Nathan/ You’ve written many books about innovation, business, and design thinking and one of the most important things they communicate is a comfort zone that stretches across these very different worlds. Do you have a definition of strategy you find useful?
Jeanne/ I am not a definition person, but in my early academic days, the prevailing definition was Henry Mintzberg’s: “strategy is a pattern and stream of decisions.” When we say strategy today, I think many people think of that document, that blueprint, that written thing that, that lays out what future they’re trying to achieve and how you intend to get there. But, then, you’ve got the lived strategy, which is what people actually do in the organization. And, as we all know, in most organizations, those bear relatively little resemblance to each other.
Nathan/ When you say strategy, that means so many different things to different people. How do you work with that?
Jeanne/ I’ve always liked a really basic model of the different levels of strategy. As someone who came out of the nuts-and-bolts business world, the most troubling thing about strategy is probably the extent to which it’s only rhetoric. So often, nothing changes in an organization despite all of these senior people espousing strategy. The mission statement, all of it, goes nowhere. We’ve all seen it.
Nathan/ And then never communicating it to the rest of the organization. Right?
Right. I wrote a paper entitled, Experiencing Strategy, about how we treat strategy as this cognitive process. But, it really only matters when it becomes embodied in the individual practices of the people who work in the organization. And, that has two levels. The first: whether it is has personal meaning for people. The second: whether it guides their behavior (and a change in it). Those are two very different things but most strategy is lacking both.
One of my favorite articles, Is Your Strategy a Duck?, was inspired by an architect, Benedict, describing what makes architecture feel real. Likewise, the Leaving Las Vegas school of architecture, describes the difference between building these symbolic things, the “ducks,” and building what the authors called a “shed,” a useful building. Most strategies, in most organizations, are ducks, not sheds. They’re form and symbolism and not terribly useful. They mostly represent the egos of consultants and senior people and they are just not really meaningful to the day-to-day practices in the organization.
There’s lots of research—one in particular querying managers in a global set of thousands at lots of organizations—on the extent to which the principles of the mission statement and their organization influenced their day-to-day practice. And, the answer, not surprising, was almost never. That’s the dilemma strategy faces when it remains an abstraction. Now, strategic intention, by definition, is abstract because you’re envisioning a few future that doesn’t exist, but to actually get there, it needs to be translated at an operational level. People in marketing and operations and finance, etc. all do things in a specific way and, at a personal level, strategy needs to be translated so that everyone knows what to do differently, on a daily basis, for this strategy to work. That translation hardly ever happens, in part, because you communicate it one-way. It’s not even a dialogue. It’s a mutli-faceted conversation. If people aren’t experiencing a new strategy on an embodied, visceral level then their behavior is not going to shift to make it real.
Nathan/ Do you feel like there’s a difference between strategy for managing a company and strategy for innovation? Or, are they the same thing happening at different times?
Jeanne/ Well, it’s hard for me to imagine that you could have an innovation strategy in the absence of a corporate strategy. How would you know who to target for your innovation? And, how would you know what competencies or unique capabilities you wanted to bring into play? In the design process, when you help people create personas the first question is “Which persona should we design for?” Well, that’s not a question design can answer. Design is mostly agnostic to who the customers are. Strategy has to answer that question. Without the umbrella of strategic intent, you don’t know how to make choices because the strategy has to tell you who to serve and how to serve them. I can’t imagine meaningful, fruitful innovation in the long term existing in the absence of some kind of coherent strategy to guide it.
Nathan/ If innovation requires corporate strategy? Why doesn’t corporate strategy require a strategy for innovation?
Jeanne/ Well, in this world, you would think it would, right? And, I think most corporations think they’re doing it. They may not be calling it an innovation strategy. They may be calling it “new business initiatives” or “growth opportunities” or whatever the language is of the moment in that organization. But, fundamentally, strategy is about change. You don’t need strategy to stay the same. If you intend to remain exactly as you are, and expect the world around you to remain exactly as you are, then you’re just wasting your time formulating strategy.
Inherent in the notion of strategy is the assumption that there is a more desirable future than the one we’ve got right now, or that there is a risk that will lose the current level of desirability we’ve got now in a changing world if we don’t act differently. So, that’s kind of why we have strategy. The prominence of innovation is kind of a new thing. Not that long ago people thought innovation was about product and service development. They didn’t mean shifts in strategic direction.
Nathan/ So, what’s your sense of the quality of strategic consulting that’s out there?
Jeanne/ You know, I don’t pay much attention to it. At one level, I think a lot of what the strategy boutiques call “strategy” is really fairly operational. It’s looking at incremental improvements in products and services, or how you introduce new products and services, or how you maximize profitability, etc. These are all while things that organizations really need to do. But, there aren’t many people explicitly trying to envision radically different long-term futures.
