Military history

Chapter 35

Deliberate or Emergent

If many remedies are prescribed for an illness, you may be certain that the illness has no cure.

—Anton Chekhov, The Cherry Orchard

The question of whether senior management really could give a business strategic direction was turned into one of the more influential dichotomies in the field, that between deliberate or emergent strategies. Henry Mintzberg, who was responsible for the most sustained challenge to the so-called design model of strategy, stressed the possibility of a continuing, intelligent learning response to a changing environment. In a seminal article with James Waters, Mintzberg urged that instead of considering strategy as a single product, handed over to others for implementation, it should be understood as a “pattern in a stream of decisions.” On this basis they distinguished between “intended” and “realized” strategy. If what was realized was intended then this was “deliberate”; patterns that were realized despite of or in the absence of intentions were “emergent.”

A deliberate strategy depended on the intentions disseminated in an organization being precise, so there could be no doubt about what was desired, and realizable. There could be no interference from any external force, whether the market, politics, or technology. Such a totally benign environment, or at least one where the problems could be anticipated and controlled, would be a “tall order.” By contrast, a perfectly emergent strategy would demonstrate consistency in action in the absence of intention. While a total absence of intention was hard to imagine, the reference was to the idea of the environment imposing a pattern of decision, as if notional decision-takers could not help themselves in the face of the structural constraints and imperatives they faced. Innumerable small decisions taken throughout the organization could move it to an unanticipated place, to the surprise and possible consternation of senior management. In practice, the sharp distinction was between a strategy that involved central direction and control based on an original plan, a model which Mintzberg considered extremely unwise, and one that was about learning and adaption.1

The idea of organizations being able to stick to an original plan in the face of uncertainty was easy enough to challenge. In some respect, all strategies were bound to be emergent. There was always a previous history, which had shaped the original plan, and even a strategy that had emerged and seemed to be working would at some point have to be addressed, if only because a particular goal had been reached. Mintzberg’s main point therefore was about the need for the organization and its leadership to keep on learning. Just like the metis of ancient Greece, this learning, flexibility, and responsiveness would be particularly important when an environment was “too unstable or complex to comprehend, or too imposing to defy.” It was likely to require a degree of experimentation, or surrendering some control to those closest to situations who had the best information to develop realistic strategies. This was not to deny the importance of managers at times imposing their intentions and providing a sense of direction.

Mintzberg’s careful conclusion was that “strategy formation walks on two feet, one deliberate, the other emergent.” His heart, however, was clearly with the emergent, perhaps because it required more of the organization and was a surer test of its structures. An organization capable of benefiting from the experiences and insights of all its members should be in better shape than one where all the running had to be made by senior management. After the 2008 financial crisis, he bemoaned the consequences of “the depreciation in companies of community—people’s sense of belonging to and caring for something larger than themselves.” Human beings were social animals who could not “function effectively without a social system that is larger than ourselves.” Communities were “the social glue that binds us together for the greater good.” Admired companies managed to create this sense of community, and to this end he cited an article by the president of Pixar (an animated film production company) who attributed his studio’s success to its “vibrant community where talented people are loyal to one another and their collective work, everyone feels that they are part of something extraordinary, and their passion and accomplishments make the community a magnet for talented people coming out of schools or working at other places.”2 Instead of the celebrated form of heroic egocentric leadership, an alternative sort was needed that was “personally engaged in order to engage others, so that anyone and everyone can exercise initiative.” This required shedding “individualist behavior and many of its short-term measures in favor of practices that promote trust, engagement, and spontaneous collaboration aimed at sustainability.”3

Learning Organizations

Mintzberg was by no means unique in celebrating “learning organizations.” One justification was organizational efficiency: those with a commitment to knowledge, mechanisms for renewal, and openness to the outside world should perform more effectively. Another was that organizational life should be an uplifting social and collective experience, “a group of people working together to collectively enhance their capacities to create results that they truly care about.”4 As individuals did the learning, a firm which aspired to be a learning organization “must teach its employees how to learn, and it must reward them for success in learning.”5 These twin objectives reflected the ambition of the human relations school. If work became a positive experience, a source of personal fulfillment, it could serve the organization by also serving the individual, marrying humanism with bureaucratic efficiency. This was reflected in the rhetoric of Peters and Hamel. Charles Handy, a British management consultant and another enthusiast for this approach, described a learning organization as being about “curiosity, forgiveness, trust, togetherness.”6

