Preface to the First Edition

Strategy is still a source of contention in most organizations. It seems that since the beginning of time man has associated strategy with mystery and esoteric rituals restricted to only an enlightened inner circle. The ancient Greeks consulted their oracle at Delphi for guidance before moving into battle. Indeed, in preparing for the historic battle at Salamis in 480 BC that pitted the Greek coalition against the might of Xerxes' fearsome Persian army it took the persuasive and cunning 'vision' of the Athenian strategoi (general) Themistocles, commander of the Greek allied navy, to provide an interpretation of the oracle that ultimately encouraged the Greeks to stay and fight in the face of almost certain defeat against the Persian army. Some had interpreted the oracle's sign to predict defeat. Themistocles skillfully and convincingly interpreted the oracle's omen to mean victory. Little, of course, could he or his Greek compatriots have appreciated the historical significance of their great victory in that battle.1

Many managers today still seek out their 'oracles' when faced with strategic decision making. The modern manager's oracle often takes on the form of endless reams of essentially meaningless data generated by management information systems. Many managers find solace in numbers, just as the early Greeks did in the Delphian oracle's signs.

Strategy need not be enigmatic. It need not be a mystical codex with seven seals. Good strategy is about clarity of thinking; of balancing insight based on well-founded intuition with rational analysis - particularly in the face of incomplete information and complex circumstances. Strategy is practiced in social contexts; that is to say, in organizations and their competitive environments. Admittedly, these represent ambiguous contexts that often defy rational analysis. Andrew Lo of MIT's School of Management has remarked that while in the physical sciences three laws can explain 99% of behavior, 99 laws in finance can at best explain only 3% of the behavior.2 The latter can be argued for the social sciences in general. However, while the context in which strategy is practiced is complex and fraught with ambiguity, the basic premise of this book is that how we approach strategy need not be. In this book we develop an approach to strategy that seeks to fulfill that purpose. An underpinning element of this approach is the strategic thinking process that leads to the generation of strategically relevant insight, even in highly ambiguous and complex competitive contexts.

This book builds on several relatively simple assumptions. The first is that strategy is a practice discipline. While this extends to the field of management science in general, it is arguably in the strategy area that 'getting it wrong' leads to the more serious consequences. Strategy attains meaning only in the practice field; indeed, some strategy thinkers even go so far as to suggest that strategy attains meaning only in the retrospective; that is, after the fact. Strategy may look impressive on paper, but it is in the practice field that it fulfills its ultimate purpose. While this may seem readily apparent to any military commander, it is not necessarily what the strategic management literature would lead us to believe. Second, strategy is not only about rational analysis and the models that support the analysis. No doubt, analysis is important in strategy. Indeed, as will be argued in this book, appropriately selected frameworks of analysis can generate a lot of useful insight. But as we will see, analysis is only one of several inputs to the strategic thinking process. Intuition, reflection, and above all a predisposition for experimentation and learning are its other important constituents.

This book is about strategy in practice. It draws on strategy theory and current thinking in the field of strategic management. However, this book is written with the practitioner of strategy in mind - the manager who faces strategic decision making in every day management practice. This is where strategy has the potential for making a difference in the business outcome of a firm. In my experience, both as management practitioner and consultant, this is where we often still find substantial gaps in the understanding of even very basic strategy concepts in firms. Managers typically have difficulty in knowing where to begin with strategy. Of those who do succeed in getting started, many quickly get bogged down in the maze of strategic analysis. This book seeks to address those gaps in understanding strategy; it aims to provide the strategy practitioner with a balanced compendium consisting of essential theory and pragmatic, practitioner insight. The strategic thinking approach that forms the core theme of this book delineates the path through the strategy forest.

Setting the right strategy is arguably the most critical managerial challenge facing a firm. Strategy is about making appropriate choices about why, where, and how to compete. Decisions of this type are invariably being made under conditions of incomplete information in increasingly complex contexts. This doesn't make the task any easier. It does, however, reflect the reality of the complex, fast-changing and messy real world we compete in. In that context, strategy is first and foremost about being different and doing things differently in deliberate response to opportunities in the firm's external competitive environment. This response invariably takes on the form of creating and delivering a superior value offering to the market. However, strategy might also have an inward focus; it might also be thought about as seeking and achieving competitive advantage through differentiation in the strategic (re-) positioning of the firm. This might require a realignment of resources and capabilities to better fit changing circumstances in the external market environment.

Good strategy, whatever its pretext, demands astute and discerning insight - strategic insight which is grounded in a suitably balanced mixture of rational analysis, intuition, healthy skepticism, reflected experience, and the willingness and ability to continually challenge the prevailing logic and paradigms. In this book we explore the strategic thinking process which leads to strategic insight. This may seem a questionable proposition - a systematic approach to understanding a complex context? No doubt, competitive contexts are highly complex. Firms' external competitive environments are continually changing; internal organizational contexts are no less complex. Complexity, we know, inherently defies structure and order.

Why then a book about anything even remotely related to structure given the messy real world we are competing in? In this book we clearly differentiate between a firm's reality marked by complex and changing contexts and an appropriate response on the part of the firm to that reality. The former, the firm obviously can neither influence nor impose structure onto. The latter, however, clearly lies within the firm's realm of strategic choices. Strategy is about clarity of thinking; about making appropriate choices under conditions of incomplete information. Strategic thinking can be a powerful means to that end.

The strategic thinking approach developed in this book does not seek to achieve simplification of the firm's complex competitive context; rather, it seeks to bring structure to the thinking that allows managers not to lose sight of the wood for the trees. Good structured thinking begins with asking the right strategic questions - those that really have potential to make a difference to the firm's ability to compete in its markets. There might be numerous questions on a manager's plate, but in reality only relatively few of these have potential for really making a difference to a business's competitive situation. Managers will want to ensure that they are indeed focusing on the few high priority issues. Strategic thinking also continually challenges the prevailing business logic. It seeks to establish relevant insights and to understand these in their current strategic context. Insight ultimately leads to the emergence of patterns that reflect the firm's competitive landscape. Though inevitably incomplete and spotty, this level of granularity is often the best there is available. The good news in all of this is that the firm's competitors are no better off in this regard.

Arguably, strategic thinking leading to an insight-driven approach to strategy is an increasingly critical strategic capability enabling those firms that have acquired skill and acumen in its application to recognize and act on opportunities faster than their competitors; alternatively, it can help to avert situations that might prove to be detrimental to the firms' competitive position. Hence, there is a lot at stake. The purpose of this book is to provide a relatively accessible guide toward achieving mastery of this important skill.

The strategic thinking process developed and discussed in this book represents an accumulation of insights, experiences, and reflections that have evolved as a result of my various roles over the years as management practitioner in industry, as strategy consultant, and as professor of strategy. This book represents a summary of the insights distilled from experiences gained wearing these various hats both in the practice field and in academia. Boxed inserts throughout the...