Look Down at Corporate Strategy

Human nature is characterized by the ability to learn from past actions and improve future ones. The human race is always on the lookout for solutions to problems. People are always on the hunt for universal formulas that work in any situation, no matter what time or place they are.

The world of business is not an exception.

Academics and practitioners have always been concerned with the question of how to achieve and sustain success in business. It was only natural that after formulas were developed to achieve success in processes and departments (such as the assembly line), we would start to look at the entire organization. In the early 1960s, the concept of business strategy began to take shape.

The concept of strategy, borrowed from military knowledge because of historical circumstances, was originally intended to (1) mobilize a company by having all departments “pull in the same directions” and (2) maximize its available resources. Due to the less-diversified nature of the company at the time, this was easily translated to finding a match between the resources of the company and its business environment.

As more and more products became commodities, and as companies faced increased competition, “corporate strategy” began to make sense. Most people generally accepted its use. Ironically, as the term gained in popularity, it became less relevant to the modern business world.

In the 1990s, the concept of business model was born. The idea of the business models, although focusing more on the operations side of the business, such as strategy, is also meant to describe/prescribe what makes a successful company. Its increasing popularity is a sign of a growing dissatisfaction about the effectiveness of corporate strategy.

Unexpectedly, the root of the current crisis is a lack of perspective. Most research on corporate strategy is based upon a limited view influenced by the military’s heritage. This is the “general’s perspective” or answer to the question, “What should the CEO be doing?”

In turn, strategy is often seen as an instrument owned by top management and usually manifested in a corporate plan or a competitive position. This approach is also encouraged by the limited tenure of the executives. It focuses on a short time horizon, which can be irrelevant in an environment as dynamic as ours. Where is the problem, then?

First, there is a lack of historical context. The majority of practitioners and academics “forgot” that the context of the times shaped the firm’s strategy at its conception. It is hard to discuss a formula for success if you don’t address the current problems. The primary purpose of the plan was not to establish corporate objectives but to unite the organization. The primary goal of the strategy was not to defeat competitors but to determine where resources could produce the best results within a given environment.

There is a tendency to overlook the fact that the interpretations chosen were simply the ones that made sense in an era of war. This society was rife with military officers. They are one of the rare occupations that combine education and leadership.

The second factor is more important. Few researchers ask about the original intent of a firm’s strategic plan, but it appears that even fewer are asking why the concept of strategy is needed in the first instance. It is important to ask this question because the answer will reveal what was obvious from the beginning. In fact, the concept of strategy is the latest manifestation of the search by the business community for a universal formula to ensure corporate success. This acknowledgment would have at least provided a better direction to the many misguided research projects that were undertaken over the years. When searching for universality, it is more effective to find fixed points on which to anchor your theory than to search for metaphors or analogies.

To conclude, in order to advance corporate strategy or, better yet, the search for a universal formula to ensure corporate success in the long term, it is essential to start with a broader view and ask two simple questions.

  1. What would the corporate strategy look like if it had been developed not just two decades after World War II but over five decades?
  2. What would be the new concept (finding formulas for long-term success) if there had never been a corporate strategy?

Leave a Reply

Your email address will not be published. Required fields are marked *