Don’t plan for the future, plan for the past

Strategy is traditionally seen as a forward-looking exercise.

This stands to reason since, in the words of my pal Robin Bonn, every strategy is essentially a “bet” that a certain course of action will work out in the future.  We think that X is going to happen and therefore we are going to do Y thing in order to exploit that.

That, I would say, is the traditional definition.

However, this definition has one pretty massive problem:

It asks you to predict the future.

It demands that you look in your crystal ball, paint a picture of what conditions will be in 1, 5, 10 years’ time, and plan accordingly.  And this isn’t great because – as we are constantly reminded – predicting the future is something humans cannot do.

Even in cases where it appears someone has successfully predicted the future, and strategised accordingly, generally it’s an illusion.

Conventional wisdom assumes that Toyota strategised their successful invasion of the USA in the early 80s.  They predicted that the American market would start to favour smaller, more economical cars, answered that need, and the rest is history.  However, in reality the driving force for their growth was the completely unpredictable oil crisis of the mid-70s.  This made traditional American cars far too expensive to run, causing drivers to seek out cheaper alternatives.  The fact that Toyota and other Japanese manufacturers fit the bill wasn’t because they had predicted the crisis – it was because gas prices were already high in Japan, causing them to make economical cars as a matter of course.

In other words?  What looked like master strategising was closer to dumb luck.

Considering this, one could be forgiven for questioning whether there’s any point in strategy at all.  If we can’t predict the future aren’t we better off simply hedging our bets and remaining agile and responsive to whatever comes around the corner?

Certainly, this is the viewpoint some organisations take, but I think there’s a better third option:

Strategy as a backward-looking exercise.

Backward-looking strategy rejects any attempt to predict the future, and instead looks back on the history of the company in order to understand what has worked for it in the past.  Once fully understood, this becomes the strategic focus of the business, propelling it into the future come what may.

With the backward-looking mindset, strategy ceases to be a speculative exercise, and instead becomes one of enhanced focus and attack.

The reason this is generally successful is that most markets don’t change dramatically from one year to the next.  There are exceptions to this of course.  The format wars of consumer technology through the 80s, 90s, and 00s, fought between concepts like VHS, Betamax, DVD, Minidisc, etc. was genuinely turbulent, with each option having to be wildly speculative in their strategic plays.  But such market conditions are extremely rare.  At most you are probably dealing with some vague and slowly emerging consumer trends like “ethical” or “plant based” or “data led” (ugh) – and even in these cases adherence to these trends is entirely optional.  The brands who reject them are as likely to thrive as die.

When you think about it this point is bloody obvious, since many businesses have never meaningfully changed their strategies.  How they deliver on them might evolve a bit, but the core market position remains relatively untouched.  Good strategies – especially in consumer markets – are often evergreen.  The dominant brands 10 years ago in most sectors remain amongst the dominant brands today.  Prediction, schmediction.

In summary then, get your head out of the tea leaves.  Businesses that try to design themselves for the world of tomorrow have extremely low hit rates.  Even when they’re “right” (in the same way a stopped clock is right twice per day), they tend to fail due to being “ahead of their time”.  Or if they do manage to exploit an unexpected trend, they do it entirely accidentally – more as a result of an absence of strategy than anything else.

Great strategies are typically great today – which means they were probably great yesterday too.  And happily, unlike the future, we know what yesterday looks like.

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