Five Myths About Strategy

Introduction

Myths can be more dangerous than lies as the latter are easier to detect. Myths are usually based on plausible half-truths. This can sow doubt and confusion about what is true. Myths

"...do not immediately lead you astray if you start to act on them. It is only with the passage of time that you realise that you've made a mistake, but by then your wrong choices can't be unmade and the damage is done..."

Stephen Bungay, 2019

Myth 1: strategy is about the long-term

Thinking about strategy as some kind of long-term commitment can blind you to what is needed, especially when things are changing quickly

"...Strategy is not about the long-term or the short-term, but about the fundamentals of how the business works: the sources of value creation, drivers of the cost to deliver it, and the basis of competition..."

Stephen Bungay, 2019

You need to concentrate more on the depth of your thinking rather than time horizons.

"...Far from being about things we going to do in the future, strategy is about what we are going to do now in order to shape the future to our advantage..."

Stephen Bungay, 2019

Myth 2: disrupters change strategy all the time

Most of the high-tech innovators have a consistent strategy that uses innovation to bring new products and services to the market. In the 1960s it was found

"...in many businesses, cost declined by a predictable amount with every doubling cumulative volume. The implication was that by pricing ahead in anticipation of those cost declines, a company could sacrifice current margins to gain share, achieve market leadership and then reap the gains..."

Bruce Henderson as quoted by Stephen Bungay, 2019

This is sometimes called 'cut-price and add capacity' or 'give it away and add users'. It is a more radical version of a strategy that was developed around 50 years ago

Myth 3: Competitive advantage is dead

There is some evidence that the time period over which an advantage can be sustained has shortened. This implies that barriers are easier to penetrate. Yet the competitive advantages of high-tech, like Amazon, Google, Apple, Facebook, Microsoft, etc are so massive that there is a public discussion about using regulation reduce their power, ie break them up.

Currently you need to build multiple competitive advantages, not just have one.

Myth 4: you don't really need a strategy; you get need to be agile

Agility is not a strategy; it's a capability which has immediate operational benefits. You still need a strategy to make the right decisions about the capability.

NB

"...A strategy is not a plan, it is a framework for decision-making, a set of guiding principles that can be applied as the situation evolves..."

Stephen Bungay, 2019

Just because you are flexible, does not mean you make the right decisions.

You need to

"...do a lot of hard thinking about fundamentals, questioning and testing basic assumptions with rigour..."

Stephen Bungay, 2019

If you don't have a coherent strategy, you will make poor resource allocation decisions.

Myth 5: you need a digital strategy

"...Digital technology is a way of collecting, storing and using information, and information is everywhere..."

Stephen Bungay, 2019

You need awhole-of-business strategy, not one of just parts like digital, IT, finance, HR, etc. You need to lay out and explore the fundamental assumptions about your complete business and ask if they are still valid.

Digital technology can give rise to fundamental changes in customer value and the cost of delivering it.

Summary

"...In our uncertain world, fundamentals are changing so we need to think about them, whether they are valid in the short- or long-term. Think how you can deploy the capabilities you have and build new ones you need to defend your competitive position. Add them in layers to create barriers. Be clear about what will make a difference so that you can make rapid resource allocation decisions. Be on the lookout for the emergence of unexpected events at the customer interface that point to opportunities that can be deliberately exploited. Play to win the short games that will enable you to prevail in the long ones. Think deep to act fast. Strategy is still what has always been: the art of taking action under the pressure of the most difficult conditions..."

Stephen Bungay, 2019

 

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