After working for more than 20 years helping companies design and execute strategy, it is now obvious to me that strategy is undergoing a profound change. More and more as we work with clients we find that the traditional strategy methods are starting to break down. Whilst I am not suggesting that everything we have learned over this period about strategy is invalid, I am suggesting that things are fundamentally different. Much of what we learned about strategy applies to organisations operating in a relatively stable macro economic/competitive context. In a straw-poll survey of more than 350 CEOs across multiple industries taken by Insurgence in 2016, more than 85% of them agreed that the environment in which they compete is highly dynamic and unstable and expected to become more so over the coming years.
One of the analogies often used to illustrate strategy is chess. In chess, each player occupies half of the board at the start of the game with the goal of ultimately and totally defeating the competition. This is a useful analogy because competition closely mirrors a game of chess in several important ways: there is a winner, there is a playing field (i.e., the chessboard) and the game requires a balance of strategy and tactics to create advantage. This is the essence of strategy. If I move, you countermove. I sacrifice a pawn to take your knight. You introduce a new product; I follow or counter. I enter a new market; you attack me in my home market.
This all works very well in a stable system where the players are known and the rules of the game are well established. I often share this analogy with business leaders, and, inevitably, a hand goes up and someone says “but that’s not how things work anymore!”. Of course the question itself is a trap and the discussion typically gets quite lively. “What’s changed?”, I always ask. The first answer is always that the game is being played by multiple players, it’s not as simple as the Coke vs. Pepsi battles of yesteryear, there are multiple players on the board all trying to win. Most leaders generally agree with this, but someone always argues that “this has always been the case, what’s different is that it is becoming more and more difficult to determine with whom we are competing.” Usually what comes next is someone then mentions – “it’s like we are playing chess on the ocean with ten foot waves!” In other words, the ground underneath the board is constantly shifting. After some more lively debate, someone almost always gets to the heart of the problem with the core analogy itself – “actually, the real problem is that we are playing chess, and so is our traditional competition; but more and more competitors are coming on the scene that aren’t playing chess so much as playing a totally different game, with different rules and different assumptions.”
Strategy, in stable systems, does look a lot like chess. In unstable systems, if you are playing chess against someone else playing “go”, how would you know if you were winning? Most of what we have learned about strategy applies to the former case, not the latter. If you are still in an industry where the rules are predictable, the competition set, the assumptions static, congratulations – keep playing chess. For the rest of us, a new approach is required, our very survival depends on it.
To learn more about strategy in unstable systems, please contact us and we will be happy to share our perspectives with you.