One book took these ideas to the extreme, advocating Strategy without Design. Rational, deliberate, strategy-making directed at specific goals was naive, failing to grasp how actions reflected “invisible historical and cultural forces,” unaware of the impossibility of comprehending the whole or the foolishness of attempts to move entities around like chessboard pieces (the favorite image from the master strategist). In practice there were “too many contingencies, too many alternative limits, too many system influences, and the pursuit is too debilitating, for such an intellectualized picture ever to emerge fully.”7 By contrast Chia and Holt, acknowledging Liddell Hart, pointed to the “surprising efficacy of indirect action.” Action that is “oblique or deemed peripheral in relation to specific ends can often produce more dramatic and lasting effects than direct, focused action.”8 This alternative strategy was not only unintelligible but also discussed without reference to power, deal-making, coercion, or coalition construction. The result was a postmodern version of Tolstoy, with barely perceptible everyday gestures moving big organizations in ways that nobody intended but could still come out right at the end. Rather than success being attributed to “the pre-existence of a deliberately planned strategy,” it could be “traced indirectly as the cumulative effect of a whole plethora of coping actions initiated by a multitude of individuals, all seeking merely to respond constructively to the predicaments they find themselves in.” The wise strategist was advised to avoid the temptation to control and to go with the organizational flow. Chia and Holt called this “strategic blandness,” involving a “will-o’-the-wisp endurance that invites no opposition and assumes no domination; it exists only in the plenitude of as yet unrealized possibilities.” The aim should be “to shy away from once fervid ambition and stringently held commitments and, instead, nurture a curiosity whose meandering enquiry moves through infatuation, temperance and indifference with equal passion.”9As “sensemaking,” this left a lot to be desired. It was also some distance away from the more prosaic reality of organizational life for most people most of the time.

Management as Domination

Theories of strategy that lacked a theory of power were bound to mislead. With enthusiasm for organizations as learning and mutually supportive communities could come reluctance to address issues of power. If anything, organizational politics was deplored for its disruptive effects. Power plays by individuals promoting their own careers or just their pet projects generated bad feeling. This could be detrimental to overall efficiency as well as to morale. Power certainly could become an end in itself, a source of status and opportunities to boss others around. Nonetheless, it was also the case that without power it was hard to move organizations toward particular goals and little of value might be accomplished. With a grasp of power, bad decisions might be implemented too rigorously, but without such a grasp potentially good decisions might not be quite taken or followed through. Power structures within organizations, even more so than in states, would depend on personalities and culture, on social contacts as well as personnel contracts, on the reputation of particular units, and on the way budgets were put together and expenditures monitored. Addressing issues of power was not a strategy in itself but an unavoidable part of strategy. It meant considering how decisions might best be formed and implemented.

Jeffrey Pfeffer, one of the rare writers on organizations to make power his main focus, largely advised on the sources and exercise of power, emphasizing the importance of understanding the main players who need to be brought on board, acquiring positions on key committees, exercising a role over budgets and promotions, gaining allies and supporters, and learning how to frame issues to best advantage.10 A later book provided guidance on how to succeed with power in organizations, including advice to beware of the leadership literature, with its “prescriptions about following an inner compass, being truthful, letting inner feelings show, being modest and self-effacing, not behaving in a bullying or abusive way,” which explained how people wished the world to be rather than how it was.11

Critics of the more optimistic views of management picked up on their naïveté about power. Helen Armstrong described the “learning organization” as a “Machiavellian subterfuge” to encourage workers in their own exploitation. The “prevalence of insecure job markets, contract and part-time work, outsourcing and downsizing is hardly conducive to feelings of empowerment for most workers.”12 Even when there was evidence of shared meanings and values these were most likely to reflect the perspectives of senior management. What might be thought of as a benign culture could appear in a different light as a hegemonic project. Issues of power and ideology could not be avoided.13

This view formed part of a critical theory, influenced by postmodernism, that considered corporate strategy a natural target because it presented itself as a very modernist project, seeking to manipulate causes to achieve defined effects in a rational way. On this basis, strategy was an example of thinking that concealed more than it revealed in order to support established power structures. Individuals and what they said and did could not be understood outside of their social context, which was in turn reshaped by what they said and did. In one Foucault-inspired critique, reflecting a postmodern insurgency in British management schools, David Knights and Glenn Morgan challenged the idea of strategy as a set of rational techniques for managing complex businesses in a changing environment and instead proposed “focusing upon corporate strategy as a set of discourses and practices which transform managers and employees alike into subjects who secure their sense of purpose and reality by formulating, evaluating and conducting strategy.”14

