Thursday, July 13, 2006
Laws of the Post-Network Economy: Strategy is a Commodity
Not much time to write, so I will try and be concise.
I'm working on a longer piece about the laws of the (new) new economy. One of the laws is the title of this post - strategy is a commodity. What does that mean?
30 years ago, thinking strategically about business was revolutionary. It allowed visionaries to shape value creation in entirely new ways. The result was the death of conglomerates and the birth of the modern transnational.
Today, the average corporation is packed to the gills with strategists. It's up to it's ears in strategy consultants. The language, vocabulary, and ideas of strategic thinking permeate it.
And that's no surprise - strategy is a very useful way to think about commerce (art, life, etc).
But that also means that everyone and their grandmother knows how to pick profitable markets, segment them, price goods and services, analyze competitors, understand industry economics, etc, etc.
Strategy itself, in a very real sense, is becoming a commodity.
But our fascination with it persists - especially in America, where we (mis)apply the rules of strategy to everything, from relationships to culture. But that's a different question.
The bigger question the commoditization of strategy begs is this: what is the next great shift in value creation? What is the next great paradigm that will shape how the people that own resources - corporations, entrepreneurs, capitalists - think about how to create value from them?
I think it is going to have to do with creativity. In a world where strategy is a commodity, creativity becomes the vital factor from which value flows. When everyone can think strategically about everything, the locus of value creation shifts from out-thinking everyone to out-creating them. The prime mover of value creation becomes putting the ability to create (goods, services, processes - even strategies) at the heart and soul of the firm.
Now, we see the hints of the revolution everywhere - from the death of mass culture/blockbusters, to the rise of free culture, to the exploding investment in innovation and design, to the flight of capital away from the US. I think it is going to create enormous challenges for firms - challenges which can't be answered by thinking strategically; but can only be faced by thinking creatively.
All of which requires a sea change in the ways we manage; the ways we coordinate; in the primordial, deep DNA that every firm shares. It requires a new way of thinking about value - onw with roots in creativity, not strategy.
Comments:
Great post
I fully agree that creativity is the next big lever - MS is going to kick themselves for letting Scoble go - artists are going to reclaim the lions share of royalties - and ze frank will be bigger than ac-360
I think that you are wrong about strategy though - strategic thinking is creative, not formulaic - strategy is a subset of creativity - it is management that is the commodity and it is management that is no longer adding value.
I too think that declaring strategy a commodity is focusing the argument at the wrong level of detail.
Rote application of strategic precepts can create commodity like strategies. But truly game changing strategy is only achieved through the genius of human consciousness ignited by the flame of passion...or, more succinctly, creativity.
Technology and economic development seem to be changing the rules of strategy from "act in your own self-interest by playing the game to win" to "live fully and responsibly with authenticity.
Perhaps the refinement of the law is that strategy without spirituality is a commodity.
You can see the results of this shift toward a more integrative & personal approach to strategy all over the emerging (post-network) economy...BGSL is a great example of it.
An interesting post on this at John Mackey's blog here: http://www.wholefoods.com/blogs/jm/archives/2006/05/the_upward_flow.html
Your thesis is 100% wrong. The idea that you can engage in the same activities as others is just plain wrong. Start with a definition of what straegy is.
"strategic positioning means performing different activities from rivals' or performing similar activities in different ways." Michael Porter
http://www.fool.com/boringport/2000/boringport000228.htm
Absolutely, the unbundling of the innovation supply chain is definitely upon us. How players adapt to this fact (=open innovation, collaboration), and who decides to participate (=global focus, lead users), will shape how that change will occur.
Good stuff.
Hi David + BB,
Those are great comments. I think my point was that the locus is shifting from rote application of "strategy" to creation of it, as you both point out.
Strategy can certainly be creative. But more often than not, it kills creativity (ie Madison Ave, Hollywood, Wal-Mart, etc). That's a complex set of issues which I have to tease out in more detail.
I think the "strategy without XX" (spirituality, meaning, purpose, etc) is a very interesting way to put it.
Anon,
Study more before you comment here. You're talking about positioning, which is a specific kind or category of strategy (one which has been commoditized, as an exploding pool of players chases a dwindling number of "positions").
Conversely, if we take your point, the discussion just becomes becomes a meaningless tautology - "strategy is difference".
Cory,
That - unbundling - is another very interesting way to put it.
Thx for the comments guys.
A couple of brief questions informed partly by the fact that I probably study different things than you, but I do study.
