LORD Livingston, former chief executive of BT, claims he used the same slide about strategy on the day he arrived at the telecoms company in 2008 as on the day he left in 2013 to become UK trade minister.

“People often think business is about strategy but it’s actually one part strategy and nine parts execution,” he says.

Similarly, Andy Mattes, who has worked at Siemens and Hewlett-Packard and is now chief executive of Diebold, the US supplier of ATM machines, says: “A mediocre strategy well executed will yield far better results than a perfect idea poorly done.”

In the opening words of Strategy, Sir Lawrence Freedman’s comprehensive 2013 history of the discipline: ‘Everyone needs a strategy.’ Companies still need to make choices about how to handle competition and serve their customers. But some of the tools big businesses applied in the 1980s and 1990s to help them form strategy are looking worn.

When Michael Porter laid out his concept of ‘five basic forces’ that determine competition in 1980, and CK Prahalad and Gary Hamel explained how companies could identify their ‘core competencies’ to support their competitive advantage in 1990, they were part of a flood of strategy fads and fashions. Since 2000, though, even if advice continues to pour out of publishers and business schools, the number of compelling new frameworks has dwindled.

In part, that is because over the past 15 years companies have found rigid strategic frameworks hard to adapt to a fast-changing environment. The rise of the smartphone and social media, rapid growth in developing markets, a financial crisis in the developed world and the fall of totalitarian regimes in the Middle East have prompted corporate leaders to concentrate more on flexibility and execution.

Strategic frameworks used by big business look worn while compelling new theories are in short supply

The ATM supplier Diebold used to have a three-day annual strategy meeting, meticulously prepared and largely dreaded by those who took part. Mr Mattes, chief executive since 2013, now prefers to use a ‘technology strategy committee’ that meets more regularly and can advise on smaller adjustments to the company’s course. As Lord Livingston puts it: “There’s a big difference between slightly touching the steering-wheel and stopping the car and going in a completely different direction.”

Yet the demand for tools and frameworks to help companies plot a path through uncertainty is as great as ever.

Renée Mauborgne and Chan Kim, strategy professors at Insead, laid out one of the few durable strategy frameworks of the 2000s in 2005, when they published Blue Ocean Strategy. Their central idea, based on 14 years’ research, is that instead of constantly fighting rivals in a ‘red ocean’ of cost-cutting and imitation, organisations can create a space — the blue ocean — where they set the rules, rendering competition almost irrelevant. The book was attacked by some as derivative or unworkable. It mixes its metaphors with abandon, at one point urging companies to ‘place [their] kingpins in a fishbowl’. But over the past decade it has sold 3.5m copies.

Prof Mauborgne says just telling executives confronted by a strategic challenge to ‘think out of the box’ or ‘do a Skunk Works’ (the separate unit set up by Lockheed Martin to develop next-generation fighter jets) is not enough. “People are sitting there sweating, filled with fear because they don’t have a way to get hold of [the problem],” she says, which is where accessible frameworks come in useful.

Prof Freedman is suspicious of aspirational strategy frameworks but even he understands their enduring appeal: “I was in senior management in King’s [College London] for 10 years so I was helping to run an organisation of 5,000 employees: you read this stuff and you think, ‘Yeah, that’s an interesting point; how does that apply to me?’”

The original strategic frameworks, developed at first by consultancies such as Boston Consulting Group, and given academic backing by Prof Porter and others, were aimed at large US companies. Having expanded in an unplanned way, these conglomerates needed strategy tools to help plan their next steps and grow more efficient.

But now, “we’re reaching diminishing returns in terms of taking what was an intuition in the 1960s and turning it into a discipline in the 1970s, 1980s and early 1990s”, says Thras Moraitis, former head of strategy at Xstrata, the acquisitive mining group headed by Mick Davis. At the same time, academics such as Rita Gunther McGrath of Columbia Business School, have questioned whether strategic competitive advantage, another Porter principle, is still a useful concept in a world where everything is in flux.

Mr Moraitis now works at X2, a mining investment vehicle formed with Mr Davis, and has co-written Playing at Acquisitions, which examines deal strategy. An alumnus of Monitor, the consultancy Prof Porter co-founded, he believes concepts such as the ‘five forces’ are still valid. But, like other strategy professionals, he warns against swallowing one formula above all others. Most do not take account of uncertainty, he says, or indicate how a particular approach might improve shareholder returns. Managers are looking, he says, “not for crutches, but for something that can give them extra insights”.

Frameworks “force you to think through things analytically”, says Mr Mattes. He compares them with varieties of diet: “It doesn’t matter which one you use because, as long as you stick with it, it will have an impact.”

Flexibility will be more important than ever as new corporate forms, such as networked organisations, mature, insights into human behaviour improve and technology advances.

But answering the question recently posed by the McKinsey Quarterly about ‘what strategists need’, executives still hope more practical tools will develop to help them understand the challenges ahead.

Published in Dawn, Economic & Business, March 30th , 2015

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