The Tao of Strategy

What’s Tao got to do with strategy?

I’ve worked on developing strategy and leadership with several multinational companies (MNCs) in SE Asia over the last 7 years. I have observed them cope with high levels of uncertainty and much change in their markets. Many of these MNCs have grown in stature in their SE Asian markets, and their leaders have been rewarded by greater levels of empowerment from the overseas headquarters.

Local leaders have become more confident and I have observed a number of classic Taoist characteristics in their strategy.? Taoism is an ancient Chinese philosophy that emphasises living in harmony with the natural world. I trace five key principles of Taoism in the strategy of these organisations.

1) Wu Wei (Non-Action)

This encourages allowing situations to unfold naturally before intervening. It is consistent with the notion of ‘emergent’ strategy, where a study of the whole system allows you to understand what is happening. It is about entering the market decisively at the right time.

My client is a British consumer health business who observed the shifting demographics of China and the relative naivety of the elderly in managing their declining health. They launched a new division that combined a new series of health products and? communication campaigns to assist older citizens protect their health with vitamins and oral hygiene. The timing coincided with the growing awareness of the specific health needs of older people.?

2) P’u (Simplicity)

This emphasises the importance of simplicity and humility - free from unnecessary desires and open to new experiences. Strategically, it refers to the need to focus on core business and key objectives, making the necessary tradeoffs to reduce unnecessary elements. It will involve reducing overly complex processes and bureaucratic arrangements - and continuously asking the fundamental question of what outcome you are trying to achieve.

An American client with operations through SE Asia is engaged in servicing the fast moving apparel sector - supplying the all important price tags that include information about size, material and origin. The rapid changes in this market necessitates a continuous response to new fashions and styles. The business has processes that allow operations to change quickly without extraneous requirements and unnecessary bureaucracy. By focusing on the needs of the workforce who are required to respond rapidly, they have eliminated many of the? ‘nice-to-have’ but non-essential requirements of headquarters. This has freed up workers to focus on responding rapidly and accurately to the market.

3) Tzu Jan (Spontaneity)

This is about embracing the natural flow of life without artificial constraints. In strategy, this refers to being flexible and adapting to the changing conditions of the market. Importantly, it emphasises the role of learning as a core element of strategy - as opposed to planning with its emphasis on rigidly sticking to a sequence of activities.?

A major European industrial caterer had traditionally focused on centralised kitchens for food preparation to serve their corporate clients in SE Asia. As smaller competitors began to attack their market share by catering to the local tastes and preferences of company employees, the company responded. They allowed their branches - many who employed local residents - to use their own ingenuity to design menus and offerings to suit regional tastes. Using some local ingredients, but still adhering to standards of food hygiene, they developed dishes that catered specifically to the need of clients’ employees. In some cases, they were at the forefront of setting new trends for food and eating experiences.

4) Wu (Non Being)

Non-being is a challenging concept for westerners, as it involves the ‘letting go’ of ego and attachments - losing the drive for specific outcomes as the structure in the market shifts. This has significant implications for strategy as it involves questioning a particular business model, core competencies and even legacy positions in the market.

The case of two German manufacturers with a strong history of engineering excellence is of note here. Both companies have a strong reputation in the automotive market, underpinned by mechanical and electrical engineering. With the shift towards New Energy Vehicles (NEV), their existing business models and core competencies are proving to be less relevant. While the one company has taken a bold move to launch a completely new division that has ‘let go’ of the traditional engineering business model in favour of a more organic digital model, the other company continues to hold on to its historical legacy. The latter is having much difficulty accepting that its traditional model and product is losing favour in the market and is watching its market share decline rapidly.

5) Yin-Yang (Harmony of Opposites)

Yin-Yang relates to the interconnectedness and interdependence of opposites, and that the understanding and embracing of this balance is key to achieving harmony in life. This challenges traditional business and strategy practices. Both rely on Cartesian logic that is underpinned by a binary logic of rationalism. In this approach, the hypothesis is either true or false; you have either achieved the KPI or not.?

However, we know that real life does not always resemble this - you can love and hate someone; a decision can be right and wrong. So-called ‘fuzzy logic’ embraces opposites and recognises the importance of their interdependence. Strategy as a learning process must accept this balance and interconnectedness in order to understand an emerging and changing situation.

I have observed numerous clients in SE Asian region who balance aggressive growth strategies with very conservative risk management processes. In the innovation space, radical experimentation occurs in a psychologically safe environment, but is simultaneously managed by a rigorous stage-gating process that cuts experiments that do not show promise or signs of success.

I believe there is much to learn by understanding these Taoist philosophies and how they might be applied as leaders. Strategy can cultivate a more flexible, adaptive and harmonious approach to the way we plan and make decisions.