According to Wikipedia, the strategic management discipline originated in the 1950s and 1960s. Since then a lot of good and interesting books have been written. People like Peter Drucker, Ichak Adizes and others have become classical theoreticians of the matter, studying and generalizing the negative and positive experience of thousands of companies. Millions of managers all over the globe use their ideas in their day-to-day routine.
But lately some authoritative and respectable business magazines, such as Harvard Business Review, have started to publish articles criticizing the classical strategic approach. They claim that traditional strategic methods make a company too rigid, too inflexible. They say that managers tend to develop a long-term strategy and to follow it even if the situation outside the window has changed. That the world is changing too fast for long-term plans.
On the one hand it is true. The technological world is changing really fast. It’s hard to believe that the first iPhone was only presented in 2007 – it seems that smartphones have been with us forever. Just twenty years ago we couldn’t dream about fast Internet connections available almost everywhere and letting us watch video online. Contemporary smartphones have more rapid and high-capacity processors than some personal computers had even ten years back. Some people assert that very soon we will be able to print almost everything we need online, using 3D technology. Others say about “uberization” of the entire economy, about new approaches and business models that will change our style of life. We see flexible or curved screens of mobile phones, we see Google glasses and augmented reality. We live in a completely different world from the one our parents lived in – it seems everything has become faster, more accessible and cheaper. And we do understand that our children will also live in a world different from ours.
Does it mean that we don’t need good old strategic management anymore? I don’t think so.
First of all our lives are not only about smartphones or augmented reality. We need to eat three times a day, we have to buy new clothes and it doesn’t matter that we can buy them online – somebody should produce our clothes and deliver them to our house (or to a store where we will buy them offline). Besides we don’t really believe in global “uberization” (read more in an additional chapter of this book).
But anyway, even if the world is really changing very fast, it doesn’t save us the trouble of long-term planning. Elon Musk founded SpaceX in 2002 and Tesla Motors in 2003, he has invested millions of dollars in both projects, and he couldn’t do it without long-term thinking. If you, for example, would like to buy new equipment in order to increase the capacity of your production facility or to improve the quality if your products, and you plan to invest a lot of money in it, how can you do it without at least three year business plan? Even nowadays it takes several years for a car manufacturer to create and launch a new model to the market – how can one do it without strategy?
The vast majority of business decisions are long-term. Decided to move your factory to Asia or to get it back home? Decided to train your employees to improve their business skills? Decided to redesign your core product? To launch a new online shop? You won’t see the consequences of these decisions soon so they are long-term decisions. And long-term decisions can’t be made without a long-term plan. Without a strategy.
Strategy is the only document connecting different parts of business. Let’s imagine that you had an innovative idea and decided to create a new product. But you know that the whole process will take a lot of time – you will need to upgrade your production facility, you will need to build a new warehouse, to install new software and so on.
What do you need to implement your plans?
You need your marketers to deeply understand your customers’ needs and adjust your product according to them.
You need your chief of production to plan and to perform all necessary changes – to choose new equipment, to order it, to install it, to test it and so on.
You need your financial guys to write a business plan, to negotiate with banks and investors.
You need your chief of logistics to get his infrastructure prepared for the new challenge.
You need your HR department to train your staff or to hire new people
You need your IT guys to provide corresponding and substantial software for the new tasks.
And you need all of them working synchronously and well coordinately. To do so you need a common plan. In other words, you need strategy.
Strategy is the only document covering all the aspects of a company’s life. It is the only plan taking into account all the tasks you need to execute in order to reach your general objectives. It is the only plan where performance meets finances, where IT meets HR, where marketing meets factory.
But what should you do if the world is changing all the time, and changing rapidly? What should you do to stay flexible enough to meet your customer’s fickle expectations? The answer is easy – you need a strategy, but you have to revise it quite often.
Of course you can’t revise your global strategy every month. You can’t cancel some plans – for instance you can’t stop building a new factory if a new brilliant idea has just crossed your mind. But you may adjust your conception from time to time, at least once a year. Sometimes you have to do it even more often.
A large company without a strategy looks like a big ship moving without a course. But even if a captain knows the course but he’s the only one who does so, it is very hard for him to rule the crew – especially if the crew is large. Strategy is the best (and, actually, the only) way not only to lay the course but also to translate it to your team.
So in our humble opinion the strategic management tools are still topical even in our fast-changing world. Read the classical strategic books – they are useful.