THREE WAYS TO MAKE STRATEGY THEORY MORE RELEVANT

“Getting published is what counts. But we struggle with relevance.”

Guess how many divisions there are in the Academy of Management? The number is: twenty-four, including one for Management Consulting and one for ‘Strategizing Activities & Practices’. After attending my first #AoM conference in Chicago I now know this (and so do you). For this I owe thanks to the participants who so kindly showed me how things work in academia. In return, I promised to share my observations, and think about how scholars could maybe connect more with us strategy professionals. Or practitioners, as we are known. Here it is. And to be clear, my ideas relate to the strategy 'stream' only, being the field that overlaps with my two decades of professional experience.

The doctors have left the building?

Just so you know, my observation was already shared with several scholars, and it made them laugh, so I think I am safe. In a nutshell: given what little I know about strategy scholarship, the image comes to mind of doctors who – about seventy years ago – set out to improve the health and wellbeing of patients. Gradually, however, they shifted attention away from patient diagnosing, toward the identifying of syndromes. This turned out to be so rewarding that, at some point, they decided to do two things: redefine being a doctor (‘it’s about analyzing healthcare data and writing papers’), and leave the hospital altogether.

An exaggeration of course! That said, I also see why scholars would shift toward the general. Like patients, businesses are unique to a very high degree and never fit any prescribed category perfectly. This can be frustrating. Moreover, being educated in the empirical tradition, strategy scholars naturally tend to care more about averages than about particulars. Nevertheless, I understand most scholars acknowledge the problem of lacking relevance, and the metaphor itself fits the conference’s theme ‘Improving lives’. It resonates even, for this theme seems to urge scholars to focus – once more – on the health and wellbeing of individuals. If not, they would probably have gone with 'Improving life’.

Luckily, many scholars want to take on the challenges of what they call ‘case-specific diagnoses’. This is good news indeed. As a fact, focusing on diagnosis will make theory more relevant, and it is where theory and practice have common interests: in shared, company-specific knowledge creation. I'm sure you agree: practitioners are always looking to act better, while scholarship is all about knowledge, and one cannot act better when one does not know better. No doubt the two can meet in the middle, but it all depends on strategists asking the infamous ‘So what?’ questions, and on scholars trying to answer them. And this answering should not be in general terms, or for the past, but for specific companies, in specific environments, in the here and now.

In line with this thinking I share with you a few ideas on how strategy scholarship could become more relevant for practice. And in true management book style – irony intended – I do this in a three-step approach: be clear, think cash flows, and imagine the decision.

STEP 1: EVERYONE, FOR GOODNESS SAKE, BE CLEAR!

Dear scholars, I truly admire the rigor in your research! Please, I urge you to maintain it in the classroom and ignore the students and managers who are just there for the diploma. They can’t be helped. Instead, focus on the strategists who want to know better, and who understand that gambling is not something that can be taught. As a first step: resist adopting vague management jargon. Clarity is the gateway standard for new knowledge, and words like disruption, core, key, value, innovation, success, threat, opportunity, best practice, performance, agile, and even strategy itself, are not clear, no matter what people think. In reality – and I have been doing this work for a long time – jargon always prohibits true understanding. Therefore, in working with my clients, I reject any and all vague language, and it saves a lot of time. Naturally, important phenomena must still be defined, but just see what happens when you describe them in terms of implied actions, consequences, and potential cash flow effects. And more importantly; see what happens when you try to explicate which companies they are most likely to impact, in what environments, why, when and how. It will clarify and enable purposeful group discussions in a way labels never can.

In short, strategy needs strong arguments, and for this we need clarity. In words, but also in the message. “Competitors with overlapping geographical markets have a 13% higher chance of doing acquisitions” seems a clear enough statement, but ask yourself this: So what? How could this improve decision making for a random company? Only the ability to think clearly allows for change. Without it, we are all left to speculate.

STEP 2: THINK CASH FLOW CONSEQUENCES

Yes, practitioners prefer discussing ‘winning strategies’ over talking numbers. Maybe, however, scholars should remind them: something is only strategic to the extent there is uncertainty involved, and that this uncertainty is always cash flow uncertainty. Embracing this notion is essential for all of us because it highlights the relative nature of value creation. And this, in turn, helps us to realize that strategy is all about how companies (and their cash flows!) are different, not about how they are the same. Cash flow uncertainty results from competition, and this is exactly why comparative knowledge is what we are looking for in strategy. Unless you work for a statistical company that is, but I don’t think anyone does.

In teaching strategy, the value of this step is found in shared attempts to compare industries based on cash flow characteristics, and in imagining how any piece of knowledge, including all theoretical concepts and well-known tools like PESTEL, Business Canvas, Porter’s Five Forces and Blue Ocean Strategy, logically relate to a random company’s cash flows in the future.

STEP 3: IMAGINE THE DECISION

No one works in the past; no one also works for an industry. Strategic decisions are always made at the company level, and they are needed every day. That is why strategy is about continuous judgment and seeing every day as a decision situation. It also means our strategy work is not over until we obtain the knowledge that is of defining importance for our decisions. So, let's do ourselves a favor and imagine acting options from the very start. Adding such ingredients early in the discussion provides both scholars and practitioners with working hypotheses on what to decide in the end. This is guaranteed to make whatever comes next more relevant.

In conclusion, I realize we already know much of what I state here, and yes, I know there is an unwillingness among practitioners to listen to argument. However, if we are serious about increasing relevance, scholars should not make the same mistake. In the end, strategy is a profession more than it is a science, and the increasing rate of change in business simply demands we learn to analyze and understand what is happening today, to specific companies, given all we can know about the past.

In the end, I believe a solution is found in scholars and practitioners making a joint effort of improving our ‘case-specific diagnosing’ skills. In fact, if scholars succeed in putting practitioners in a proper diagnosing mode – thus freeing them from their addiction to the latest potion-that-will-cure-anything – a lot is already won. It will offer new opportunities for integrative strategy teaching, and it will certainly make theory more relevant. For this we need all scholarly insights we can get that enable a thorough comparison of circumstances, industries and companies. It also means rigor and scholarship remain absolutely essential. After all, if insights based on the best possible information are not used as input for decision making, then what is used? Data from the future….? I say, let’s do this.

DO YOU LOVE DEVELOPING THEORY THAT IS RELEVANT FOR STRATEGY PRACTICE AS MUCH AS I DO, LET ME KNOW!

#TheStrategyScript #StrategicWisdom #RoelandVanStraten #AOM