Discussion: View Thread

We had a great post in December from Richard Whittington, drawing attention to a series of articles on this topic, so thought we might see an avalanche of responses – maybe from younger folk in the field worried about its future [and theirs], or from more experienced figures vigorously refuting that there is a problem. So the subsequent silence is puzzling.

The evidence may be mostly anecdotal, but it seems increasingly recognised that students see little value in strategy classes, recruiters don't value what those students learn in those classes, and executives and consultants don't use the tools that have been so painstakingly put together. Why does no-one dare mention this 'elephant in the room'?

If "there is nothing so useful as good theory" and our tools are not used, the conclusion seems inescapable – we have little useful theory! If we accept that there actually is a big problem here – where has it come from? I will probably get beaten up for this, but here goes with two suggestions ...

-          Most of the tools, whether external or internal oriented, originate from efforts to explain profitability [rents], when that is of little interest to either investors or managers. It has been axiomatic to those in Finance for decades that investors value growth in free cash flows .. which does not correlate with maximising rents. Profitability needs to sufficient to either fund growth or enable funds for growth to be raised, and growing companies are likely to be less profitable than they could be if not growing. How long have we known this? – since Penrose in the 1950s! [ In some cases e.g. Amazon  'sufficient' profitability can even be negative for many years so if sustained superior profitability is the goal, where are the case studies exploring how UNsuccessful Amazon has been?!].

-          Most of the tools offer ways to find  a good strategic 'position' for a firm vs. rivals .. but this question only arises at start-up or at major cross-roads in a company's history [most of the great case study companies we use in class have sustained essentially the same 'position' for decades [IKEA, Southwest Airlines, eBay ...] , or else made just one or two major changes [IBM, Nokia ...].. so what does 'strategic management' actually do in between these once-in-a-lifetime events? If we were honest we would rename our classes, if not our whole field 'Strategic Positioning' instead of Strategic Management.

The consequences of having no useful tools for the continuing strong strategic management of organizations are serious. We are experiencing right now the result of incompetent strategic management of many of our major corporations, especially but not exclusively the banks of course. So – are we going to continue ignoring this elephant and keep churning out research and tools that no-one values, or really try to do something about it?

... excuse me while I go hide under the table.

Kim Warren

Dear All

This topic came up earlier this year, and Joe Bower mentioned a relevant Dialog forthcoming in the Journal of Management Inquiry. The Dialog has now been published under the heading: 'Directions for a Troubled Discipline: Strategy Research, Teaching and Practice', JMI, 17, 4, 265-286, 2008.

The three main papers are:

Joe Bower, 'The Teaching of Strategy: From General Manager to Analyst, and Back Again?'

Rob Grant, 'Why Strategy Teaching should be Theory Based'

Paula Jarzabkowski and Richard Whittington, 'A Strategy-as-Practice Approach to Strategy Research and Education'.

The link is http://online.sagepub.com/cgi/searchresults?src=selected&andorexactfulltext=and&journal_set=spjmi&fulltext=jarzabkowski

My interpretation here was much more to affect of, why are our activities in the field of strategy being marginalized when we see so clearly what the negative effects of not using them are?

Of course this transcends strategy and also includes the topics of corporate governance, a question of the justness of the foundations of our underlying economic system (its inherent contradiction to our democratic beliefs), i.e. free market and neo liberal economic policy as well as heavy aspects of human behavior.

Bruce Kibler

If the point you are making is that growth is more important than profitability in the eyes of investors, I agree. But is there good empirical support? Can someone who know shed further light on this issue.