I n this strategy was not a general approach to the problems of management but a specific corporate ideology. Thus they asked: “If strategy is so important, how did business manage to survive so long without ‘consciously’ having a concept of strategy?” Somewhat oddly, given Foucault’s own extensive references to strategy, they criticized early writers, such as Chandler, for imputing “strategic intent to the business world as if it existed prior to practitioners having subscribed explicitly to the discipline of strategy.” The crime, apparently, was for the academic to act as legislator, telling people what they really meant in a way which might be quite different from the actors’ “own discursive understanding of their actions.” This meant neglecting the interesting question of what people actually meant when they talked about strategy or whatever other descriptor they used for activity that an observer might consider to be strategic. Knights and Morgan argued that strategy only became important as the corporation had to explain what it was doing and why to internal and external audiences. It was about legitimizing the elite as much as deciding upon a course of action. The “discourse of corporate strategy” constituted “a field of knowledge and power which defines what the ‘real problems’ are within organizations and the parameters of the ‘real solutions’ to them.” It was a “technology of power,” enabling some actors while disabling others, and a source of “the problems it professes to resolve.” As such it might have been challenged by alternative discourses, for example, reflecting more instinctive and or less hierarchical approaches or else the indifference and cynicism prompted by top-down pronouncements. For the discourse of strategic management to have become so embedded was a “triumph.” It sustained and enhanced the prerogatives of management and gave them a sense of security, legitimized their exercise of power, identified those able to contribute to their discourse, and rationalized success and failure.

Stewart Clegg, Chris Carter, and Martin Kornberger, also representing the critical strand in British management theory, took this theme further. They argued that strategy of this type, especially in its manifestation as a corporate strategic plan, could be represented in Cartesian terms as an intelligent mind attempting to lead a dumb and submissive body or as a Nietzschean “will to power,” an attempt to control, predict, and dominate the future.15 This effort was, however, doomed. Strategic plans were often management fantasies, far exceeding organizational capabilities, with goals defined as if the future could be predicted. The effort was bound to fail because of the inevitable gaps between planning and implementation, means and ends, management and organization, order and disorder. Instead of managing these gaps, strategic planning actively generated and sustained them. The practice of strategic planning created “a system of divisions that constantly undermines and subverts the order that the strategic plan proposes.” It created an illusion of “an ordered and cosy realm, as a controllable inside, confronting a more or less chaotic outside, an exterior that constantly threatens its survival. Strategic planning reinforces and deepens this gap: it ignores the complexities and potentialities of ‘disorganization.’ ”

This critique was directed at something of a straw man. Possibly in earlier decades senior managers had really believed in such an orderly and controllable interior world, and had been sustained in this belief by this comforting and ambitious ideology, manifested in a detailed plan, based on ultra-rationalist assumptions, passed down through the hierarchy, and prescribing behavior on almost Taylorist lines. In terms of the grip of economic theory on business schools, the idea that real businesses might try to work this way was not wholly preposterous. It lingered on, in a mild form, with “the balanced scorecard.” Actual management practice, however, suggested a much greater sense of insecurity and uncertainty. Management strategy had become a much more capacious umbrella, including a range of approaches. Some managers might approximate to this caricature but others would be seeking to draw staff into decision-making and were well aware of the distorting effects of attempts at detailed plans with fixed targets.

Fads and Fashions

Mintzberg et al’s influential Strategy Safari identified ten different approaches to the challenge of strategy. Elsewhere the concern was that the disagreements had become so numerous and “fractious” that “scholars despaired that [they] could not even come up with a logically coherent definition of the field.”16 Another described strategy as being in a “pre-paradigmatic state.”17 Yet another saw the source of confusion as a multiplicity of strategies rather than a single paradigm. The word strategy was being attached to every new initiative:

Strategy has become a catchall term used to mean whatever one wants it to mean. Business magazines now have regular sections devoted to strategy, typically discussing how featured firms are dealing with distinct issues, such as customer service, joint ventures, branding or e-commerce. In turn, executives talk about their “service strategy,” their “joint venture strategy,” their “branding strategy” or whatever kind of strategy is on their minds at a particular moment.18

John Kay observed in a skeptical overview that: “Probably the commonest sense in which the word strategy is employed today is as a synonym for expensive.”19

The proliferation of strategies had been both vertical, in the range of subsidiary activities given the label, and horizontal, in the range of both procedural and substantive prescriptions for relating to the environment. The 1980s and 1990s involved a dizzying sequence of grand ideas, the appearance of gurus such as Peters and Hamel, and the rise and fall of BPR. As a result, a new field of research developed around the proliferation of management fashions and fads. Their frequency and variety, the surrounding hype, and their short half-life prompted a degree of wonder at why they were taken at all seriously.20 The management consumer was not confronted with a dominant paradigm but instead with cacophony and inconsistency, hints of unique keys to success that could be accessed by buying the book, attending the seminar, or—best of all—signing the consultancy contract. The ideas came thick and fast, tumbling over each other, the banal with the counterintuitive, genuine insights with implausible propositions, telling insights with dubious generalizations.

