One of the concerns that we have as we begin to investigate strategy, and strategy in the 21st century, is how we might avoid mistakes of the past. And in fact, there are quite a lot of mistakes of the past in the practice of strategy. But let's walk through a few of the issues that arose in the history of strategy with an eye to avoiding the mistakes of the past. First of all, it's important to understand and to see the relationships between strategy making, especially as it evolved in the 60s and 70s, and strategy in warfare. There's been a long standing connection between the way people talk about strategy in business and the way people talk about strategy in war. Sun Tzu, it's called The Art of War, it was written in its final form around 500 BC. There's a considerable debate about whether Sun Tzu was a real person, or whether he's just the name that is placed on a book that was created by the collective wisdom of a lot of people and a lot of generals over time. But regardless, it does present a coherent version of how one should do strategy. Most of what Sun Tzu says about strategy is in the form of what we might call maxims, or principles. And so I thought we would just sample some of those because we're gonna see relationships between those and business strategy. So for example, Sun Tzu says, appear weak when you are strong, and strong when you are weak. This is very much related to the idea of strategy as a ploy. We've seen this idea in the last module. Sun Tzu also says, victorious warriors win first, then go to war, while defeated warriors go to war first, then seek to win. Now this should sound very familiar as well. This says plan first, then implement. It says get the plan completely together and coherent before you go into the implementation phase. That's strategy as a plan, we've talked about that too. Sun Tzu also says there are roads which must not be followed, armies which must not be attacked, towns which must not be besieged, positions which must not be contested. Now this is very similar to Michael Porter's idea of strategy as position. That there are some positions one can occupy in a strategy landscape that are more defensible and less defensible. We might also say that there are roads which must be followed, there are armies which must be attacked, and towns which must be besieged. But this is very much the idea of strategy as position. Another thing that Sun Tzu says is that in war there are no constant conditions. And this reminds us of the idea from business strategy about fit, about how the internal capabilities of the firm need to be fitted to the external environment. Another scholar on battlefield strategy that's been very influential and to whom we can trace lines back from business strategy is Clausewitz. He wrote a book in 1832 called, On War. Also, he wrote many principles, or people have extracted principles from his work, and we're gonna mention a few of those here. Clausewitz argues for defined, decisive, obtainable objectives. He says that you can't just be on defense, that offensive action is necessary. He says you must try to concentrate superior power for decisive purpose. So bring all of your resources together in a way that overwhelms your opponents. He also says it's important to conserve resources through measured allocation of available power. In other words, be efficient, don't use up resources needlessly. He also says flexible maneuvering can put the enemy at disadvantage, and that a single commander with authority needs to be in charge in directing an unambiguous hierarchy. He argues in favor of protecting yourself from surprise and, conversely, of trying to produce surprise for your rivals, to catch your enemies unprepared. And finally, he argues for simple and direct plans to minimize confusion and mistake. Well, business strategy as a distinct, formal subject, arguably arose in the 1960s, around the mid 1960s. And it arose in a familiar format that you'll probably see in more detail in the second course in this business specialization. Something called SWOT analysis, S-W-O-T. And the basic idea here is that you need to compose a plan of action that establishes a good fit between the internal capabilities of your company and the external possibilities that are presented to your company. So what does SWOT mean? Well, in SWOT you need to do an internal assessment, what are your companies strengths and weaknesses? That's the S and the W from SWOT. You need to do an external assessment, what are the opportunities and threats that exist in the environment? That's the O and the T in SWOT. Put those together you get strengths, weaknesses, opportunities, and threats and you get SWOT. You do a good job of that, then you will succeed in business strategy. So how do we choose between alternative strategies? Well, the strategic management theorist Rumelt has given us some ideas here, How to Evaluate a Strategy. He says that the strategy that you choose needs to be consistent, needs to contain no inconsistency in goals and policies. It also needs to be consonant. It has to be a reasonable, or effective, or adaptive response to the external environment. And also to the changes that are ongoing in that environment. It must provide advantage, that's the third thing that a strategy needs to do. It must create and maintain competitive advantage. Feasibility, it must not require resources that exceed those available, and it must not create problems that are insurmountable or unsolvable. So if you have a strategy that excels in consistency, consonance, advantage, and feasibility, that's the best one to choose according to Rumelt. What became apparent before too long, is that there were some problems with this approach to practicing strategy. So what are some of the problems that people started to identify really quite early? Well first, there's an assumption in this approach to strategy that strategy making is a deliberate process based on reason and conscious thought. That is, it didn't really leave room for things to happen accidentally or opportunistically. Strategy is a deliberate process, it's based on reason, it's based on things that we're thinking about consciously. And as we would see later, that isn't always a great assumption. It also says that strategy should be formulated in advance and fully formed before it's implemented. This is very much like Sun Tzu's argument that you have to win before the battle. You have to get the full blown plan in place before you do anything. And as we will see, that turned out to be not such a great idea as well. Another idea that was implicit, or inherent in this idea, is that there was a chief strategist, generally the CEO. Or at most, it was the CEO, and a small senior team. This is very similar to Clausewitz's idea that there should be a single commander unambiguously controlling a hierarchy. Another thing that was a part of this approach was the idea that strategy has to be tailored to the individual situation. This is very much like Sun Tzu arguing that there are no constant conditions in warfare. And finally, and this'll be familiar too, from Clausewitz, the argument in this approach is that we must keep strategy simple and direct. So that's it. That's the origins of strategy, the origins in warfare. The origins in the early days of business strategy in the 60s and 70s with SWOT analysis and variations on SWOT analysis. As I've hinted, not all of that went well. We'll see in the next lesson when we take on some additional ideas that some of the assumptions we've just been talking about are also shared by those approaches. And that there will be problems that arise as a result of this. So let's take a look now in the next lesson at the next chapter in the development of strategy, which is also, ultimately, a sad chapter. We'll be right back.
