What’s the use of strategy tools?

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On behalf of executives and consultants who really would like some useful approaches to strategy, I last week issued the following challenge to the Business School profs’ discussion lists – so far, just a handful of the thousands of recipients have responded, and no explanation offered as yet for the irrelevance of strategy research and teaching.

TO…

  • Business Policy and Strategy List [mailto:BPS-NET@AOMLISTS.PACE.EDU]
  • Management Education and Development Discussion [MG-ED-DV@AOMLISTS.PACE.EDU]

We had a great post in December from Richard Whittington [below], drawing attention to a series of articles on this topic, so thought we might see an avalanche of responses – maybe from younger folk in the field worried about its future [and theirs], or from more experienced figures vigorously refuting that there is a problem. So the subsequent silence is puzzling.
The evidence may be mostly anecdotal, but it seems increasingly recognised that students see little value in strategy classes, recruiters don’t value what those students learn in those classes, and executives and consultants don’t use the tools that have been so painstakingly put together. Why does no-one dare mention this ‘elephant in the room’?
If “there is nothing so useful as good theory” and our tools are not used, the conclusion seems inescapable – we have little useful theory! If we accept that there actually is a big problem here – where has it come from? I will probably get beaten up for this, but here goes with two suggestions …

  • Most of the tools, whether external or internal oriented, originate from efforts to explain profitability [rents], when that is of little interest to either investors or managers. It has been axiomatic to those in Finance for decades that investors value growth in free cash flows .. which does not correlate with maximising rents. Profitability needs to sufficient to either fund growth or enable funds for growth to be raised, and growing companies are likely to be less profitable than they could be if not growing. How long have we known this? – since Penrose in the 1950s! [ In some cases e.g. Amazon  ‘sufficient’ profitability can even be negative for many years so if sustained superior profitability is the goal, where are the case studies exploring how UNsuccessful Amazon has been?!].
  • Most of the tools offer ways to find  a good strategic ‘position’ for a firm vs. rivals .. but this question only arises at start-up or at major cross-roads in a company’s history [most of the great case study companies we use in class have sustained essentially the same ‘position’ for decades [IKEA, Southwest Airlines, eBay …] , or else made just one or two major changes [IBM, Nokia …].. so what does ‘strategic management’ actually do in between these once-in-a-lifetime events? If we were honest we would rename our classes, if not our whole field ‘Strategic Positioning’ instead of Strategic Management.

The consequences of having no useful tools for the continuing strong strategic management of organizations are serious. We are experiencing right now the result of incompetent strategic management of many of our major corporations, especially but not exclusively the banks of course. So – are we going to continue ignoring this elephant and keep churning out research and tools that no-one values, or really try to do something about it?

… excuse me while I go hide under the table.

Kim Warren

From: Business Policy and Strategy List [mailto:BPS-NET@AOMLISTS.PACE.EDU] On Behalf Of Richard Whittington
Sent: 10 December 2008 10:52
To: BPS-NET@AOMLISTS.PACE.EDU
Subject: FW: Business Policy and Strategy Management: Is there any differnce?

Dear All

This topic came up earlier this year, and Joe Bower mentioned a relevant Dialog forthcoming in the Journal of Management Inquiry. The Dialog has now been published under the heading: ‘Directions for a Troubled Discipline: Strategy Research, Teaching and Practice’, JMI, 17, 4, 265-286, 2008.

The three main papers are:

Joe Bower, ‘The Teaching of Strategy: From General Manager to Analyst, and Back Again?’

Rob Grant, ‘Why Strategy Teaching should be Theory Based’

Paula Jarzabkowski and Richard Whittington, ‘A Strategy-as-Practice Approach to Strategy Research and Education’.

Richard Whittington


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Comments

  1. Dmitry K  February 21, 2009

    This is a very important question and I’m glad it was raised. I’ve been thinking about it for some time already and my conclusion is that we cannot teach strategy in an old way (i.e., Porter analysis, SWOT, etc.). We need to quantify it. Therefore, system dynamics and strategy dynamics seem to be the most appropriate tools of bringing strategy to the next level of sophistication.

    reply

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  1. digforleadership.com  February 16, 2009