There were a variety of explanations for the phenomenon. Gurus helped the managers make sense of an uncertain world and provided a degree of predictability. They also offered an external authority to help legitimize what they were up to. Even the skeptics were anxious that they might be missing out on something, or that they might be perceived to be ignoring important developments. The succession of fads and fashions might have suggested something cynical and even random, but there was always the possibility of actual progress, as if some higher stage of management was really at hand. If so, the conscientious manager at least had to pay attention.21 Nor was it the case that all products were useless.22 Since Drucker first introduced management by objectives, certain techniques had been introduced that might once have been considered fads but were now considered generally helpful, such as SWOT analysis, the Boston matrix, or quality circles. Even with BPR the problem was in excessive radicalism, demanding too much at once and overstating the benefits. After the 1980s, it was the rare company that would not claim to be aspiring to excellence and quality, looking to encourage local initiative. One legacy was the regular insistence that senior managers were “passionate” about such matters.

The innovations most likely to endure were those that helped senior executives exert influence over the organization. Consider the example of the “balanced scorecard,” first introduced in a 1992 Harvard Business Review article by Robert Kaplan and David Norton. Financial returns, they argued, were an inadequate guide to how well a company was doing. A much broader and also realistic view of performance was required. They understood strategy as being a “set of hypotheses about cause and effect” and proposed that by measuring key effects it should be possible to demonstrate whether or not a strategy was being properly implemented. Goals and appropriate measures should be developed, covering finance, the views of customers, internal organization, and the ability to innovate. This assumed that “people will adopt whatever behaviors and take whatever actions are necessary to arrive at those goals.” The advantages of the balanced scorecard were that it was easy to understand, staff could be involved in its construction, and it improved the information available to management. The key performance indicators (KPIs) would reflect, however, what could be measured—not necessarily what was important—and then become ends in themselves. Staff would meet the goals as measured even if there was no obvious benefit to the organization. Managers who relied solely on monitoring the indicators could be swamped by data that was hard to interpret, fail to understand the complex interactions between the different measures, and still miss vital signs of dysfunction.23 Without being clear on what needs to be done and why, Stephen Bungay pointed out, “the fetishization of the metrics is a near certainty.” Though the scorecard could be a way of communicating intent, it was still fundamentally a control system.24

A study of sixteen management fashions from over five decades suggested that over time they had become “broader-based but shorter-lived and more difficult for upper management to implement.”25 When a particular management technique was adopted, few effects on organizational performance could be discerned. Nonetheless, adoption did influence corporate reputation and even executive pay. The research strengthened “previous arguments that firms do not necessarily choose the technologically best or most efficient techniques but, instead, seek external legitimacy by adopting widely accepted and approved practices.”25 Other research suggested that the new ideas that seemed to catch on were considered to be capturing “the zeitgeist or ‘spirit of the times.’ ”27 An analysis of the conceptual development of the word 2 trategy gathered ninety-one definitions for the period from 1962 to 2008. Looking at the way nouns were used, the authors observed an abrupt drop in planning, a rise and then steady decline in environment, with competition showing a steady increase. While the verb achieve was a constant, over time formulate gave way to relate.28

This interest in the role of fads and fashions in enterprises reflected awareness that strategy could not be considered as a product, something that in the form of an input might give direction to an organization or as an output that might order relations with the external environment, but as a continuing practice, the everyday work of many people (not just those at the top) within an organization. Strategy was not the property of organizations but something that people did. This led to the idea of “strategy as practice.” This was a natural continuation of the work of organizational sociologists and psychologists, such as Weick, with their interest in the disparate experiences and aspirations of individuals bound together by the demands of employment and developing social forms that were more or less creative or destructive, both for them and the broader purpose the organization was supposed to serve. It could bring together the macro-level of the institution with the micro-level of the individual with guidelines for observational research.29

One unfortunate consequence of the focus on strategy as practice was to encourage the use of the verb strategizing , meaning “to do strategy.” It also encouraged the idea that this was a ubiquitous activity, “to the extent that it is consequential for the strategic outcomes, directions, survival and competitive advantage of the firm.” This therefore involved multiple actors at all levels.30 Strategy “practitioners,” including managers and consultants, would draw on the established strategic “practices” particular to their organizations, turning these into a specific strategic “praxis” as they engaged with others to generate something called strategy, which in turn reshaped the organizational practices.31 This challenged the idea of strategy as a deliberate, top-down process that was the purview of senior management. As soon as questions of implementation came in, it was evident that micro-level decisions could influence the macro-level performance. This was at the heart of the familiar critique of the strategic planning model. That was not the same, however, as organizations effectively being managed from the bottom up. The decisions of senior managers, for better or worse, more or less influenced by what they understood to be the character of organizational practices, were still normally much more significant than those further down the hierarchy thanks to their reach and the resources at their disposal. Strategy as practice was important when it came to understanding organizations, but so too was strategy as power.