Alfie Marcus

Professor and Spencer Chair in Strategy and Technological Leadership
Strategic Management and Organization Dept.
<st1:place w:st="on"><st1:placename w:st="on">Carlson</st1:placename> <st1:placetype w:st="on">School</st1:placetype></st1:place> of Management
<st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Minnesota</st1:placename></st1:place>

Kim Warren wrote:

We had a great post in December from Richard Whittington, drawing attention to a series of articles on this topic, so thought we might see an avalanche of responses – maybe from younger folk in the field worried about its future [and theirs], or from more experienced figures vigorously refuting that there is a problem. So the subsequent silence is puzzling. <u5:p></u5:p>

<u5:p> </u5:p>

The evidence may be mostly anecdotal, but it seems increasingly recognised that students see little value in strategy classes, recruiters don't value what those students learn in those classes, and executives and consultants don't use the tools that have been so painstakingly put together. Why does no-one dare mention this 'elephant in the room'?<u5:p></u5:p>

<u5:p> </u5:p>

If "there is nothing so useful as good theory" and our tools are not used, the conclusion seems inescapable – we have little useful theory! If we accept that there actually is a big problem here – where has it come from? I will probably get beaten up for this, but here goes with two suggestions ... <u5:p></u5:p>

<u5:p> </u5:p>

Most of the tools, whether external or internal oriented, originate from efforts to explain profitability [rents], when that is of little interest to either investors or managers. It has been axiomatic to those in Finance for decades that investors value growth in free cash flows .. which does not correlate with maximising rents. Profitability needs to sufficient to either fund growth or enable funds for growth to be raised, and growing companies are likely to be less profitable than they could be if not growing. How long have we known this? – since Penrose in the 1950s! [ In some cases e.g. Amazon  'sufficient' profitability can even be negative for many years so if sustained superior profitability is the goal, where are the case studies exploring how UNsuccessful Amazon has been?!].<u5:p></u5:p>

<u5:p> </u5:p>

Most of the tools offer ways to find  a good strategic 'position' for a firm vs. rivals .. but this question only arises at start-up or at major cross-roads in a company's history [most of the great case study companies we use in class have sustained essentially the same 'position' for decades [IKEA, Southwest Airlines, eBay ...] , or else made just one or two major changes [IBM, Nokia ...].. so what does 'strategic management' actually do in between these once-in-a-lifetime events? If we were honest we would rename our classes, if not our whole field 'Strategic Positioning' instead of Strategic Management.<u5:p></u5:p>

<u5:p> </u5:p>

The consequences of having no useful tools for the continuing strong strategic management of organizations are serious. We are experiencing right now the result of incompetent strategic management of many of our major corporations, especially but not exclusively the banks of course. So – are we going to continue ignoring this elephant and keep churning out research and tools that no-one values, or really try to do something about it? <u5:p></u5:p>

<u5:p> </u5:p>

... excuse me while I go hide under the table. <u5:p></u5:p>

Kim Warren <u5:p></u5:p>

<u5:p> </u5:p>

<u5:p> </u5:p>

Dear All<u5:p></u5:p>

<u5:p> </u5:p>

This topic came up earlier this year, and Joe Bower mentioned a relevant Dialog forthcoming in the Journal of Management Inquiry. The Dialog has now been published under the heading: 'Directions for a Troubled Discipline: Strategy Research, Teaching and Practice', JMI, 17, 4, 265-286, 2008. <u5:p></u5:p>

<u5:p> </u5:p>

The three main papers are:<u5:p></u5:p>

Joe Bower, 'The Teaching of Strategy: From General Manager to Analyst, and Back Again?'<u5:p></u5:p>

Rob Grant, 'Why Strategy Teaching should be Theory Based'<u5:p></u5:p>

Paula Jarzabkowski and Richard Whittington, 'A Strategy-as-Practice Approach to Strategy Research and Education'.<u5:p></u5:p>

<u5:p> </u5:p>

The link is http://online.sagepub.com/cgi/searchresults?src=selected&andorexactfulltext=and&journal_set=spjmi&fulltext=jarzabkowski<u5:p></u5:p>

<u5:p> </u5:p>

-- 

Please note new email address

amarcus@umn.edu

Responses to Alfie, Paulo, Bruce ...

