stick to a plan. Managers in these circumstances risk following old ideas and paths that no longer work, rather than leading with new ones. Film is dead The demise of Kodak is a prime example of a company following bad strategy. Founded in 1890, by the 1970s Kodak was the US market leader in the photographic sector, with nearly 90 percent of the film and camera market. It was rated as one of the world’s top brands. In 1975 Kodak engineers invented the digital camera, but the senior management of Kodak ignored the opportunity presented by this new technology. They believed they were in the chemistry-based film business and were not prepared to “kill the golden goose.” Executives failed to see that digital photography would make film redundant and challenge their near-monopoly business. Japanese company Fujifilm, however, recognized the threat and diversified successfully. Kodak began its shift to digital cameras too late, as smartphones and tablets replaced cameras. The senior executives’ inability to make the tough decision to change course led to the company being declared bankrupt in 2012. ■