Coherence in Strategy: The Importance of IF-THEN Reasoning and Implicit Assumptions

A new strategy is always a bet on the future. It is impossible to predict whether it will lead to success. We will only know afterwards. On the other hand, it is possible to check upstream if it is consistent. One example suffices to convince oneself of this.

When Apple released the first version of the iPhone in 2007, Nokia executives were convinced that it would not be successful because it did not use the most advanced technologies. For example, it used 2G while most competitors’ phones already benefited from 3G. It was also not very reliable and its battery life was limited. The reasoning of the leaders of Nokia could therefore be summarized as follows: the iPhone does not use the most advanced technologies. It will therefore not be successful.

Unfortunately, this reasoning was totally biased because the conclusion (the iPhone will not be successful) did not necessarily follow from the observation (the iPhone does not use the most advanced technologies).

To determine if a strategic reasoning is coherent, it is imperative to bring out the implicit hypotheses and to question their relevance. In the case of the iPhone, a “good” strategic reasoning would have taken the following form:

IF the iPhone does not use the most advanced technologies
And IF a phone that does not use the most advanced technologies has no chance of success
THEN the iPhone will not be successful

We then immediately realize that the reasoning of the leaders of Nokia did not “hold water”. Many products are successful even though they don’t use the most advanced technologies. Using the most advanced technologies is therefore not a necessary condition for success…

Discussions about strategy often lack rigor. To check if a strategy is coherent, nothing beats IF type reasoning (a hypothesis is true…) THEN (we will reach this conclusion…). But be careful not to forget to take into account all the assumptions that should be true for a strategy to be coherent. Nokia executives made this mistake…and it was fatal to them.

Source : Carroll, G. R., & Sørensen, J. B. (2021). Making Great Strategy: Arguing for Organizational Advantage. Columbia University Press.

2023-05-31 22:00:30

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