-          The market seems to be telling us that, yes, it does want tools, methods, frameworks etc. to help develop and manage strategy and performance – some generalised, abstract ability to think strategically doesn't get MBAs into the best jobs, which is why they prefer Finance and other courses, and why the top recruiters are not happy with the strategy skills of their new hires and [I understand] immediately train them in other things beyond strategy that are useful.

-          I fear the reason our strategy tools are marginalised in spite of the negative outcomes we see is that executives and consultants do not believe that using them would make any difference – but we would need to hear from such folk to be sure.

-          The growth point is basically simple – if a firm is making 10% ROIC, it can double profits by getting up to 20%, but it can't keep doing that by trying for 40%, 80% etc. So if it is to give investors increasing cash flows it must, at some point, grow. If that growth needs spending on, say, hiring/training, R&D, marketing/sales etc., this will depress ROIC vs. what it could deliver by not growing. That's why investors and managers have very little interest in ever-higher profitability ratios and why – I humbly submit – the idea that sustained superior profitability is a useful indicator of 'sustainable competitive advantage' is a nonsense. Or maybe I have got this entirely wrong and that is not at all what any strategy research is trying to do? See for example 'How to choose between growth and ROIC' in the McKinsey Quarterly [URL http://www.mckinseyquarterly.com/how_to_choose_between_growth_and_roic_2043]

My interpretation here was much more to affect of, why are our activities in the field of strategy being marginalized when we see so clearly what the negative effects of not using them are?

Of course this transcends strategy and also includes the topics of corporate governance, a question of the justness of the foundations of our underlying economic system (its inherent contradiction to our democratic beliefs), i.e. free market and neo liberal economic policy as well as heavy aspects of human behavior.

Bruce Kibler

If the point you are making is that growth is more important than profitability in the eyes of investors, I agree. But is there good empirical support? Can someone who know shed further light on this issue.

Alfie Marcus

Professor and Spencer Chair in Strategy and Technological Leadership
Strategic Management and Organization Dept.
Carlson School of Management
University of Minnesota

Kim Warren wrote:

We had a great post in December from Richard Whittington, drawing attention to a series of articles on this topic, so thought we might see an avalanche of responses – maybe from younger folk in the field worried about its future [and theirs], or from more experienced figures vigorously refuting that there is a problem. So the subsequent silence is puzzling.

The evidence may be mostly anecdotal, but it seems increasingly recognised that students see little value in strategy classes, recruiters don't value what those students learn in those classes, and executives and consultants don't use the tools that have been so painstakingly put together. Why does no-one dare mention this 'elephant in the room'?

If "there is nothing so useful as good theory" and our tools are not used, the conclusion seems inescapable – we have little useful theory! If we accept that there actually is a big problem here – where has it come from? I will probably get beaten up for this, but here goes with two suggestions ...

Most of the tools, whether external or internal oriented, originate from efforts to explain profitability [rents], when that is of little interest to either investors or managers. It has been axiomatic to those in Finance for decades that investors value growth in free cash flows .. which does not correlate with maximising rents. Profitability needs to sufficient to either fund growth or enable funds for growth to be raised, and growing companies are likely to be less profitable than they could be if not growing. How long have we known this? – since Penrose in the 1950s! [ In some cases e.g. Amazon  'sufficient' profitability can even be negative for many years so if sustained superior profitability is the goal, where are the case studies exploring how UNsuccessful Amazon has been?!].

Most of the tools offer ways to find  a good strategic 'position' for a firm vs. rivals .. but this question only arises at start-up or at major cross-roads in a company's history [most of the great case study companies we use in class have sustained essentially the same 'position' for decades [IKEA, Southwest Airlines, eBay ...] , or else made just one or two major changes [IBM, Nokia ...].. so what does 'strategic management' actually do in between these once-in-a-lifetime events? If we were honest we would rename our classes, if not our whole field 'Strategic Positioning' instead of Strategic Management.

