Strategy Masters Series: The DNA of strategy.
If you want to do any kind of strategy better, you first have to define it better.
Strategy as theory
First things first, to think about strategy properly, you need to define what you actually mean by ‘strategy’, for that you need to realise a simple truth:
Strategy is a theory you have about the answer to a particular situation.
It’s a strong hunch, a firm prediction about a certain condition, what you are going to do to change it and why you are uniquely placed to do that thing.
Because it’s a theory, it lives and dies through experiments that explore it.
You can test if it is right.
Because it’s a theory, you are always looking for ways to strengthen it, to sense where it is wrong.
A strategy evolves, it is always in beta.
Key questions to ask
It’s the ultimate strategic frame, it means we can then ask some basic questions of any condition we want or need to change…
What’s our theory about how we tackle this situation?
What is that theory based on?
(facts, opinions, expertise, experience, predictions)
Why is it different, better than another theory?
And, is it different enough? (more on this later).
How do we test that theory? What experiments can we run? How do we measure the results?
Just by exploring, answering these, you are going to be further down the track on strategy than most.
Theory born of two convicitons
If theory is our frame, what is it built from?
Convictions.
Why? To have a conviction, you need to believe your theory is right.
It’s a combination of facts, foresight, belief and practicality.
It has energy, it has a point of view, it primes you for action, it knows it can deliver what is needed.
This is probably the place where my thinking has evolved the most.
For a long while I had this naive notion that you could capture everything that a theory, and therefore a strategy, needed to be in one pithy sentence.
But I realised that it needed to have two parts, one more emotional and one more practical, and therefore you need two convictions:
Core and Functional.
Core Conviction - Lights the fire
The first is a ‘Core' Conviction:
A clear, simple point of view on the foundations of the answer.
It needs to be as ambitious as it is uniquely doable by you.
Here lies the Theories emotional depth: It must light the fire.
To do that it must have three qualities:
Insight-generate.
Story-launch.
Emotion-induce.
Let’s have a deeper look at what these are:
Insight-generates
Does is re-frame something for you about the situation, the challenge, the opportunity, the solution? Does it cause a re-appraisal of something you thought you knew? (the ‘Ah yes, that’s it’, or ‘I hadn’t thought about it like that’).
Story-launches
You naturally go places with it, imagine what that could mean. We all know what this feels like, it’s a very good sign.
Emotion-induce
It moves you in some way, this can be from intrigue through to ‘Hell yeah, sign me up!’. You feel something, you lean in.
To use an example from the Corporate strategy space, not known for its emotion, Disney’s Core Conviction might look like this:
We create happiness through magical experiences by speaking not just to children, but to the child in us all.
It does all three: Insight-generates + Story-launches +Emotion-induces.
Functional Conviction - Lights the way
If the Core Conviction lights the fire, we also need a corresponding conviction that lights the way, defining how it is delivered, in the day to day, it is functional.
In the key capabilities, expertise and activities.
In how those compliment and reinforce each other.
To create a something that is difficult to imitate.
Here lies the theories functional depth, breadth and reach.
Let’s use Disney’s Corporate Theory* again, it’s functional conviction might look like this:
We can sustain value-creating growth through an unrivaled capability in family-friendly animated and live-action films and then create a reinforcing system with other entertainment assets that both support and draw value from the characters and images in those films.
It does all three: Defines key capabilities & activities, reinforcing, compounding, rare, difficult to imitate.
This Functional conviction is best visualised by Walt Disney’s now famous original diagram below.
It’s what Michael Porter would describe as an ‘Activity system’, which creates a virtuous, complimentary, reinforcing interactions. Because of one, the others are better = harder to replicate.
Challenge your theory before someone else does it for you
These two convictions shape, define everything else, they are your Theory.
This also gives you angles to challenge it, before someone else does it for you, and they will.
Where doesn’t it work? And are these important?
Are there alternative theories that are better?
Is the theory based on any assumptions that may no longer be right? How do we know?
How do we test them?
Depending on the situation, this can be a regular check in’s, or ideally it can be built into the theory itself, which brings us to the last part…
Strategy is always in beta: Sense - Shape - Seize
Because a theory is always in beta, it must be able to evolve.
It must be sure it is right, but also aware that it might not be.
For that it needs to do three things*:
Sense: changes that could be important. This can be in the big stuff, where the theory itself is challenged, or tweaks to optimise it.
Shape: the ability to take the insights sensed and create an appropriate response.
Seize: and do so in a timely fashion, before an opportunity is missed (by time passing, or by someone or something else) or a challenge unsolved.
The DNA of strategy
So, we have the basic building blocks of strategy: we have our theory, built of two core convictions, and we have a system around it designed to test and evolve that theory as and when needed.
The next chapter in the Strategy Masters Series will cover the fuel behind great strategic thinking - creativity and the psychological empowerment it requires.
*Built on Todd Zenger’s definition from his seminal 2013 paper ‘What Is the Theory of Your Firm?’.
*Felin and Powell’s brilliant Three S’s.