#2 How strategy works

The world is plagued with strategists. 

A search on LinkedIn will produce millions of so-called strategists: from the brand strategist, digital strategist, content strategist, P.R strategist and of course, the most bizarre of all, the junior creative strategist. 

Among politicians, anything shrouded in mystery is deemed strategic.  In business circles, people go to break-away sessions and spend several days, mostly brainstorming or partying, and then come back with heaps of flip charts that are later converted into a fifty-page document with budgets, projections, targets and milestones –  all in the name of strategy.  Another common usage of strategy, particularly among academics, implies the means but which something is done.  For instance, an academic may talk about a strategy for preparing research questions, when they are implying how (or the means by which) one prepares research questions.

I found that this confusion around the definition of strategy warranted some analysis. My investigation started in 2019 and is captured in an essay I am still working on and therefore yet to release. What you will read today is an abridged version of that essay, focusing mainly on what strategy is, where it applies, and how to apply it. Importantly, we also discuss what strategy is not.

What is strategy?

I sat in a strategy review session in 2019. Among us was Mark Lamberti, a celebrated entrepreneur in South Africa and much of the world for having built the biggest retail business in Africa among many other accomplishments. He opened by asking, “How is strategy different from long-term planning.” Although I did not know it then, it is characteristic of Mark to raise questions and allow people to arrive at different versions of an answer.

A few weeks after the session I concluded that strategy is a plan to win. Simplistic as this might seem, there is quite a bit going on. For starters, winning suggests that there is an opponent whose aim is also to win and their doing so compromises can be at one’s cost. Also, consider planning suggests that is a conscious effort on the part of the strategist. In other words, one cannot regard oneself as doing strategy if there is no conscious effort to overcome an opponent.

What strategy is not

Suppose one is planning a trip to the moon. Complicated as this might be, there is no strategy required in going to the moon because it will not respond to the plan. However, getting into the ring and fighting someone requires strategy because the opponent will respond, which would require a change or adjustment of one’s plan. The former example meets one condition of strategy – planning. However, the latter example meets both i.e. planning and winning.

One might argue that successfully arriving on the moon and returning is the same as winning. This is an accomplishment, in my view, and different from winning because there is no adversary actively attacking a plan. Of course, one may extend the context of my example and add that the Soviet Union during the Cold War was also trying to get man to the moon. In that context, yes. The space race was a strategic endeavour because the Americans and Russians were adversaries.

I hope to clarify that strategy, in my view, only exists in a competitive environment where two or more adversaries intentionally pursue plans to win, and where that winning may translate into the loss of the other.

Developing Strategy

My opinion is that the best book on strategy is Sun Tzu’s Art of War. However, I also think it is the most misunderstood book because the context in which it was written – some 2000 years ago – is entirely different from our times. I wrote an 18-minute article on LinkedIn that you can read for an in-depth understanding of The Art of War.

Nevertheless, strategy is the consideration of factors that contribute towards winning with the least effort. Sun Tzu advised that there are five factors to consider, namely: Heaven, Earth, The Commander, Method & Discipline and Moral Law. A large part of my article on LinkedIn is dedicated to translating and modernising these terms. But the diagram below provides a glance.

Heaven and Earth (the top and the bottom layers) refer to temporary but significant conditions and things that hardly change respectively. These are both external factors that affect strategy. The middle layers refer to internal factors that contribute to one’s readiness to pursue a winning strategy. In other words, the first step towards developing strategy is appraising one’s advantages and disadvantages in each factor.

You can use the following questions to make a strategic assessment:

Heaven: Temporary but Significant Conditions

1. What time of the year is the best to pursue our plans? I run an events ticketing software and we make most of our money during the festive season. I also ran a school and realised quickly that our revenue for the year was determined in January when learners were enrolling. How does timing affect your venture?
2. What are the social conditions that will affect us? If you live in a place prone to crime, you might want to be cautious about setting up a stall.
3. How will the weather affect us? Going back to my events business. My clients are affected by the weather – if it rains their event may be ruined. As a strategist, how can you account for this possibility?

Earth: Terrain & Things That Hardly Change

• What terrain we are on? (is it wetlands, a desert, a forest, a mountain pass, grasslands). Note that you can use these as metaphors. E.g. a highly regulated trading environment is like a mountainous terrain. An environment where customers are hard to find is like a desert.
• Are there any laws or regulations we need to take into account? A few years ago the General Data Protection Regulation (GDPR) regulation was passed in Europe and many companies had to change how they handle data. One gaming company which generated good revenues online was caught off guard and migrating their software to comply with the new regulations would have been too expensive. So, they shut their doors.
• What is the lay of the land? What are the prevailing value propositions in the market and who are the leaders in each market?

The Leadership

• What is the strength of the leadership? Is the leader wise and decisive? Do they have the support of their people? What is the leader’s track record of the leader? This challenge is in full display in South Africa, where a former president is challenging the incumbent, leading to a prevailing narrative that the incumbent is weak.
• What is the leader’s personality like? Are they aggressive? Are they temperamental? Do they like showing off their possessions? Are they promiscuous? Although John F. Kennedy (a former American President) was popular, many reports reveal him as a playboy who also mistreated his wife on many occasions.
• What issues is the leader dealing with? Do they have personal issues, like health or financial challenges? Are they going through a divorce? Is there a personal crisis that will affect their decision-making?

