When I started my career, I struggled to grasp the concept of strategy (you might feel the same). I read ‘ten’ books on strategy and ended up with ‘twenty’ different strategy recipes.
After all, the number of strategy tools and frameworks that CEOs/leaders can choose from has exploded massively since the birth of business strategy in the early 1960s.
According to Harvard Business Review, the number of strategy frameworks has skyrocketed over time. In 1960, there were only 2 frameworks, i.e., Ansoff Matrix and Industrial Organization. By 1970, there were 10 frameworks. Fast forward to 2013, the number jumped to over 80 frameworks!
No wonder so many of us are confused. Which tools to use for what? After all, many of them are simply different ways of cutting and presenting the same things.
Principles vs. Tools
This is why principles of strategy are more helpful than strategy tools. At least for three reasons.
1. Knowing the tools without understanding the principles is pointless and dangerous.
I once sat in an executive meeting where a consultant from Bain (a prestigious consulting firm) introduced a strategy framework called Radar 360. This prompted the CEO to challenge: “Too complicated. I am old school. For me, a strategy is about Where to Play and How to Win – as simple as that.” Then, the COO quickly offered his view: “Actually, for me, a strategy is about SWOT.” Jumping into the bandwagon, other executives started to throw their favorite strategy tools. The meeting quickly turned into a framework debate and derailed. Indeed, so many tools out there, from the classical McKinsey 7-S framework to cutting-edge Deep Neural Network Learning. But how do you know which ones are relevant to your problem and which ones not to use? The principles of strategy will guide you.
This is because the principles of strategy are the basic building blocks of winning. You can trace all other strategy tools back to these blocks. You can combine two or more of the principles to form tools. In other words, the principles of strategy are both the simple and elegant substance behind the tools. You can use principles of strategy to generate intelligent, real-world solutions and results. You can use these principles to diagnose business challenges and devise workable solutions. Knowledge of these strategy principles gives you clarity on the path to win, not obfuscate it.
Furthermore, unlike strategy tools that deal with a narrow facet of a problem, the principles of strategy represent the collectively complete solution, where all the critical elements of winning are present, and none are missing. Due to their narrowness, tools are often in conflict with each other. On the other hand, principles are internally congruent, i.e., they are logically and intuitively consistent.
2. Principles are timeless while tools aren’t.
The relevance of tools can quickly become outdated in this 21st Century. Due to technological advancements (e.g., Internet of Things, Cloud Computing, and Cognitive Computing), many strategy tools are being superseded by more modern tools. For example, you can now use machine learning techniques to automatically create a customized offering for a single individual based on his specific behavior – rendering the classical customer segmentation technique less relevant, if not obsolete. On the other hand, the principles of strategy (e.g., must understand the customer) are enduring: they remain valid beyond the 21st Century.
In sum, the principles of strategy are timeless, meaning that they can still be expected to work 1,000 years from now, and they would have worked 1,000 years ago. By mastering the principles of strategy, you don't have to worry that your knowledge and skills will be outdated. P
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3. Due to their simplicity, principles are applicable in vast arrays of situations – making them much more versatile than sophisticated tools.
Take Extreme Gradient Boosting, for example. It’s a powerful predicting tool for machine learning. However, it’s overkill and irrelevant in many business situations. More than 90% of the time, you don’t need this tool. It is just like in martial arts: the ‘Jackie Chan’ style acrobatic fighting techniques do look awesome and wow the spectators. But, in a real fight, if you want to knock out the opponent, simple punches are easier to execute and more effective (e.g., you rarely see the flashy backflip kicks in the UFC championships). This is why, in the GOSPEL of Strategy approach, we’ll use simple principles (and simple tools).
The principles of strategy are universal. They apply to anyone, anywhere, in any situation. They work equally well for all industries: pharma, e-commerce, consumer goods, education, etc. They are culturally independent -- they work for American companies, European companies, Asian companies, African companies, and so on. They also work for all sizes of businesses, whether you are a company of one or a company with millions of employees. They also work both at the individual level (i.e., you can apply these principles to yourself) and the organizational level (i.e., you can apply these principles to your organization). In addition, the principles of strategy are effective for any company at any stage (e.g., start-ups, growing companies, mature companies, and declining companies).
In essence, the principles of strategy give you the unifying big picture of strategy! It is important because, with the unifying big picture, you can:
Understand better the true concept of strategy.
Grasp clearly in your mind what a strategy really is.
See how strategy relates to all other elements of your business.
This is why in the GOSPEL of Strategy, I focused on the principles of winning strategy.
Learn more about Winning Strategy here.
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