Does Your Company Suffer From Strategic Insanity?

Last Updated Sep 7, 2010 3:04 PM EDT

The definition of insanity, says the quip, is doing something again and again but expecting a different result. By this definition, every company I've known is looney tunes. We've all seen companies throw good money after bad. Oldsmobile was a zombie for years before the brand was interred. Corporate initiatives, like cost cutting or culture change, are particularly susceptible to the "it failed before, so let's do it the same way again" syndrome. People who know tell me that Time Inc. tries, then abandons, the same ad sales force reorganization just about every 8 or 10 years. Get in a lather, rinse, repeat: The success formula for shampoo applies to change management, too.

What's the root cause of this strategic insanity? Here are three hypotheses, each with impeccable provenance:

  • A failure of leadership: Jim Collins, in his book How the Mighty Fall, sees decline in personal terms, as a consequence of hubris and complacency, the opposite of humility + will, his formula for the leadership of companies that go from good to great. Jim, the rock-climbing husband of a tri-athlete, finds that the roots of success and failure are very personal.
  • Organizational inertia: Organizations get into ruts, says Donald Sull, a professor at London Business School and author of a terrific book called Why Good Companies Go Bad and How Great Managers Remake Them. Sull, who majored in government in college, sees the folly as built into organizational life: The status quo is powerful; as Machiavelli showed long ago and as any manager knows, it's much easier for you to get budget to repeat the mistakes of the past than to get support for a course into an unknowable future.
  • Economic forces: Clayton Christensen's research, for example in his book The Innovator's Dilemma, emphasizes how market dynamics almost inevitably expose companies to upstarts: The better you serve your best customers (as you must, as you should), the more vulnerable you become to an attack from a disruptive innovator, whose "good enough" products destroy you from the bottom up. Clay originally trained as an economist with a special interest in developing nations.
These are different legs of the same elephant: If you focus too much on your core business, you risk digging yourself a hole. Whether the mechanism is psychological, sociological, or technological, the effect is the same. And it seems scarily inevitable: Combined, their insights suggest that to keep a business alive requires bucking human nature, group dynamics, and market forces.

If the sources of strategic insanity are many, so must be the cure. It cannot just be hiring new leaders, designing a brilliant reorg, or finding a new strategic position (leaving a core-business fortress to sail out on a blue ocean, for example). Somehow you've got to find a way to shape the energy of ego, empire, and economics so that they are convergent -- so that they create momentum instead of dissipating it. People crave growth, not just self-aggrandizement. Organizations like clarity. Markets love innovation. ("New!" will always be the most powerful word in advertising.) As management guru Bob Dylan put it, "He not busy being born is busy dying."

These things can be brought together when strategy takes capabilities as its starting point. Rather than work back from the market -- "Where's the money? Let's get it!" -- strategy should start with who we are and what we do best. What you want is a constant, constructive conversation between what-we-do-well and what-the-market-wants. Strategy, in this sense, is as much about identify as it is about positioning. If you know who you are and what you're trying to do, then repetition isn't insanity: It's practice makes perfect.

Image courtesy Flickr user hillary h, CC 2.0