Corporate strategy today uses thinking similar to that which supports astrology – offering lots of examples to support an untested theory.
“Most proposed corporate strategies flunk the ’if-then’ test. They’re goals or missions, but they don’t say why the company should be or will be successful if they’re followed.”
For effective strategizing, use scientific thinking and methodology.
“Astrology is not proved by a catalog of examples, and a business strategy is not proved by a list of successful companies.”
The test of a theory’s greatness is its falsifiability.
“Like the astrologers, we find confirmation of past predictions everywhere in the historical record.”
A business strategy is essentially a theory that needs testing.
“The time is ripe for corporate strategy, like science at the time of the Galileo, to break out of the chains and dogmas of its own Middle Ages. Like the Renaissance itself, it is time for corporate strategy to reach back into the richness of human history and reach out to the habits, logic and values of science.”
“A theory’s power and greatness lie in its ability to specify what observations or consequences would make it false.”
Test your business strategy by making an “if-then” statement – “if” this action happens, “then” these are the expected results.
“What is a business strategy? It should be nothing more than a prediction about what markets, customers, and competition will do in the future, and how that will change depending on the action you take. That is, a strategy is a hypothesis.”
“If you accept the idea that a robust strategy is a falsifiable hypothesis, you will have taken the quantum leap that moves a tough-minded company’s thinking ahead of the pack.”
Make your strategic hypotheses about something crucial to your company.
“In science, even the simplest hypothesis is a creative act. The great discoveries are acts of synthesis in which disparate ideas are combined and transformed to create something surprising and new.”
“If you insist on recasting your company’s strategy as an ’if-then’ statement, you open the door to fruitful strategic dialogue. That’s because the ’if-then’ statement breaks down the strategy into digestible pieces.”
The most important strategy guideline is “The Hammer and Pivot,” which generals have used successfully throughout military history.
“The Hammer is the central focus of your main effort. It’s where you create or exploit an advantage. It’s what you use to overcome competition, capture customers, and build markets. The Hammer is the engine of growth. And it is the embodiment of the strategic hypothesis on which your company’s hopes, dreams and plans depend.”
The Pivot represents the fundamental, dependable aspects of your business. Shift resources to your Hammer when you put your strategic hypothesis into effect.
“Many of the differences used in the past to erect sustainable advantages are disappearing due to technology, transportation, communication, and the globalization of culture.”
Instead of seeking a sustainable competitive advantage, think about creating and exploiting opportunity.
President of Evan M. Dudik & Associates, a consulting firm in Vancouver, Washington. He was a company president, a McKinsey and Co. consultant and a lobbyist.