Three Ways To Make Strategy Theory More Relevant
“Getting published is what counts. But we struggle with relevance.”
Can you guess how many divisions there are in the Academy of Management? The number is: twenty-four, including one for Management Consulting and one for ‘Strategizing Activities & Practices’. After attended my first AoM conference in Chicago, I now know this (and so do you). For this I owe thanks to the participants who kindly showed me how things work in academia. In return, I promised to share my observations, and think about how scholars could connect more with us professionals. Or practitioners, as they like to call us. Well, here it is. To be clear, my ideas relate to ‘strategic management’ only, being the field that overlaps with my professional experience.
The doctors left the building?
Just so you know, this observation was already shared with several scholars, and it made them laugh, so I think I am safe. In a nutshell: given what (little) I know about strategy scholarship, the image comes to mind of doctors who – about seventy years ago – set out to improve the health and wellbeing of patients. Gradually, however, they shifted attention away from patient diagnosing, toward the identifying of syndromes. Apparently, this proved to be so rewarding that they decided to do two things: redefine being a doctor (‘it’s about analyzing healthcare data and writing papers’), and leave the hospital altogether.
An exaggeration of course! That said, I can even understand why scholars would shift toward the general. Like patients, businesses are unique to a very high degree, and it can be frustrating that they never perfectly fit any prescribed category. Moreover, being educated in the empirical tradition, strategy scholars naturally tend to care more about averages than about particulars. Nevertheless, I noticed most scholars acknowledge the problem of lacking relevance, and the metaphor fits the conference’s ‘Improving lives’ theme. Appropriate even, as it seems to urge scholars to focus – once more – on the health and wellbeing of individuals. If not, I guess they should have used ‘Improving live’.
Luckily, I met many scholars who still want to take on the challenges of what they call ‘case-specific diagnoses’. This is good news indeed. A focus on diagnosis will definitely make theory more relevant, and it is where theory and practice have a common interest: in shared, company-specific knowledge creation. After all, practitioners are always looking to act better, while scholarship is all about knowledge, and how can you act better when you do not know better? I am convinced the two can meet in the middle. It all depends on strategists asking the infamous ‘So what?’ questions, and on scholars trying to answer them. And I don’t mean answering them in general terms, for the past, but for specific companies, in specific environments, in the here and now.
In line with this thinking I share with you a few ideas on how strategy scholarship could become more relevant for practice. And in true management book style – irony intended – I do this in a three-step approach.
STEP 1: EVERYONE, FOR GOODNESS SAKE, BE CLEAR!
Dear scholars, I truly admire the rigor in your research! Please, I urge you to maintain it in the classroom and ignore those students and managers who are just there for the diploma. They can’t be helped. Instead, focus on the strategists who do want to know better, and who understand that gambling is not a skill. As a first step: resist adopting vague management jargon. Clarity is the gateway standard for new knowledge, and words like disruption, core, key, value, success, best practice, threat, opportunity, performance, agile, and even strategy itself, are not clear, no matter what people think. In reality – based on two decades of experience – jargon always prohibits true understanding. Therefore, in working with my clients, I reject any and all vague language, and it saves a lot of time. Naturally, we must still define important phenomena, but see what happens when you describe such phenomena in terms of implied actions or consequences, and potential cash flow effects. And more importantly; see what happens when you attempt to explicate which companies they are more likely to impact, in what environments, why, and when. It will clarify and enable purposeful group discussions in a way singular labels can never do.
Strategy needs strong arguments. For this we need clarity not just in words, but also in the message. “Competitors with overlapping geographical markets have a 13% higher chance of doing acquisitions” might seem a clear statement, but ask yourself: how could this improve decision making for a random company? Only the ability to think clearly allows for change. Without it, we are all left to speculate.
STEP 2: THINK CASH FLOW CONSEQUENCES
Yes, practitioners always enjoy discussing ‘winning strategies’ more than talking numbers. Maybe, however, scholars should remind them that something is only strategic to the extent there is uncertainty involved, and that this uncertainty is always cash flow uncertainty. Embracing this notion is essential for all of us because highlights the relative nature of value creation. This, in turn, helps us to realize that strategy is all about how companies (and their cash flows) are different, not about how they are the same. Cash flow uncertainty results from competition, and this is why comparative knowledge is what we look for in strategy. That is, unless you work for a statistical company, but I don’t think anyone does.
In practice, the value of this step is found in shared attempts to compare industries based on cash flow characteristics, and in imagining how any piece of knowledge, including all theoretical concepts and well-known tools like PESTEL, Business Canvas, Porter’s Five Forces and Blue Ocean Strategy, logically relate to a random company’s cash flows in the future.
STEP 3: ALWAYS IMAGINE THE DECISION
No one works in the past; no one also works for an industry. Strategic decisions are always made at the company level, and they are needed every day. That is why strategy is about continuous judgment and seeing every day as a decision situation. It also means our strategy work is not over until we obtain the knowledge that is of defining importance for our decisions. So, to do ourselves a favor, let’s imagine acting options from the very start. Adding such ingredients early in the discussion provides both scholars and practitioners with working hypotheses on what to decide in the end. This is guaranteed to make whatever comes next more relevant.
In conclusion, I realize we already know much of what I state here, and yes, I know there is an unwillingness among practitioners to listen to argument. However, if they are serious about increasing relevance, scholars should not make the same mistake. In the end, strategy is more a profession than a science, and the increasing rate of change in business simply demands we learn to analyze and understand what is happening today, to specific companies, given all we can know about the past.
I believe a solution is found in scholars and practitioners making a joint effort of improving our ‘case-specific diagnosing’ skills. Moreover, when scholars succeed in putting practitioners in a proper diagnosing mode – thus freeing them from an addiction to the latest potion-that-will-cure-anything – a lot is already won. This will offer new opportunities for integrative strategy teaching, and it will certainly make theory more relevant. For this we need all scholarly insights we can get that enable a thorough comparison of circumstances, industries and companies. It means rigor and scholarship remain absolutely essential. After all, if logic and insights based on past information are not used as input for decision making, then what is used? Data from the future….? I say, let’s do this.
