Apr 8, 2021 at 1: 19 pm

Rita McGrath on Strategy Tools in Action

Rita McGrath

4 MIN READ

Imagine enrolling in a traditional course on strategic management, because you need to or want to understand something about the topic. You hope the course will help land you a job in an exciting industry – perhaps high tech, advanced materials or consulting or other professional services. You’re excited about learning to cut through the strategy fog and discover tools and frameworks that will illuminate the choices you know you’ll need to make.

So what do you find as you scan the syllabus for this exciting course?

You’ll start with Gillette’s launch of the Sensor razor from 1990, a session that never gets as far as the 2010 founding of Dollar Shave Club and the direct-to-consumer revolution in retail. Then you’ll move on to a famous case from 1992 about airline pricing wars, ignoring the mergers that consolidated the industry and allowed the top 6 airlines to spend 96% of their free cash flow (some $47 billion dollars) on stock buybacks in the decade leading up to 2019. Next up is a 1998 case about Anheuser Busch and the U.S. Brewing industry, which proceeds in blissful ignorance of the later 2008 acquisition by Belgium’s InBev which preceded drastic cost-cutting, and a retreat by the whole beer category in light of more skillful strategic thinking by spirits
companies.

Then, let’s talk pricing, which you will approach by examining the 1990 price war between Maxwell House and Folgers. At the time, Starbucks had just 84 stores, but its growth trajectory was already noticeable. You’ll move on to a year 2000 case about Airbus’ decision to build the world’s largest commercial jet. Then, it’s Minnetonka (the moccasin people?) getting into SoftSoap in 1988 and toothpaste, followed by an in-depth discussion of decisions surrounding innovation in 16-bit video games.

And it goes on, with strategy apparently frozen in time. Lest you think I am exaggerating, these are actual cases taken from this year’s syllabus for an undergraduate strategy class at a top-drawer school.

This is but a symptom of a much larger problem. Strategy as a field has not itself adapted to an interconnected, digitized world in which barriers to entry have changed, capital is abundant and information and knowledge, rather than raw materials, are the inputs in scarcest supply. The use of outdated tools, and the outdated assumptions they rest on, perhaps help explain why there is so much disappointment with the strategy process.

This is one of the reasons I am delighted to be working with the team at Strategy Tools to update the essential tools of strategy into modern use. Let’s understand what these tools help you to do.

Make strategy choices tangible

At the end of the day, the reason one needs a strategy is because we have to make choices under conditions of competition and limited resources – if you had no competition and unlimited resources, just try everything and see what works. For most of us, unfortunately, we’re not in such a benevolent position.

The difficulty is that strategic clarity, in the sense of what we will and will not consider doing, is hard to create. It’s even harder to be clear with others as you widen the circle of people who need to make choices at their own levels. By the time you get to the “edges” of the organization, where big strategic shifts first make themselves felt, it is highly likely that the level of clarity that seemed so obvious in the boardroom has eroded completely. Instead, we see that strategies are still being informed by old assumptions, new strategies are trying to be crammed into old structures, and the incentive system in the organization has not been redesigned to bring people into alignment.

Part of the problem is that strategy can seem like a very intangible thing that few people in the organization actually “touch.” By using the Strategy Tools toolkits, the strategy of any organization can be made very concrete and people can build their confidence in making strategic choices without having to take huge amounts of time or risk.

Creating critical mass quickly

In an organization of any complexity, getting the majority of stakeholders on board with a new strategic direction is a daunting challenge that can, if the transformation is big enough, take years. Well, guess what – we can’t be thinking about years of implementation in a world that is moving at a pace of weeks – or even days. What the toolkit helps to do is bring a critical mass of people, quickly, to an understanding of the situation the organization is in and to a grasp of what needs to be done considering those circumstances.

Linking decisions to outcomes

The real world can be a harsh teacher. It is entirely possible to follow best practices, use good processes and do the right thing and then to find out that an external force beyond your control is decimating your business. That has, in fact, happened with any number of sectors that depend people being in close contact with strangers. Conversely, you can do everything wrong and be in the right place at the right time. There is, in other words, a lot of noise in the system around what actions lead to what results.

With the simulations, on the other hand, people can experiment and see the outcomes of their decisions immediately. They can experiment with multiple decision frameworks and learn quickly, without making the big bets in the real world.

Making an impact

In this report, you’ll be learning from strategy practitioners – people working in or with companies that need to reconsider their strategic directions. They’ll share which tools they used and why, how the experience went and what the results are. Along the way, you’ll see how the old world of strategy has given way to the new. And as we work our way through the aftermath of a global pandemic and economic disaster, these tools will be even more valuable.

Rita McGrath
Rita McGrath

Best-selling Author, Speaker,
Professor at Columbia Business School

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