By Ted Ko
Some recent writings by Jay Ogilvy (not yet published) on the opposing styles of systems thinking provide an enlightening philosophical framework behind the evolution of strategy theory and the successes and failures of corporate strategy development processes. Fundamentally, strategy design is a systems thinking exercise and executives would do well to understand the basic approaches to systems theory. Then, optimal design would seem to require active awareness of the “oscillations” between arrogance and humility and strike an appropriate balance.
Corporate strategy is like a set of guideposts at the intersection of two systems: the company system and the marketplace in which the company operates. Both are complex systems with a myriad of unpredictable interactions . Good strategy directs decision-makers towards the most effective choices to achieve desired changes in the systems, and explains how the company system should react to the market system.
Long-term, prescriptive strategic plans are basically arrogant in nature. These assume from the start that it’s possible to know enough about the market to accurately discern the company’s optimal position. “Blue ocean” strategies in particular arrogantly assume that a company can fundamentally change the way the market works, that their attempts at a radically different business won’t get absorbed back in to homeostasis or just be a temporary ripple. Too much arrogance of this sort risks catastrophic failure. But, as Ogilvy points out, often “a little arrogance is in order,” or else the company won’t be able to effect the change it needs to succeed.
Emergent strategy development and reactive plans are essentially humble. This type of strategic decision-making is based on listening to what the system is telling individuals, and making sure that all of the company processes are flexible enough to react purposefully to market conditions. This approach, of course, risks that strategic moves are too small, that they don’t impact enough of the systems to achieve meaningful change.
As with most things in life, the best approach seems to be balancing between the extremes. Get the big picture and design broad strategy around an optimistic belief in system change. But use tools such as scenario planning to make sure the strategy is prepared for unanticipated system effects and a future radically different than what was predicted.
My subsequent conclusion is that corporate executives should go beyond just using this balance in initial strategy design. They should maintain ongoing awareness of when their company system is acting arrogant or humble, acknowledge that the oscillations will happen naturally, and adjust plans along the way.
Ted Ko is a strategist and writer inspired by the Presidio Graduate School MBA program to work on energy policy for a sustainable economy. Ted writes and speaks on policy and regulatory strategy as the Associate Executive Director of the FIT Coalition.