Strategy in a dynamic perspective
VIBRANT STRATEGY – Inner Purpose as a driving force
(this article was translated from Dutch using AI)
In this article I want to show you the central themes within VIBRANT STRATEGY: strategic thinking in a dynamic perspective. Concepts such as Inner Purpose and Long-Lasting Perspective are discussed. Strategy as Evolution and the Involvement of Many. I start with a retrospective in which I describe how strategic thinking has developed over the past decades on the basis of relatively static principles. Then I will focus on the accents that we want to put within strategic thinking from a dynamic perspective. Hopefully it will become clear how the dynamic approach differs and how it adds to existing strategic thinking.
The history of Strategic Thinking is determined by ideas of confrontation, market structure, competitive edge and maximizing returns.
If we look at the strategy literature and strategy practice of the past decades, a number of things stand out. In the early years of, say roughly, the 1970s, strategic thinking was mainly numerical planning. The leading strategy magazine at the time was also called Long Range Planning. Strategy consisted of the statistical extrapolation of annual figures. Preferably over long time axes. 10 years was not unusual. Quite understandable because the 60s and 70s of the last century were, with the exception of the years surrounding the oil crises of 1973, the years in which we had 4%-6% annual growth in GNP. In such a stable context in which growth seems self-evident, extrapolation of an apparently uninterrupted series of growth figures becomes a matter of course. Tools such as the BCG matrix provided insight into the relative growth potential of products and services within the business portfolio and helped to allocate investments to stimulate growth or harvest maximum contribution.
In the 1980s, under the influence of the work of Harvard professor Michael Porter, this changed. Porter was trained as an economist and he introduced the external perspective into strategic thinking. Strategy was no longer the logical extension of an (internal) growth path; strategy became a position within a powerplay of strategic forces in the company’s external context. The market, or rather the industry as Michael Porter called it. That position had to be defensible, difficult to copy and preferably sustainable over a long time. Say a strategy with a long Shelf Life. According to Porter, the touchstone of successful strategy was profitability. With this, the economist Porter seamlessly connected to the economist Milton Friedman, who after all propagated: “the sole purpose of a firm is to make money for its shareholders”. A good strategy leads to better profitability. A key role was played by the notion of attractiveness. Attractiveness of the industry, expressed in terms of profitability or profit potential, the attractiveness of the segment within the industry where the company in question is active and the strength of its own competitive position within that segment. If all signals are green, we have an extremely successful (profitable) strategy. Strategy became choosing the right industry and developing a defensible position. It is interesting to note that in Porter’s jargon companies are referred to as “player”. This emphasizes once again the game element in thinking about strategy. Companies as players in a game that needs to be won. These are also the years in which game theory makes its entry into strategic thinking.
In the nineties, strategic thinking focuses increasingly on the characteristics, characteristics, also referred to as competencies, that underlie the construction or acquisition of a defensible competitive advantage. We look for the internal “assets” that form the basis of our defensible competitive position. Competence thinking makes its entry into strategic thinking. The fathers of this thinking are C.K. Prahalad and Gary Hamel. Both professors. Since this internal orientation was less quantifiable, less tangible than Michael Porter’s economic perspective, this movement never gained the prestige that Michael Porter’s tough competitive thinking did. However, the perspective of Prahalad and Hamel did enrich strategic thinking. A broader view on the strategy issue.
With Strategy as a means of winning a competition, the question arises: when do you win the competition? The economic perspective under the strategic discipline means that the answer is sought from a financial perspective. Profit, return, market share EDITDA, the list of financial criteria to express success is infinite. The consequence of the ever-increasing importance of financial criteria in the assessment of strategic success, in other words whether or not winning the battle, makes the achievement of certain criteria almost an objective in itself. Strategy degenerated into a way to meet the next hurdle of financial yardsticks. In financial markets that measure companies on a quarterly basis, Strategy loses its long-term orientation and becomes a short-term instrument to achieve next quarters objectives.
Over the years Strategic Thinking as a discipline crystallizes further within the Business Schools. And with the maturing of the profession as a scientific research field, we also see the increasing influence of professional strategy consultants. Strategy becomes more difficult, weightier, therefore belongs in the Boardroom and when formulating a strategy, you need external intellect and analytical skills. Strategy became the Champions League of the consultancy world. And the influence of external strategy consultants on the strategic selection process increased enormously. But with that, strategy and strategic thinking became more and more the privilege of the Boardroom. Something weighty and difficult that only the top layer of the company was allowed to deal with. With the logical consequence that once the thinking had been done, in other words, once a strategy had been chosen, the management was then confronted with the implementation issue. And that’s where the shoe pinches very often. Because after the thinking was done, the rest of the organization simply had to follow. “Structure follows Strategy” is a well-known statement from that time and implies the pure separation of thinking and acting. Unfortunately, we have to conclude in retrospect that many strategic plans have disappeared into the proverbial bottom drawer in this way.
In short, the dominant view of strategy has a strong static, mechanistic character and in this sense, it is in line with the Legacy of the Enlightenment. We define an industry, within that industry a weighting of strengths and weaknesses leads to the choice for a defensible competitive advantage and then we adapt the organization accordingly so that we actually realize our advantage. Rationality to its fullest extent. In practice, however, very little is done with the outcome of strategy projects. Strategy rarely provides the blueprint for strategic action and implementation that it is supposed to provide. In practice, the world of strategy implementation turns out to be much less malleable than we had assumed. Strategy becomes a paper-based thought exercise that has little relevance to action and execution. Because Structure follows Strategy, but Culture eats Strategy for Breakfast.
