Why we choose the wrong approach to strategy

Companies should use distinctly different approaches to the development of their strategies. The goal is to match the strategy making process to the competitive circumstances. Most of them DO NOT. Many use approaches appropriate only to predictable environments - even in highly volatile situations.

The idea behind Martin Reeves book, Your Strategy Needs a Strategy is that we can divide strategic planning in 5 styles (classical, adaptive, visionary, shaping, renewal) based on two factors: how predictable is the environment and what can we do to change or influence the environment factors.

In a survey with more than 120 companies in 10 industries, they found that companies were most often using the two styles best suited to predictable environments—classical (35%) and visionary (40%)—even when their environments were clearly unpredictable. What’s more nearly half the executives believed they could control uncertainty in the business environment through their own actions and more than 80% said that achieving goals depended on their own actions more than on things they could not control. Although we could put the blame on misplaced confidence and the wrong education or experience, it goes to the essence of how we deal with reality.

In A Big Little Idea Called Legibility, Venkatesh Rao develops James C. Scott idea of “legibility”:

“The state is not actually interested in the rich functional structure and complex behavior of the very organic entities that it governs. It merely views entities as resources that must be organized in order to yield optimal returns according to a centralized, narrow, and strictly utilitarian logic. Any elements that are non-functional with respect to the singular purpose tend to confuse, and are therefore eliminated during the attempt to “rationalize”. The deep failure in thinking lies is the mistaken assumption that thriving, successful and functional realities must necessarily be legible."

Rao then argues that what tempts us into this failure is that legibility get rid of the anxieties evoked by apparent chaos by describing this experiment:

“In Mind Wide Open, Steven Johnson’s entertaining story of his experiences subjecting himself to all sorts of medical scanning technologies, he describes his experience with getting an fMRI scan. Johnson tells the researcher that perhaps they should start by examining his brain’s baseline reaction to meaningless stimuli. He naively suggests a white-noise pattern as the right starter image. The researcher patiently informs him that subjects’ brains tend to go crazy when a white noise pattern is presented. The brain goes nuts trying to find order in the chaos. Instead, the researcher says, they usually start with something like a black-and-white checkerboard pattern.”

We use the wrong approach, because we fail to understand all the subtleties of how the complex reality works and will try to put order by simplifying that reality with classical or visionary goal setting strategy rather than embrace strategies fit for unpredictable environments.