Back to the Narrative

What about strategy as “sensemaking”? If there was one persistent theme it was the attraction of a good story to help convey the most important points. This was evident in Taylor’s story of the hard-working Schmidt, Mayo’s of the Hawthorne experiment, or Barnard’s unemployed in New Jersey. It was behind the whole reliance on the case study method, underscoring the view that the best way to understand the challenges of management was to try to tell a tale around a specific set of circumstances. In much of the organizational literature, as a methodological contrast to rational actor theory, stories were elevated to a vital source of organizational communication and effectiveness.32 This could draw on psychological research which confirmed their importance as ways of explaining the past but also convincing people about future courses of action. With businesses no longer run on military lines and employees expecting to be persuaded rather than just instructed, managers were urged to use stories to help make their case. “Gone are the command- and-control days of executives managing by decree,” observed Jay Conger in 1998, for now businesses were run “largely by cross-functional teams of peers and populated by baby boomers and their Generation Y offspring, who show little tolerance for unquestioned authority.”33 “Stories are the latest fad to have hit the corporate communications industry,” observed columnist Lucy Kellaway. “Experts everywhere are waking up to the something that any child could tell them: that a story is easier to listen to and much easier to remember than a dry string of facts and propositions.”34

Stories made it possible to avoid abstractions, reduce complexity, and make vital points indirectly, stressing the importance of being alert to serendipitous opportunities, discontented staff, or the one small point that might ruin an otherwise brilliant campaign. Stories were to the fore in Weick’s account of sensemaking, allowing “the clarity achieved in one small area to be extended to and imposed on an adjacent area that is less orderly.”35 Peters and Waterman came to appreciate through successive briefings that their ideas worked with business audiences as stories but not as charts and diagrams. They described how their excellent companies were “unashamed collectors and tellers of stories . . . rich tapestries of anecdote, myth, and fairy tale.” Many business strategy books were essentially collections of stories, each intended to underline some general point.

Stories could come in all shapes and sizes: innocent and unstructured, as well as deliberate and purposeful; about technical specifications or perhaps the antics of a senior manager; elaborate or barely an anecdote; designed for regular re-telling or heard once and then forgotten; intended for a privileged few, and thus sharp and to the point, or knowingly prepared for multiple audiences, and so carefully ambiguous. Narratives could be found in minutes of meetings, presentations to clients, business plans, and even formulaic forms of analysis: in SWOT, analysis “opportunities” represented the “call,” whereas “threats” became antagonists. “As strengths are employed and weaknesses transformed, the protagonist becomes a hero.”

Eventually academics took notice, influenced by the “narrative turn,” so that stories and storytelling came to be identified not only as essential to effective leadership when formulating and implementing its strategy, but at the heart of all communication in an organization, from low-level grumbles and mid-level pep talks up to the high-level visions. Stories were told about senior managers to show how reasonable or out of touch they might be, of past events to show how the organization was once great or had an enduring culture, of the chance insight that led to an exciting new product or the poor calculation that led to a flop. By studying stories, the development and reinforcement of institutional cultures could be explored as well as the beliefs and assumptions that underpinned them. In the constant conversations that made up any organization, this culture could be changed and even subverted, as individuals on the basis of their own experiences told their own stories that qualified or challenged those of senior management, while senior management picked up cues that led them to reappraise key assumptions.36

The narrative field became a battleground. The political practices that we discussed in the last section, as parties sought to present themselves in the best possible light and their opponents in the worst, were evident in the business world as well. Rockefeller’s control of Standard Oil began to unravel as the trust’s dubious claims were undermined by a muckraking journalist. Not surprisingly, one of the greatest storytelling organizations of recent times, Walt Disney Studios, was adept at fabricating stories about its own history, “as artfully constructed and as carefully edited as their legendary characters.” Disney was acclaimed for the cartoon characters, such as Mickey Mouse, and the animation techniques. But this required denying others the credit they deserved. Disney’s creativity was played up and his authoritarianism played down. His studios were organized, not at all uniquely, on Taylorist, paternalistic lines, yet employees were referred to as part of a family, an image that was put under strain as union disputes broke out in the 1940s.37 This opened up the basic paradox of stories: they might have great explanatory power and be the most natural form of communication, but that could be at the expense of reinforcing explanations that suited those best able to control the means of communication while making it difficult to mount a challenge. Even the best and most liberating stories could be wide of the mark or else so ambiguous that the intended message was lost. The accomplished storyteller might derive an inspirational message from the mundane, but the inspiration could soon fade should the reality turn out to be more tedious.