The consequences of having no useful tools for the continuing strong strategic management of organizations are serious. We are experiencing right now the result of incompetent strategic management of many of our major corporations, especially but not exclusively the banks of course. So – are we going to continue ignoring this elephant and keep churning out research and tools that no-one values, or really try to do something about it?

... excuse me while I go hide under the table.

Kim Warren

Dear All

This topic came up earlier this year, and Joe Bower mentioned a relevant Dialog forthcoming in the Journal of Management Inquiry. The Dialog has now been published under the heading: 'Directions for a Troubled Discipline: Strategy Research, Teaching and Practice', JMI, 17, 4, 265-286, 2008.

The three main papers are:

Joe Bower, 'The Teaching of Strategy: From General Manager to Analyst, and Back Again?'

Rob Grant, 'Why Strategy Teaching should be Theory Based'

Paula Jarzabkowski and Richard Whittington, 'A Strategy-as-Practice Approach to Strategy Research and Education'.

The link is http://online.sagepub.com/cgi/searchresults?src=selected&andorexactfulltext=and&journal_set=spjmi&fulltext=jarzabkowski

-- 

Please note new email address

amarcus@umn.edu

Allow me to stir the pot.....

Years ago, as an Assistant Professor at a research school, I often struggled with the cognitive dissonance that arose from teaching Strategy from one set of sources and trying to publish papers that would contribute to a literature we largely kept out of sight of managers.  Yes, I am talking about using HBR articles and HBS cases to teach MBAs and to supplement the 30,000-ft-above-sea-level theories, frameworks and concepts found in, say, Hill & Jones (still the best of the lot).  The HBR+HBS stuff was the only way those of who used them to inject a sense of realism into the material we taught our MBAs, but it was also done, let's face it, to legitimize ourselves (especially to the more experienced MBA students) and to compensate for what the more experienced among our MBA students thought of the arcane/ inscrutable language in which our journal articles were written!! 

Years later, when I started regularly reading and drawing on articles in McKinsey Quarterly and Strategy+Business (Booz Allen's publication), it became clear to me how shallow even HBR articles were.  Yes, there are good HBR articles from time to time, those, for instance, that earn the McKinsey award each year, but, for the most part, the "slapstick" and simplistic tone of their articles should cause the thinking manager some rightful indignation. Mind you, in the case of articles that do make it into McK-Q, the concepts are sufficiently "sanitized" and generalized, so that the Firm doesn't give away its crown jewels.  So, that means the ideas in the average McK-Q article are at least a few years old and sufficiently sanitized, yet leading-edge enough so as to project the Firm as a thought-leader among its intended audience of CEOs and other senior members of the managerial class.  

There are good reasons for why the consulting industry is alive and thriving.  Let's go back in time and remember Don Hambrick's AMR article (based on his presidential luncheon address at the Academy in 1993): "What if the Academy Actually Mattered"; for the die-hards among us, that, by the way, was a rhetorical question, whose answer was patently obvious even to the casual observer of the management-education scene.  

From time to time, we, as an institution, pause long enough to engage in introspection, only to conclude that what we do does improve the lives of those we touch at the margin, but take away our legitimizing function in society (read degree-granting status) and the ROI to our constituents becomes that much more questionable.

But, life goes on, as it always has (even for the family of the 9-11-widow who perished in the <st1:city w:st="on"><st1:place w:st="on">Buffalo</st1:place></st1:city> plane crash this week).  This Great-Depression-like crisis, too, shall pass; not much will change in the Academy, which is, after all, home to at least as much intellectual power as the Christian clergy, which has survived two millennia, is home to moral persuasive power.  When you house so colossal a brain-trust, how difficult can survival be?  Who, among the commoners, would know enough (of that esoteric language) to question our raison d'etre?  