I think we’re just talking about something that’s incredibly difficult to do, and has never been done particularly. What has changed are the consequences of not being able to grow and change. The world has gotten much more unforgiving—especially for large businesses. Pre-internet and before all of the lower barriers to entry, globally and in industries, if you were a big company, inertia alone pretty much kept you alive. Now, more people have access to your competitors. So many of the barriers have now come down, even globally, and flooded the market with lots of competitors that makes it hard if you don’t have some really durable advantages.
Nathan/ Well, if that’s the case, would you say that the way that strategy was taught before, is no longer accurate or adequate?
Jeanne/ I haven’t taught strategy in a long time—probably 10 years and I’m not even sure what’s in the Darden strategy class, but I’m sure Porter’s Five Forces are still being taught. The five forces are incredibly brilliant and they’re still relevant now. They’ll tell you what not to enter, but they won’t help you envision a future that doesn’t exist yet. So, while they’re useful, occasionally they’re just dead wrong. Some of the stuff we used to believe about strategy, like keeping things secret and networks are much more important than they used to be. Certainly, the shift in moving from teaching strategy as product market selection to teaching strategy as ultimately being about the building of a set of durable capabilities has allowed it to remain relevant. But, I think the trouble is the toolkit. We don’t really have a good toolkit, not just in strategy but also in product development. Outside of the toolkit for, say, scenario planning, which is fabulous and has been around for many decades, now, there aren’t a lot of tools to guide you in inventing something that doesn’t currently exist.
Nathan/ One of your, your books is called Designing for Growth. Is growth a requirement? Responding to change absolutely is. But, should we place so much importance on growth?
Jeanne/ Oh my god. We know that that’s what’s destroying our environment, in part. For quite a while now, people have been pointing out the system-level consequences of the corporate focus on growth. Wall Street and the other markets are incredibly and only focused on growth. It’s a terrible thing for the planet and the environment and everything else—even for people who don’t need to keep buying new junk they don’t need. But, we don’t seem to be able to escape that focus for publicly held companies. Capital market systems are primarily driven by growth potential.
Nathan/ I have to say that I don’t think all growth is bad, right. If we could grow electric vehicle use, renewable energy, more nutritious food, and more meaningful things so that people aren’t just buying crap because they get a temporary dopamine hi, those would be good growth. But, that speaks to a higher network strategy of the whole market or the whole of society about growing certain things and not others.
Jeanne/ Yes. Currently, the de facto understanding is that all profitable growth is good. For the tech industry, I don’t even need to put the word profitable in there. We’ve seen crazy company-flipping and other phenomenon. That’s probably one of the biggest challenges to the logic of strategy, when you no longer have to demonstrate that you actually create value in excess of your costs, but you’re still worth a so much money in the stock market. I don’t even know how you make sense of that, logically, but it’s the “all growth is good” mentality that corporations are kind of prisoners to. It’s a chicken-and-an-egg thing. Where does the madness stop? You can’t really stop it at an individual level. If you’re the head of a publicly traded organization, the stock market will just devalue your stock and the price will drop and you’ll be out of a job or your company will get acquired or bad things will happen.
So you don’t really have much choice. Now, to your point, you can target your growth into areas that are more acceptable, but that’s not figuring-out how to sell more of what you’ve already got to more customers (or selling slightly refined things to your existing customers). It’s inventing whole, new technologies, products, and services. That’s much more difficult.
Nathan/ I’ve always thought that the market was essentially the world’s largest legalized gambling system. In the terms that you’re describing, essentially, the market responds to the promise of growth regardless of the evidence of growth.
Jeanne/ Maybe not “promise” because CEOs are really good at promising things and, eventually, the market figures out what’s delivered, but certainly the likely possibility of growth. It’s a set of analysts, for the most part, assessing what they believe the likelihood of growth is.
Nathan/ Does this, then, look like how much of strategy happens in the public policy sphere? Because, it sounds like it needs to, if we’re going help guide the private sphere in the right direction.
Jeanne/ Oh yeah. We know that if we really want companies to behave differently, we have to change the incentives in the system. Yeah. Right. If companies are allowed to have absolutely no responsibility for the disposal costs of their product, those externalities then create incentives to build them in a certain way and churn ’em out, without consideration. There may be a couple of random companies who decide to do things differently, but they’re at a big disadvantage. They’re always going to be anomalies in the market. Public policy is the only solution that I can see to change bad behaviors and, if anything, we seem to have gotten further away from a willingness to use public policy in areas like this.
This interview is from A Whole New Strategy: Everything You Need To Think And Act More Strategically