The more academic business strategists tended to use their stories largely for illustration, selecting cases which made their points without always asking whether there were comparable cases where the outcomes had been quite different, or whether the same players would always get the same results by employing the approved strategic practices in slightly different circumstances. Sometimes the stories were not only selected carefully, but their telling was also highly contrived. We have seen how those of Taylor, Mayo, and Barnard were embellished. Weick’s favorite story involved an incident during military maneuvers in Switzerland, when a small unit had got lost in bitterly cold weather and was feared lost. The unit eventually returned and the young lieutenant in charge was asked how they had made their way back. Though they had assumed they would die, they had gotten back by means of a map one of the men had in his pocket by which they were able to get their bearings. When the map was examined, however, it turned out not to be a map of the Alps but of the Pyrenees.38 The strategic lesson was that with a map the unit calmed down and took action, which led to the conclusion that “when you are lost, any map will do!”39But luck would also have been required, as there are not many routes out of the Alps. Unfortunately, there was also no way of knowing whether the story was true or not. Weick received it via the Czech poet Miroslav Holub based on an anecdote told to him from the Second World War.40

Consider another of Mintzberg’s favorite stories, as narrated by Richard Pascale, who we last met working for McKinsey’s researching Japanese industrial success. Between 1958 and 1974, the American motorcycle market doubled but the British share shrank from 11 percent to 1 percent. Japan gained 87 percent of the new market, with Honda alone accounting for 43 percent. Pascale challenged the established explanation for Honda’s successful entry into the American market in 1959, which stressed issues of price and volume. A much more intriguing story that highlighted “miscalculation, serendipity, and organizational learning” had been missed. When Honda sent its marketing team to the United States, the intention had been to compete with midsized bikes, but Honda struggled to find dealers and was plagued by technical problems. Then they received inquiries about the small 50cc SuperCubs they were using for their own transport. So they sold them instead. The moral of the story, according to Pascale, was that over-rational explanations, assuming that what happened was intended, could result in missing the most important reasons for a marketing success. Rather than a determined, long-term perspective, he pointed to the ability of an organization to learn from experience and show agility in the face of unexpected opportunities.41 This lesson was picked up enthusiastically by Mintzberg, who referred to it regularly as he emphasized the importance of emergent strategies. He used it to show that the managers made every mistake in this case, except to learn when the market told them they were going wrong.42 He described Pascale’s article as the most influential in the management literature. Other writers have developed this “lesson” further to turn it into a story about how lowly employees can transform a strategy. Out of this single case study, a series of general propositions were developed about learning organizations.

This was not the only use made of the Honda story. This was one of the great Japanese success stories, from the company’s formation in 1948 to becoming the world’s largest manufacturer of motorcycles and an effective manufacturer of cars by 1964. It fascinated business strategists as a source of lessons for American companies. Andrew Mair warned, however, of the perils of extracting one episode, often imperfectly understood, and drawing large conclusions. For example, Honda had always intended to sell the SuperCub in the United States. This bike made up a quarter of those sent with the American team. The company had, however, supposed that it would first have to prove the worth of its bikes against larger models (which is why they put an emphasis on racing). The error was in not realizing that the American market was actually going to be similar to the Japanese. At any rate, sales collapsed in the late 1960s, and then Honda did have to rely on the larger bikes it had always expected would be the key to its American success. In practice, Honda’s strategy followed the experience already successfully followed in Japan—it was not a leap in the dark.43

Its experience up to this point had demonstrated the importance of ruthless management and robust organization. The postwar Japanese market for motorcycles was huge because public transport could barely cope and gasoline supplies were limited. Unlike other industrial sectors, this one was barely regulated, resulting in something of a Darwinian struggle for survival. During the 1950s there were some two hundred companies competing for this market in what was known as the “motorcycle wars.” This was a time when “doing business was a turbulent and hazardous pursuit involving all manner of lucrative opportunities and nasty surprises.”44 When the wars were over, four companies were left (Yamaha, Suzuki, Kawasaki, and Honda). Of these, Honda (formed in 1948) was the most prominent. Its success was due to a number of factors. It began with Soichiro Honda’s own engineering genius, combined with the financial acumen of his business manager, Takio Fujisawa. They had some wartime experience of mass production techniques and they understood the Toyota production model and the importance of supply chains. Their internal organization was very strong, with careful financial control and—particularly important—great effort put into developing their dealer network.

