Warning: this one gets a bit “deep”… but you might still get a kick out of it, let’s see.
As many of you know, I never had any formal strategy training.
Heck, until fairly recently, I’d never even read a book about it. In fact I think I had the misguided arrogance to set up a “strategy consultancy” without having done so – a decision I now cringe at, but still, it worked out OK in the end.
In light of this you may well wonder where I got my “knowledge” from. How I’m able to keep on churning out all of this content, despite never having consumed any in the first place.
Well, there are three explanations, all a bit true:
- Real world experience
- Being good at bullshitting
- A hidden universal theory
The first two of these are pretty self-explanatory, but it’s actually the third I want to speak about today. You see the fact is that rather than learning all the formal “elements” of strategy from books, courses, and the like, my approach was kind of the reverse:
I inferred these elements from one single root idea
I drew this root idea from other sources, but what’s amazing about it is that the practical “strategic lessons” it teaches you correspond almost exactly with classical strategy theory – the kind of stuff you’d read in HBR or learn on an MBA course.
It’s just another way of accessing that material – and in some sense it’s more powerful, since when you grasp it you can always refer back to it to “fill in the blanks” of your understanding.
So what is this magical theory of which I speak?
Let’s get into it.
The theory of “systemic fit”
The underlying idea that informs all strategic principles is not to be found in business at all, but rather in nature.
In nature we can see that every discrete thing that exists is simultaneously a “whole”, made up of smaller things, and also a “part” of a larger thing. For instance.
An atom is part of a cell.
A cell is part of an organ.
An organ is part of a body.
A body is part of an ecosystem.
Etc.
See what I mean? A kind of endless stack, up and down.
Now, the thing about each one of these things (each whole/part) is that they are not independent. In fact they are intensely interdependent – they each have jobs, and their job is defined by the needs of the larger whole of which they are a part, and their relationship to the other parts around them.
For example a liver has to work as part of a “team” with the other things at its level (i.e. other organs, the heart, the stomach, etc.), in order to serve the thing above it, a body (let’s say a deer for sake of illustration). The deer in turn has to behave in a certain way in “partnership” with other species serve the ecosystem of which it is a part. It has to eat grass, poop, and occasionally be eaten by wolves etc.
What happens if something in this stack doesn’t do what it’s supposed to do?
Well, it damages both itself, and the whole that it’s a part of. For example a malfunctioning liver is liable to kill the body, and thus also itself and the other organs around it.
But if it works in harmony with the other organs? Then the body will thrive, and so too will it.
So what the hell does this have to do with strategy?
Well, these systemic relationships aren’t just the stuff of biology textbooks – they are universal. This is simply how the dynamics of complex systems are arranged, anywhere and everywhere; and it doesn’t matter whether that system is natural, or man-made.
For example, you could replace the illustration I made above with the following:
An employee is part of a team.
A team is part of a division.
A division is part of a company.
A company is part of a market.
All the same dynamics apply – with the role of each piece being determined by the needs of the whole above it.
Now if you buy this line of thinking, it has some very interesting implications, especially for strategy. You see what this says is that companies and their competitors are not in opposition, but are actually in collaboration for the purposes of creating a healthy market. And not only that, their respective roles must be complementary – in exactly the same way that the liver, the heart, and the stomach are complementary within their system.
Get the gist?
This immediately leads us to a whole bunch of practical strategy implications, e.g.:
- Businesses must be different from their competitors, and not “double up” in their functions, because this would be the equivalent of having “two livers”
- Businesses must define their offers one the basis of balancing with competitors in order to create the most rounded and healthy market possible – i.e. the one with the optimal diverse blend of options for customers
- If a business tries to “bulldoze” the market with capital and take share by brute force (e.g. like Casper mattresses did), it will not only damage the market and its competitors, but it will also damage itself
All of this is why I constantly refer to strategy as a yin-yang balancing act, where the characteristics of each company, properly aligned, can even be beneficial to the others around it.
(NB it’s worth noting that just like in a natural system everything is a state of constant churn, so offers might go “extinct” over time just as species do if they fail to adapt)
Can you see then how all you ever really have to do, is serve these dynamics?
How if you are true to them, every decision will take you down the the path of effective strategy – even if you know nothing about “strategy” per se?
The whole book Blue Ocean Strategy, if you’ve read that, is simply a retread of this logic – although the authors never refer to it. It’s the same thing just shoved into business-speak form.
So too was my TEDx talk from a few years ago – where I illustrated the same points but with various classic strategy examples.
It all fits. It’s all so elegant.
Now look, I’m sure there are various edge cases where the model has to be adapted. I’m not saying that every single important business-specific strategy principle can be inferred from this.
But I do think it’s a pretty solid start.
And if you can zoom out far enough to see things this way, you’re unlikely to ever go too far wrong.