Chandru Rajam, PhD

CEO

EduMetry, Inc.

a provider outsourced grading and assessment-of-learning services to higher education

<u1:street w:st="on"><u1:address w:st="on"></u1:address></u1:street>

 .............where the science of learning informs the art of teaching.

Virtual-TA™     www.Virtual-TA.com

EduMetry™      www.EduMetry.com

Responses to Alfie, Paulo, Bruce ...

-        The market seems to be telling us that, yes, it does want tools, methods, frameworks etc. to help develop and manage strategy and performance – some generalised, abstract ability to think strategically doesn't get MBAs into the best jobs, which is why they prefer Finance and other courses, and why the top recruiters are not happy with the strategy skills of their new hires and [I understand] immediately train them in other things beyond strategy that are useful.

-        I fear the reason our strategy tools are marginalised in spite of the negative outcomes we see is that executives and consultants do not believe that using them would make any difference – but we would need to hear from such folk to be sure.

-        The growth point is basically simple – if a firm is making 10% ROIC, it can double profits by getting up to 20%, but it can't keep doing that by trying for 40%, 80% etc. So if it is to give investors increasing cash flows it must, at some point, grow. If that growth needs spending on, say, hiring/training, R&D, marketing/sales etc., this will depress ROIC vs. what it could deliver by not growing. That's why investors and managers have very little interest in ever-higher profitability ratios and why – I humbly submit – the idea that sustained superior profitability is a useful indicator of 'sustainable competitive advantage' is a nonsense. Or maybe I have got this entirely wrong and that is not at all what any strategy research is trying to do? See for example 'How to choose between growth and ROIC' in the McKinsey Quarterly [URL http://www.mckinseyquarterly.com/how_to_choose_between_growth_and_roic_2043]

My interpretation here was much more to affect of, why are our activities in the field of strategy being marginalized when we see so clearly what the negative effects of not using them are?

Of course this transcends strategy and also includes the topics of corporate governance, a question of the justness of the foundations of our underlying economic system (its inherent contradiction to our democratic beliefs), i.e. free market and neo liberal economic policy as well as heavy aspects of human behavior.

Bruce Kibler

If the point you are making is that growth is more important than profitability in the eyes of investors, I agree. But is there good empirical support? Can someone who know shed further light on this issue.

Alfie Marcus

Professor and Spencer Chair in Strategy and Technological Leadership
Strategic Management and Organization Dept.
<st1:place w:st="on"><st1:placename w:st="on">Carlson</st1:placename> <st1:placetype w:st="on">School</st1:placetype></st1:place> of Management
<st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Minnesota</st1:placename></st1:place>

Kim Warren wrote:

We had a great post in December from Richard Whittington, drawing attention to a series of articles on this topic, so thought we might see an avalanche of responses – maybe from younger folk in the field worried about its future [and theirs], or from more experienced figures vigorously refuting that there is a problem. So the subsequent silence is puzzling.

The evidence may be mostly anecdotal, but it seems increasingly recognised that students see little value in strategy classes, recruiters don't value what those students learn in those classes, and executives and consultants don't use the tools that have been so painstakingly put together. Why does no-one dare mention this 'elephant in the room'?

If "there is nothing so useful as good theory" and our tools are not used, the conclusion seems inescapable – we have little useful theory! If we accept that there actually is a big problem here – where has it come from? I will probably get beaten up for this, but here goes with two suggestions ...

Most of the tools, whether external or internal oriented, originate from efforts to explain profitability [rents], when that is of little interest to either investors or managers. It has been axiomatic to those in Finance for decades that investors value growth in free cash flows .. which does not correlate with maximising rents. Profitability needs to sufficient to either fund growth or enable funds for growth to be raised, and growing companies are likely to be less profitable than they could be if not growing. How long have we known this? – since Penrose in the 1950s! [ In some cases e.g. Amazon  'sufficient' profitability can even be negative for many years so if sustained superior profitability is the goal, where are the case studies exploring how UNsuccessful Amazon has been?!].