In the late 1950s, Honda overtook the previous domestic leader Tohatsu (which soon went bankrupt). As Honda then went on to car production, Yamaha caught up in market share and, believing its rival to be distracted, decided to build a brand new factory with the aim of becoming the market leader. Instead, Honda mounted a strong defense leading to a fierce battle between the two (known as the “H-Y war”) in 1981. Honda’s response was neither subtle nor indirect. According to Stalk, who made this clash a centerpiece of his analysis of Japanese competitiveness, this was launched with a war cry, “Yamaha wo tsubusu!” which he roughly translated as “We will crush, squash, butcher, slaughter, etc., Yamaha!” Honda cut prices and boosted advertising expenditures, and introduced a number of new products, so that having the most up-to-date motorcycle became a fashion necessity. Yamaha’s bikes were left looking “old, out-of-date, and unattractive” and demand for them dried up, leaving dealers stuck with old stock. Eventually Yamaha surrendered. Honda’s victory had come at a price but had deterred other competitors besides Yamaha. Stalk was most impressed by the way that Honda had accelerated its production cycles to head off the competition and made this the central lesson he drew for Americans. Although this was undoubtedly impressive, this focus played down the extent to which Honda’s strategy had been brutally attritional, with its price cuts and promotions.

Hamel and Prahalad also used Honda in 1994 as an example of exploiting core competence, mocking the experience curve, demonstrating great ambition and creativity in extracting maximum benefit from the mastery of the internal combustion engine (which allowed them to move successfully into a number of related production lines, from lawnmowers to tractors and marine engines), and enabling a challenge to Ferrari and Porsche in the high-end sports car market with the new NSX. They understood the needs of customers without following them slavishly. Yet as Mair reports, the NSX was a costly failure for Honda. This was not the result of only bad luck due to an appreciating currency undermining its competitiveness, but also the choice of market. The interest in sports cars was more a reflection of Honda’s culture than of its core competence and meant that it missed the developing American market in the 1990s for recreational vehicles and minivans. In other areas, a determination to make a technological breakthrough meant that they lacked a follow-on car when it was needed. More generally, the only serious diversity made possible by Honda’s engine technology was from motorcycles to cars. Other products remained a minor part of its portfolio. In fact, its strategy from the mid-1980s to the mid-1990s revealed a “narrow self-definition and a technological stubbornness” and so a lack of responsiveness to consumers.

Mair raised a number of basic methodological problems with these stories. They were often based on patchy research and focused on a particular period. All the way through Honda was treated as a great success, yet during the course of its history it had made a number of major errors and at times faced financial ruin. The failures were never deemed to be of interest. The business theorists who wanted to draw lessons might have asked why it never managed to dent Toyota’s dominance of the Japanese car market or explain why companies that followed similar strategies did not do as well. Insufficient attention was paid to the less glamorous but vital aspects of Honda’s approach, such as its operations and dealer management, perhaps equivalent to the disinterest in logistics often displayed by military strategists. There was always going to be more interest in sparks of genius than the tedious slog of administration. Mair criticized analysts seeing “only what they want to see” and of “acute one-sided reductionism.”45 He noted the tendencies toward polarization, as in deliberate/emergent and competence/ capabilities, as if it had to be one or the other. The data was aligned to fit the theory, while inconvenient material was ignored or fudged.

Back to Basics

Military strategy had been launched at a time when it was believed that there were basic principles which, if applied properly, could at least increase the probability of success, even if success could not be guaranteed. It then struggled as it became apparent that the application of military force was a more complicated and frustrating business than envisaged by Jomini in the first glow of Napoleon’s advances, especially as it proved hard to escape from the norm of decisive battle. Business strategy was the product of a similar bout of optimism of the mid-twentieth century, picking up on a general confidence in the possibilities of long-term planning, not only for nations but also for large companies, including the large American conglomerates. It also struggled as the limitations of the planning model became apparent, but unlike the military the managers did not have an agreed framework to provide coherence. As a result, business strategy lost its way, following many diverse paths and falling prey to temporary enthusiasms. There was a resulting tendency to prescriptive hyperbole. In a cautionary analysis, Phil Rosenzweig dismissed purveyors of business success stories for misleading their readers, sustaining the myth that there were reliable rules for success that once discovered could ensure the success of a business. He offered examples of sloppy thinking, by and large involving the standard muddle between correlation and causation, the tendency to explore explanations of success without worrying whether the same factors might be present in failures, and paying inadequate attention to the competition. The basic muddle he identified was the “halo effect,” the tendency to assign factors such as culture, leadership, and values, responsibility for a strong performance when they are really attributions that resulted from a strong performance.46

