The problem of strategy

Once upon a time, everybody knew the answer to the question of strategy. But, don’t be fooled: this fact has nothing to do with strategists’ definitions of their own discipline; it actually has everything to do with an environment where strategies were executed. That environment was really predictable, clear, and stable.

There, strategists — not avid doers by nature — assumed a comfortable position of mostly observing the field from their elevated spot. Tricky as they are, they took pride in their talent of seeing everything that is going on in their business, brand, and consumer landscape. They were confident in predicting the next business move, and the next one, and the one after that. The whole strategic wisdom resided in optimizing a given set of alternatives, specifying a particular course of action, and committing to it. They knew what resources they had, they knew what their goal way, and simply enough, that their job was to connect the two. Sweet & simple, yet so antiquated.

At that ancient time, it was easy to say, “strategy is how you create value,” “strategy is how you make money,” or “strategy is how you use your finite resources to achieve your goal” (oh, actually: for some people, it’s still easy to say that).

Ok, now, let’s rewind to the present. What we are dealing with is messy, unpredictable, and hard to measure. It’s complex. It’s no longer possible to observe and predict enough to map out courses of action that guarantee desired outcomes. If you commit to a certain alternative, you may end up being dead. Turns out, a solid strategy may as well be your biggest liability.

In this context, we can’t say anymore that strategy is “how we create value” and here is why. Simply, we don’t know in advance what’s valuable — or what may turn out to be valuable — to people online. Our criteria and our definitions of value don’t work there. What the sources of value for people there are — free access, sharing, creating, participating, interacting — may not necessarily be valuable to business itself. In fact, it may seriously undermine it. Yet, there’s ton of sources of value online. Best businesses of the past few years focused on making visible the network of connections between people, between things, and among the two. They didn’t know in advance if there’s any businesses value in those connections: they mostly believed that, if they create conditions for all those ties to be exposed, that new sources of value will emerge. And they did. How fast we run, how much gas our car uses, where do we go, what do we buy, what do we like, who do we talk to — all turned out to be potentially lucrative. Truth is, making this info visible also created new behaviors, changed how people do things, make product decisions, and form brand preferences. All of this unforeseen and sometimes not very obvious, yet very relevant. What these new businesses knew is that their strategy is a process of not creating, but understanding value: where it resides, how it has been exercised, and how it’s distributed through this space.

And this is precisely why we also can’t say anymore that strategy is “how we make money.” Web certainly doesn’t lack an entrepreneurial streak: people create value for themselves, and for each other; start-ups create value for people and for themselves. Is what’s valuable on the web always (if at all) aligned with brands’ money-making goals? Not necessarily. More importantly, should it be? Where exactly in this system either people or startups need to worry about if an advertising agency or a brand makes money? Further yet, why would they want them to make any money at all? And then, there’s this trick: does the business of making information and connections visible — no matter how valuable — equal to making money? Not always the case. Facebook, for the longest time, didn’t know what’s its main source of revenue (our privacy?), Twitter didn’t know (early bird?), and Foursquare still doesn’t know. What they know — and know it well — is to react to opportunities that arise quickly and unexpectedly. And because these companies deal mostly just with creating conditions that make possible for the unexpected value to show up, they don’t restrict their money-making options to a limited number of alternatives. Nor should they.

Then, here’s why we can’t say anymore that strategy is “how you use your finite resources to achieve your goal.” Hate to break the news, but the resources are finite only if you make them so. What’s worrisome here is the possibility that someone working online would even consider relying only on their own, by default limited resources, instead of utilizing the bulk of existing ones, or even creating conditions for new resources to show up? (No, I am not talking about crowdsourcing here, but basically about everything that people are doing online; all their actions can be used/amplified/facilitated/turned into a resource). At the end of the day, we are dealing with a hybrid behavior of people and technology, and the more distributed our resources, the better off we are. But, there’s also something else here: on the web — it being so tricky with value and moneymaking and all — we often really don’t know in advance either what resources we are going to need to achieve some goal or how to allocate them. Those who think they do, are either already out of business, or delusional (or both). For the rest of us, the best we can do is to see which connections have the biggest generative potential, and pour more resources into those.

So if strategy based on value predictions, projections, and finite resources doesn’t make much sense anymore, what are we left off with? We got to accept that value online comes from very different and unexpected sources, and that we should not restrict our understanding if it in advance; that value is not always going to equal money on the short-term, and that this thus may not be the best way to inform our actions; and that our resources are as vast as we make them, and that how we allocate them depends more on the environment than on our strategic plan. Having all of this in mind, the best we can do is to try to work on providing conditions to make things happen: things like new behaviors, new connections, new sources of value, and new resources. The money will follow. Or not. But one thing is certain: the world that strategists work in is under active construction and there’s no blueprint. For the first time ever, we are part of the construction crew: we are not directing it. And we need to reinterpret a lot of things that we have been regarding as fixed, and also probably come up with a new language to describe what the hell we are doing.

Originally published on July 15, 2010