Method and Discipline

• Is there order in the ranks? Are roles defined? Are there standard operating procedures? Are the rules of reward and punishment adhered to?
• Are people trained? Do people know what they have to do? Is there a regiment for training the team? Is there a plan for developing or acquiring skills in a particular direction?
• Are there sufficient tools? Do people have the right tools for trade? Do people know how to use their tools? Does the organisation/team use the most efficient tools?

Moral Law

• Is there chemistry? Do teammates trust work well together? This goes beyond trust and liking. In 2000, Real Madrid went on a spree to buy the best footballers in the world. At some point, they were regarded as the most decorated team in world football. However, following their victory in 2003, the club president sacked the coach, leading to over a dozen players leaving and some refused to play citing low salaries (compared to the stars who had now left).
• Is there faith in a bigger mission? Elon Musk’s mission to Mars is a case in point. Likewise, Enzo Ferrari’s mission was less about selling cars and more about building the best racing machines.
• Is there moral superiority? Does the mission represent a morally correct stance? Take the revolution currently unfolding in West African countries, where the French are driven out. I have seen many other tweets of people who claim that should the French retaliate, they will be the first to leave their countries and fight with the likes of Burkina Faso. These are signals of moral superiority.

Applying Strategy

A common view is that strategy is a long-term plan. What is wrong with this view? If we accept that a strategy exists in a competitive environment, then it follows that taking forever to respond to events is bad. Furthermore, failing to respond to emerging events (or the five factors discussed above) will equally lead to one’s demise. Strategy is therefore dynamic and is required whenever essential factors change or whenever one finds an opportunity to change them.

Regarding the catalogue of questions above, the point is not to answer them one by one. The point is the review them to find the influencing factors. For instance, we saw the attempted ousting of Sam Altman, the CEO of Open AI, on 17 November 2023. The next day after his removal by the board, 700 employees signed a petition, threatening to resign unless he was reinstated as CEO and the board resigned. How can we study this in terms of the five factors by Sun Tzu?

Firstly, one can consider the principles of Moral Law were at play. i.e. Altman was seen by his team as the legitimate custodian of the greater mission of bringing AI to the world. The board’s unjustified removal of Altman was a violation of this principle and therefore rejected. In addition, the board as the leadership (without Altman) was weak. Note that Sun Tzu warned that if the soldiers are strong and the officers weak, this will lead to insubordination, which is essentially what the petition was all about.

In the abovementioned example, two factors influenced the turn of events, Moral Law and Leadership.

The Complexity of Strategy

Strategy is not the mastery of tools.

For example, a creative director is not necessarily a strategist. A senior lawyer is not necessarily a strategist, simply because they understand the law. A software engineer, like myself, is not necessarily a strategy because they understand software. Strategy is a leap into systemic thinking; it is zooming out and, as if from a bird’s eye view, understanding the critical factors that affect the course of events.

How then does one understand these critical factors?

Sun Tzu’s last chapter, often forgotten, is about the use of spies. We no longer use the word spies today because it is considered dark and diabolical. But the mark of great strategists remains knowledge about things that others do not know. Strategists keenly understand the facts about events. Even better, they know other people’s plans, which is the same as an inkling of the future.

For example, in 1985 Coca-Cola planned to launch a new flavour. They had sent invites to journalists for a big press conference, of which the CEO of Pepsi caught wind. Through his network of spies, he learned that Coka-Cola was planning to launch a new flavour. Considering that in the previous months, Pepsis was running a blind taste test campaign confirming that consumers preferred Pepsi over Coke, the Pepsi CEO launched a scathing marketing attack. In the days preceding the Coke conference, there were full-page newspaper ads, claiming that Coke was changing its flavour because it had lost to Pepsi’s blind taste test. In addition, the CEO planted journalists at the conference to ask critical questions about Coke’s new sweeter flavour (like Pepsi). The result was an increase in market share by Pepsi.

Of course, the war between Pepsi and Coke rages on to this day and things have markedly changed since the 1985 campaign. Nevertheless, this is a modern example of the use of spies.

I cannot recall who said this but the rule is, “the cost of information is always lower than the cost of losing.” Therefore, one must always be willing to pay a premium for the best information. In some instances, the best information comes from universities, joining clubs, hiring experts, paying spies, or buying tools that provide insights into the trading environment.

In Sun Tzu’s words, cultivating a network of information is, “the sovereign’s most precious faculty.”

In Closing and Summary

Given how devastating the consequences of a failed business are, a leader who sends their team and resources into the market without understanding the factors that move events is sending them to their death. Such a leader is committing the most inhumane act according to The Art of War.

This is a very short version of a much more comprehensive body of work still under construction. I hope it served its purpose as an introduction to my view of strategy. How do you think about strategy? What is your approach? What do you regard as poor strategy?

I hope to hear from you.