Most of the tools offer ways to find  a good strategic 'position' for a firm vs. rivals .. but this question only arises at start-up or at major cross-roads in a company's history [most of the great case study companies we use in class have sustained essentially the same 'position' for decades [IKEA, Southwest Airlines, eBay ...] , or else made just one or two major changes [IBM, Nokia ...].. so what does 'strategic management' actually do in between these once-in-a-lifetime events? If we were honest we would rename our classes, if not our whole field 'Strategic Positioning' instead of Strategic Management.

The consequences of having no useful tools for the continuing strong strategic management of organizations are serious. We are experiencing right now the result of incompetent strategic management of many of our major corporations, especially but not exclusively the banks of course. So – are we going to continue ignoring this elephant and keep churning out research and tools that no-one values, or really try to do something about it?

... excuse me while I go hide under the table.

Kim Warren

Dear All

This topic came up earlier this year, and Joe Bower mentioned a relevant Dialog forthcoming in the Journal of Management Inquiry. The Dialog has now been published under the heading: 'Directions for a Troubled Discipline: Strategy Research, Teaching and Practice', JMI, 17, 4, 265-286, 2008.

The three main papers are:

Joe Bower, 'The Teaching of Strategy: From General Manager to Analyst, and Back Again?'

Rob Grant, 'Why Strategy Teaching should be Theory Based'

Paula Jarzabkowski and Richard Whittington, 'A Strategy-as-Practice Approach to Strategy Research and Education'.

The link is http://online.sagepub.com/cgi/searchresults?src=selected&andorexactfulltext=and&journal_set=spjmi&fulltext=jarzabkowski

-- 

Please note new email address

amarcus@umn.edu

So glad to see this discussion.

I was talking to a friend of mine . He is of the entrepreneurial kind. He was telling me that, even though he enjoyed it, he was a little bit tired of hearing why firms had been successful.  Nobody in strategy was telling him how to go forward.

I am not sure it summarizes the discussion, but to me it is worth listening to.

Thanks

Carlos

Responses to Alfie, Paulo, Bruce ...

-         The market seems to be telling us that, yes, it does want tools, methods, frameworks etc. to help develop and manage strategy and performance – some generalised, abstract ability to think strategically doesn't get MBAs into the best jobs, which is why they prefer Finance and other courses, and why the top recruiters are not happy with the strategy skills of their new hires and [I understand] immediately train them in other things beyond strategy that are useful.

-         I fear the reason our strategy tools are marginalised in spite of the negative outcomes we see is that executives and consultants do not believe that using them would make any difference – but we would need to hear from such folk to be sure.

-         The growth point is basically simple – if a firm is making 10% ROIC, it can double profits by getting up to 20%, but it can't keep doing that by trying for 40%, 80% etc. So if it is to give investors increasing cash flows it must, at some point, grow. If that growth needs spending on, say, hiring/training, R&D, marketing/sales etc., this will depress ROIC vs. what it could deliver by not growing. That's why investors and managers have very little interest in ever-higher profitability ratios and why – I humbly submit – the idea that sustained superior profitability is a useful indicator of 'sustainable competitive advantage' is a nonsense. Or maybe I have got this entirely wrong and that is not at all what any strategy research is trying to do? See for example 'How to choose between growth and ROIC' in the McKinsey Quarterly [URL http://www.mckinseyquarterly.com/how_to_choose_between_growth_and_roic_2043]

My interpretation here was much more to affect of, why are our activities in the field of strategy being marginalized when we see so clearly what the negative effects of not using them are?

Of course this transcends strategy and also includes the topics of corporate governance, a question of the justness of the foundations of our underlying economic system (its inherent contradiction to our democratic beliefs), i.e. free market and neo liberal economic policy as well as heavy aspects of human behavior.