Skeptical figures, who had seen fads and fashions come and go, urged a return to the basics. John Kay warned that strategies could not be generic because they had to be based on distinctive capabilities. The aim therefore should not be to come up with grand designs that even the most totalitarian institution would struggle to realize. Companies lacked the knowledge to construct the plans and the power to implement them. Instead of the “illusion of control” and the belief that success would result from superior vision and will, he urged a resource-based approach based on the work of Edith Penrose in the 1950s. The task was to find the best fit between the internal capabilities of the firm and its external environment. The place to start was with an understanding of a company’s actual and possible position in the marketplace, as well as the distinctive capabilities it already had rather than those it would like to have.47

Positioning documents might describe desirable end points—places to be in five years’ time—but the starting point would have to be the current situation. While there might be a temperamental preference for strategies that outsmarted competitors rather than relied on superior capacity, much would depend on the problem that was to be solved. Thus Stephen Bungay urged avoiding the pathologies of central control, with constant demands for extra information and reduced opportunities for individual initiative. His advice was to concentrate on what mattered, not to attempt to “plan beyond the circumstances you can foresee,” and formulate strategy as intent and with a simple message, encouraging people to adapt their actions to circumstances.48 A book based on the successful experience of Alan Laffley in charge of Proctor & Gamble (P&G), written with his chief consultant Roger Martin, considered strategy in terms of “making specific choices to win in the marketplace.” The questions behind a winning strategy, they advised, were about describing a winning aspiration, where to play, how to win, the capabilities and management systems that needed to be in place. The book explained how this was done at P&G, but also commented on the need to avoid “strategic traps.” The basic source of error was failing to set real priorities, traps described as “do-it-all,” “something-for-everyone,” or as Waterloo (starting with multiple competitors on multiple fronts). Other errors were described as Don Quixote, attacking the strongest competitor first; “program of the month,” which meant going for the latest fashion; and last, “dreams that never come true.”49

Similarly, Richard Rumelt described good strategy as starting with a diagnosis that defined or explained the nature of the challenge, thus simplifying the complexity of reality—which could be overwhelming—by identifying the most critical aspects of the current situation. This would facilitate a guiding policy for dealing with the challenge and a set of coherent actions designed to carry out the guiding policy. Rumelt recognized that the problem could be internal as well as external, found in both its routines and bureaucratic interests, and that rather than reaching for the sky the best course at times was to set proximate objectives, close enough at hand to be feasible.

Many writers on strategy seem to suggest that the more dynamic the situation, the farther ahead a leader must look. This is illogical. The more dynamic the situation, the poorer your foresight will be. Therefore, the more uncertain and dynamic the situation, the more proximate a strategic objective must be.50

Rumelt also warned of the dangers of bad strategy, especially the quality he described simply as “fluff’ or a “form of gibberish masquerading as strategic concepts or arguments,” but also for failing to define the challenge to be addressed, mistaking goals for strategy, stating a desire without a means for achieving it, and setting objectives without considering their practicability.51 He warned against senior management setting impossible targets and explaining how anything can be achieved with sufficient drive and will (though in practice they were unlikely to be able to manage more than a few challenges at any one time), seeking consensus between incompatible visions instead of making a definitive choice, and attempting to inspire by buzzwords (“charisma in a can”) instead of natural, personal language. “Bad strategy flourishes,” Rumelt suggested, “because it floats above analysis, logic, and choice, held aloft by the hope that one can avoid dealing with these tricky fundamentals and the difficulties of mastering them.”52

Business strategy, like military and revolutionary strategy, could suffer from its own heroic myths. It acquired an unrealistically elevated status as the ingredient that could make all the difference between success and failure. Master strategists with master strategies were regularly identified to be admired and emulated: “captains of industry” keeping their organizations stable and set on a steady course; financial wizards taking aggressive action against all inefficiencies and so extracting the last ounce of shareholder value from a business; hard competitors scouring the marketplace for the most advantageous position; soft revolutionaries recognizing the creative potential of a committed workforce; innovative designers transforming a market with a truly unique product. Management theorists and gurus promoted their own preferred heroes. There were inevitably some managers who matched at least one of these types, but what worked in one situation could go wrong in another. Too often, the individuals and companies who soared one moment seemed to come crashing down the next. The hype that accompanied the promotion of successive strategic fashions exaggerated the importance of the enlightened manager and played down the importance of chance and circumstances in explaining success.

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