Key characteristics of VIBRANT STRATEGY: Inner Purpose, Evolution, Involvement, Thinking and Doing.
The dynamic perspective is based on interaction, interdependence and constant movement. We could also call it an evolutionary perspective or a natural perspective. A perspective in which developments are a logical extension of an evolutionary path and in which things do not develop after they have been conceived, but in which things develop “as we go along”. The idea of a complex adaptive system comes to mind. An organization as a complex adaptive system that develops and improves iteratively through constant interaction between the actors within the system and in relation to its environment. Development has a recognizable common thread. The system has a past, has its roots and has a Core Identity from which it thinks and acts. Nature shows us this clearly. An oak tree is an oak tree. Becomes stronger and healthier as an oak but never becomes a chestnut. Path dependency we call this.
VIBRANT STRATEGY has four essential starting points:
- A strong Inner Purpose
- Strategy is Evolution
- Everyone is involved
- Congruence between Thinking and Doing
A strong Inner Purpose
Organizations start for a reason. Often the conviction of the entrepreneur. A dream, a wish, an idea. Something for which the entrepreneur is willing to give and sacrifice everything. Something he or she is engaged in day and night because it drives him or her forward. An inner conviction, dying, ambition. An Inner Purpose. This purpose is almost always of a qualitative nature. The entrepreneur wants to add something. Wants to mean something. His or her motivation is qualitative and not quantitative. It is infinite and not finite. It is the source of direction even when that direction is not sharply defined. Within VIBRANT STRATEGY, this core identity, this Inner Purpose, fulfils a determining role. It forms the basis from which the organization functions and acts. Simon Sinek hit the nail on the head with his book: “Start with Why?”.
Strategy is Evolution
If the Inner Purpose is the driving force behind the organisation, then Strategy within the dynamic perspective is the next logical step in the realization of our Inner Purpose. Strategy becomes evolution. And evolution never stops. So, strategy within the dynamic perspective is never over, never finished. There is always a logical sequel in the realization of the Inner Purpose. It is the reason why the organization is on earth and wants to stay on earth. Evolution is infinite and the goal of strategy within the dynamic perspective is to contribute to the “infinity of the organization”. Strategy is not a short-term competition that has to be won in financial terms. Strategy is the next logical step on the life path of the organization. Big steps and many small steps. The Inner Purpose is the focal point, the point of orientation. It gives meaning. It motivates and invigorates.
The central question within VIBRANT STRATEGY is: what is the next valuable step on our Inner Purpose journey?
Everyone is involved
Every actor within the complex adaptive system is, within his or her role, daily engaged in the development of the system, plays a role in the development of the whole. Within his or her role, every employee within an organization is involved in and responsible for the long-term well-being and vitality of the organization. Every day. By thinking about and carrying out step-by-step activities that make the organization better, more vital. The impact differs from role to role and the content also but the principle is the same: regardless of role or task, every employee within the organization is daily involved in and responsible for the long-term vitality of the organization. The next logical step in the realization of the Inner Purpose. In this sense, strategy is not reserved for the happy few.
Congruence between Thinking and Doing
Within the dynamic perspective, thinking about strategy and the implementation of strategy are not separate. Strategy is not something that is thought up before it is executed. Strategy emerges in a workable way. Always with an eye on the Inner Purpose. As in evolution, there is a constant interaction between direction and execution. If the execution produces something in the right direction, we move in the right direction. If we discover in the execution that the direction does not provide enough progress, we have to adjust the direction. Strategy as iterative learning process. The yardstick is progress. Progress in the direction of the Inner Purpose. Henry Mintzberg once came up with the notion of “Strategy in Hindsight.” Strategy as a path we walked in retrospect. That thought expresses the congruence between thinking and doing. In the sense that strategy is the sum of logical steps. On the other hand looking back is too passive. Dynamic strategy does not involve looking back over time; it involves constant interaction, evaluation and adjustment over time. VIBRANT STRATEGY is very active and is based on constant improvement and sharpening of the company’s life path.
In short,……
Our strategic thinking is highly influenced by static thinking frames and frameworks that have their origin in the Enlightenment. Within clearly defined markets we choose a defensible position. Strength/weakness profiles in relation to two-by-two matrices that strategically interpret the market and our offering help us to choose a certain strategic direction. Under the influence of the economic orientation, the focus within strategy country shifts over the years from a long-term perspective to short-term financial performance. Strategy becomes a means for a short-term objective. And the long-term perspective slowly fades into the background.
The dynamic view on strategy offers a different approach. VIBRANT STRATEGY starts from the Inner Purpose of the organization and considers strategy as the next logical interpretation of and contribution to the Inner Purpose. All employees play a role in that interpretation. In this sense, strategy is a collective assignment, which is given different colorings within different roles and functions, but always focuses on the logical interpretation of and contribution to the company’s Inner Purpose. Strategy focuses on the long-term vitality of the organization and not the short-term profitability. Profit and return are a result and not a goal in itself.
Literature
Competitive Strategy, Michael Porter, 1980
Milton Friedman, Time Magazin, 1970
Core Competencies, C.K. Prahalad en Gary Hamel
De levende OrganisatieArie de Geus,
The Fifth Discipline, Peter Senge,
Start with Why? Simon Sinek
The infinite game, Simon Sinek
Strategy bites Back, Henry Mintzberg