More on strategic responses to the downturn

More from McKinsey on this, including a review on some useful thinking from last time.

I couldn’t find much in Leading through uncertainty on what to actually do, though it does offer some broad scenarios of how the future might play out, depending on the depth of the global recession and recovery of financial markets. 

Strategy in a ‘structural break’ argues that this downturn is qualitatively different than others – in some sectors, things look very unlikely ever to return to where they were. ‘Structural break’ is a phrase from econometrics denoting the point in time-series data when trends and the patterns of associations among variables change.  It’s the second part of this that is so dangerous, because it may disable policies and strategies that previously worked. But not sure it all hangs together:

  • It asserts that “the most important element of a strategy is a coherent viewpoint about the forces at work, not a plan” – sounds smart, but a coherent view with no idea what to do in response seems inadequate. 
  • Surely, on its definition above, the internet revolution imposed sructural breaks on many more industries and business models than the current banking crisis and recession. It’s not clear this downturn meets those conditions in more than a few sectors. This is important, because the structural break argument is being used by consultants and writers to push firms into looking  for changes to their business models that is mostly inadvisable. This article argues that “The wrong way forward in a structural break during hard times is to try more of the same. The break and the hard times are sure indications that an old pattern has already been pushed to its limits and is destroying value.” True, but that’s not what most firms are currently facing.
  • Some good points it raises though … complexity may have grown, and needs to be sorted out – that was an important part of the case in my ‘Strategic Recovery‘ article ..  the first task is to understand how a business has survived, competed, and made money in the past, and if the business is too complex to comprehend, break it into comprehensible parts.

The downturn’s new rules for marketers has good pointers I don’t have time to go into.

A fresh look at strategy under uncertainty interviews Hugh Courtney on his excellent book 20/20 Foresight: Crafting Strategy in an Uncertain World, published in 2001. The book outlines four levels of uncertainty – a clear future, a few clear alternatives, a wider range of scenarios, up to complete lack of any idea how things might play out. Hugh points out that the present situation does not feature widespread level-4 uncertainty for most of us. If so, the radical revision of business models being advocated by others is just plain bad advice. Instead, Hugh advises some thoughtful scenario-planning, and faster, more active strategic management [more substantial decisions, more often] – which of course is where strategy dynamics is so helpful. The last point I’d make is that strong firms don’t wait to see how the future will play out – they make it happen the way they want. 

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