My rule of thumb for separating strategy and tactics is that strategy deals with the big picture and tactics are the various things you do to enact that strategy, though I think of their relationship as more interactive than linear.
Does that fit where you're coming from?
My other question has to do with the shifting focus to creativity. I've been running into lots of short pieces on the topic for a few years now but I rarely see good examples of businesses that are pursuing such an approach.
I should clarify that I've read many examples of companies working creatively and of companies focused on creative activities but not many examples of how companies focused on previous paradigms, lacking the creative approach you support, are now putting such an approach into practice and finding success in comparison to their competitors.
Since my reading in that area is limited, do you recommend anyone that's written clear case studies illustrating the emerging focus on creativity?
Thanks for any help you can offer.
You're on the right track.
We are flooded with bland, uncreative strategy and thinking, and it is often that same type of strategic thinking that kills creativity.
When responding to Lord Saatchi's FT article about "the strange death of modern advertising" in which he blames continuous partial attention (caused by the internet, of course) for the woes of agency networks and their lack of success, I suggested:
Couldn't the problem be due to a general decline of creativity in advertising, especially in large shops? It isn't about simplicity and speed as Lord Saatchi suggests. It is about value and choice.
More here:
http://www.i-boy.com/weblog/2006/06/dead-flowers-on-advertisings-grave.html
Strategy is about gameplay, viewing the world as scenarios to win, then picking your best moves. If I understand you, you're suggesting not only that everyone is playing chess, but that everyone is reaching grand master status. Of course mastery begins to look like art.
100 years' ago, the ability to use a phone was rare, and conferred comparative advantage in business. Now that everyone has it, everyone has those same advantages and you must do more than be able to dial and answer the phone.
50 years' ago, typing was a rare skill. As it's become comoditized, you'd think those who'd type fastest would be better with computers.
25 years' ago, the tools of strategic analysis were restricted to military officers and a few MBA professors. Today millions of people consider their goals in the context of what other players will do. SWOT analysis is taught in high schools. Risk analysis is an everyday mindset in the online poker culture. And business is a spectator sport.
I'm not sure strategy is completely fungible; not all experts play from the same handbook, carry them with the same personality and soft skills, or share the same insights that frame strategic thought. Perhaps minor league strategy is a commodity, covering the 20% of strategic tools that yield 80% of the value. Mastery could mean applying the other tools well or being able to make new tools when none of the existing ones fit your situation.
It comes down to what you mean by creativity. Strategy driving innovation? Innovation driving strategy? Or sparking the one in a billion shot that creates entirely new ways of seeing the world and kicking over the table?
Technology and economic development seem to be changing the rules of strategy from "act in your own self-interest by playing the game to win" to "live fully and responsibly with authenticity.That is so beautiful! :)
Strategy came to business from the world of foreign affairs and diplomacy - it concerns itself with the manipulation of the balance of power.
Creativity is far closer to the heart of commercial endeavour.
The creative process is a simple one when looked at in sections; we assimilate information, juggle the pieces, wait for a moment of inspiration (often unconscious) whereby something new suddenly appears in our heads, and then we create that new thing, be it on a canvas, by proving a scientific principal or by taking a new product to market.
Perhaps the distinction between the two is that strategy is always rational and creativity can be non-rational (as opposed to irrational.)
And, as David Landes points out, Northern Europe and America's sweep past rich, rational Spain and Italy over the last 500 years can be put down to their non-rational approach (taken from Protestantism - work for work's sake.)
So the winners in your new world, where strategy is a commodity, should therefore be those who create for the sake of creating.
This in turn tracks with the idea that most markets are now so liquid that your best chance of turning a buck is to throw yourself into a space you like and work out how to profit from it later on - because looking at it strategically you'll only see what everyone else does and eveyone else will already have captured the value.
So the functional consequence of strategy commoditising is that the market no longer has time to wait for you to have a strategy.
We're not playing chess any more, we're playing squash.
I�d contend that �strategies� are commoditized not strategy. Strategy is evolutionary. Creativity and innovation will yield new strategies� they�ll be applied, learned and ultimately commoditized. Winning in business is a combination of applied strategy (blocking and tackling) and innovation. �Strategic advantage� is and always will be attainable.
I can't wait to read your larger article!! After reading this short blog entry intuitively everything you are saying rings true. Compare the iPOD and any of its competing products or service. Apple has created "value" thru design and consumers are paying a premium for what otherwise is commodity hardware and software.
Very informative post! Really thanks for sharing.
Thanks and Regards/-
Jason Webb