Bruce Kibler

If the point you are making is that growth is more important than profitability in the eyes of investors, I agree. But is there good empirical support? Can someone who know shed further light on this issue.

Alfie Marcus

Professor and Spencer Chair in Strategy and Technological Leadership
Strategic Management and Organization Dept.
<st1:place w:st="on"><st1:placename w:st="on">Carlson</st1:placename> <st1:placetype w:st="on">School</st1:placetype></st1:place> of Management
<st1:place w:st="on"><st1:placetype w:st="on">University</st1:placetype> of <st1:placename w:st="on">Minnesota</st1:placename></st1:place>

Kim Warren wrote:

We had a great post in December from Richard Whittington, drawing attention to a series of articles on this topic, so thought we might see an avalanche of responses – maybe from younger folk in the field worried about its future [and theirs], or from more experienced figures vigorously refuting that there is a problem. So the subsequent silence is puzzling.

The evidence may be mostly anecdotal, but it seems increasingly recognised that students see little value in strategy classes, recruiters don't value what those students learn in those classes, and executives and consultants don't use the tools that have been so painstakingly put together. Why does no-one dare mention this 'elephant in the room'?

If "there is nothing so useful as good theory" and our tools are not used, the conclusion seems inescapable – we have little useful theory! If we accept that there actually is a big problem here – where has it come from? I will probably get beaten up for this, but here goes with two suggestions ...

Most of the tools, whether external or internal oriented, originate from efforts to explain profitability [rents], when that is of little interest to either investors or managers. It has been axiomatic to those in Finance for decades that investors value growth in free cash flows .. which does not correlate with maximising rents. Profitability needs to sufficient to either fund growth or enable funds for growth to be raised, and growing companies are likely to be less profitable than they could be if not growing. How long have we known this? – since Penrose in the 1950s! [ In some cases e.g. Amazon  'sufficient' profitability can even be negative for many years so if sustained superior profitability is the goal, where are the case studies exploring how UNsuccessful Amazon has been?!].

Most of the tools offer ways to find  a good strategic 'position' for a firm vs. rivals .. but this question only arises at start-up or at major cross-roads in a company's history [most of the great case study companies we use in class have sustained essentially the same 'position' for decades [IKEA, Southwest Airlines, eBay ...] , or else made just one or two major changes [IBM, Nokia ...].. so what does 'strategic management' actually do in between these once-in-a-lifetime events? If we were honest we would rename our classes, if not our whole field 'Strategic Positioning' instead of Strategic Management.

The consequences of having no useful tools for the continuing strong strategic management of organizations are serious. We are experiencing right now the result of incompetent strategic management of many of our major corporations, especially but not exclusively the banks of course. So – are we going to continue ignoring this elephant and keep churning out research and tools that no-one values, or really try to do something about it?

... excuse me while I go hide under the table.

Kim Warren

Dear All

This topic came up earlier this year, and Joe Bower mentioned a relevant Dialog forthcoming in the Journal of Management Inquiry. The Dialog has now been published under the heading: 'Directions for a Troubled Discipline: Strategy Research, Teaching and Practice', JMI, 17, 4, 265-286, 2008.

The three main papers are:

Joe Bower, 'The Teaching of Strategy: From General Manager to Analyst, and Back Again?'

Rob Grant, 'Why Strategy Teaching should be Theory Based'

Paula Jarzabkowski and Richard Whittington, 'A Strategy-as-Practice Approach to Strategy Research and Education'.

The link is http://online.sagepub.com/cgi/searchresults?src=selected&andorexactfulltext=and&journal_set=spjmi&fulltext=jarzabkowski

-- 

Please note new email address

amarcus@umn.edu

Sorry for X-posting ... thanks for the many open and off-line responses to this topic – lots of useful things to think about. One question asked off-line was whether in these times of devastated profitability, growth is now of little interest .. see a response to that below.

