The Art and Technique of Strategy

Even though the majority of decision-makers acknowledge the need to develop strategies, vision and knowledge of the market dynamics and context, not all of them address these issues, allowing present operations to guide the way. However, as mentioned in the World Economic Forum, companies need the courage to reimagine their strategies, prioritizing long-term economic success and environmental stewardship versus any short-term disruption.

If operations prevail, the course will always be the same. Given the enormous dynamism of the current environment, the course must be defined strategically and not simply adapted to the circumstances that arise.

There are analogies that help us generate this great vision, such as the ones we can extract from The Art of War, the masterpiece of the military strategist and philosopher Sun Tzu. In an integrated, complex and dynamic setting, companies and decision-makers must fight many and very diverse battles both internally and externally. Whether they win or lose them, they must prepare for the proximity and possibility of the next fight.

From this perspective, knowing the state of human, financial and technological resources, among others, becomes as critical as defining the course and goals: Where are we going? What do we want? What volume or margin of growth and/or sustainability? We must not forget that decision-making involves taking into account actions, reactions and consequences in the assessment of the strategy.

Therefore, it is very important to know if the company will be competing frontally or laterally (avoiding a direct confrontation), if it will take a position of defense or attack, and how the advance and analysis will be executed at each stage. We must first know the rival, its situation, its environment and the entire context of the competition, but without losing sight of knowing itself in terms of advantages, opportunities and state of resources, among other things. What could lead us (or the rival) to victory or defeat? Will this condition be permanent or temporary?

Performing a tactical, strategic and operational analysis is, undoubtedly, a compulsory step. Fortunately, there are different tools and methodologies available to us, ranging from traditional but current analyses – SWOT, CANVAS, PESTEL – to the possibility of using more sophisticated physical or abstract modeling techniques and tools, such as computational modeling with analytics and artificial intelligence.

With large volumes of data and the capacity not only to analyze them in their structure, but also to correlate them, see patterns, trends, etc., we can propose and test strategies, evaluating at all times what the goal will be, for example, of the return on investment (ROI). The search for focus and agility are crucial in the face of a complex and even chaotic reality that at times appears endogenously and at others exogenously.

In this sense, understanding the time horizon is essential, since there is a process of resource depletion and limitation. Consequently, we will be able to project and measure the effect of proposing certain processes, entering certain markets or launching products, with their respective causes and effects within a framework of innovation and evolution.

Under this premise, strategic alliances must be forged inside and outside organizations with a holistic understanding of the limitations that exist or may exist at each stage, as well as the corresponding economies of scale to be generated and the possible growth in scope.

Even disruptive businesses, which at one time had a high market value proposition and were highly revolutionary, are vulnerable to business cycles, especially in the current environment of technological and social change. Innovation and the vision of sustainability, in its different facets, underpin decision-making. For all these reasons, we must bear in mind that defining strategy is not only an art, but also a technique.

The author is director of EGADE Business School, site Guadalajara.

Article originally published in Expansión.