Unless I missed something, there seems little dissent that:

-          we have a problem with current strategy methods not being valued by the people who are supposed to use them,

-          ... which implies we have little useful theory [notably that seeking explanations for profitability is the wrong question], and

-          existing strategy tools focus on the rare issue of choosing strategic position, rather than what management actually does to steer strategy and performance continually through time.

If this is all about right, perhaps any firm's 'sustained competitive advantage'  shows up not in persistent higher profitability, but in stronger sustained growth in cash-flows. Perhaps this implies that the question strategy should be asking [in business cases at least] is 'what does management actually do to deliver sustained growth of cash flows ahead of others?' On this measure, performance of strong firms might be tens or hundreds of times greater than that of weaker ones, so an answer would seem to be of more interest to our customers .. executives, consultants, students .. than a few percentage points of ROIC or 'rent'.

It would be useful to hear more from the senior figures in the strategy field as to whether this is all way off-target – I would not want to stand accused of encouraging colleagues down a long, deep and dark blind alley. Maybe there is no problem with the reputation of Strategy in its market-place, with basic strategy theory, or with the utility of the tools and methods that are recommended and taught?

Kim

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As regards whether growth is still a relevant question in these recessionary times ...

Perhaps my original post was not clear enough – I meant it to say that, as I understand it, investors are interested in the present value of future cash-flows – not growth per se. There is no point in simply growing market share or revenues if it does not ultimately improve future cash flows [the error that followed misuse of the growth-share notions from BCG in the 70s]. But as we speak, companies are understandably trying hard to maintain revenues In the current recession [i.e. minimise negative growth] as well as hold up profitability.

If this is right, the recession makes no difference to the fundamental point. If cash flows with poor or average strategy would likely decline sharply, and good strategic management would lead to a better cash-flow trajectory, then that is what will be best for investors and what management should be pursuing. Profitability [ROIC or similar] is but one lever to achieve that – and one that comes with big dangers. If your ROIC was previously 10% and recession hits it down to -5%, then investors would no doubt like to see it back up to, say, 5% ... unless 5% and no subsequent growth was all they would ever see thereafter.

Percentages are not at all helpful in all this. If this scenario meant that your 10% ROIC corresponded to profits [or more strictly free cash-flows] of $10m/year, investors should prefer you to accept the minus-$5m if it meant that next year you get back to say, zero, then $10m, then $15m etc rather than $5m/year for ever.

Maybe the main reason firms pursue dangerous cost-cutting in a desperate attempt to prop up profitability is precisely because the naïve analysts who comment on their performance understand so little about the link from good strategic management to a firm's value, and constantly bully management for 'poor profitability', rather than asking whether current profitability is actually in investors' best interests. For an example, see my blog-post on what looks like a big strategic error by Starbucks, who are trying to sustain profitability by cutting costs sharply – including the costs of supporting exactly the 'sustained competitive advantage' that drove their historic strong growth in cash flows .. their unique investment in staff rewards and training which features in so many great case studies on the company. [URL http://www.kimwarren.com/2008/11/big-mistake-at-starbucks/ ]

To see a powerful and lucid explanation of why growth in free cash-flow is the right measure for investors and executives [and strategy researchers!] to focus on, see the statement from Jeff Bezos, founder and CEO of Amazon.com that opens the company's 2004 Annual Report ... at http://library.corporate-ir.net/library/97/976/97664/items/144853/2004_Annual_report.pdf . Prior to founding Amazon.com, Jeff was a star Wall St analyst .. to be distinguished from the more average folk in that world. Professional guidance on the same issue features in many finance reference books, e.g. Copeland, Koller, and Murrin, Valuation-Measuring and Managing the Value of Companies, Wiley, Chichester .. http://eu.wiley.com/WileyCDA/WileyTitle/productCd-0471702218.html . It's not perfect – e.g. the section on forecasting growth is way off, but as regards how firm performance is valued, it looks like essential reading for anyone planning to teach strategy.

Kim Warren

Kim Warren

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