Myth 1: Strategy Is About The Long-Term: Assignment

The document discusses and rebuts five common myths about strategy: 1. Strategy is not about the long-term, but understanding how the business works currently to shape the future. 2. Disruptors like Amazon have consistent strategies to cut prices and add capacity, not constantly changing strategies. 3. While competitive advantages may be harder to sustain, companies like Amazon and Apple have massive advantages and barriers remain very high. 4. Agility alone does not replace the need for a coherent strategy to direct resources effectively. 5. There is no need for a separate "digital strategy"; strategy is understanding how the business works under changing conditions like new technologies.

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Myth 1: Strategy Is About The Long-Term: Assignment

Uploaded by

Mrunal Waghchaure

Available Formats

Download as DOCX, PDF, TXT or read online on Scribd

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Assignment

There are lies, there are big lies, and then there are myths. Unless you have sealed yourself off in
a social media echo chamber, lies are easy to spot. People hearing or reading big lies start to
doubt themselves and think 'maybe I have got things completely wrong'. That's why politicians
and propagandists tell big lies. That's bad, but a smart person can resist a big lie by looking at the
evidence at hand. Myths present a different, subtler trap, which is what makes even smart people
fall for them. They are usually based on a plausible half-truth, and they do not immediately lead
you astray if you start to act on them.

Myth 1: Strategy is about the long-term

Why it's plausible In some industries, the basis of competition can remain unchanged for
decades, and leaders who stick to their strategy through downturns as well as upturns and ignore
surface noise do very well. Why it's wrong It is precisely when long-held assumptions about an
industry are challenged that strategic changes happen. You will need to make those changes very
quickly. Thinking about strategy as some kind of long-term commitment can blind you to that
need Strategy is not about the long term or the short term, but about the fundamentals of how the
business works: the sources of value creation, the drivers of the cost to deliver it, and the basis of
competition. To get a grip on strategy, we do not need to lengthen the time horizon of our
thinking, but its depth. Far from being about things we are going to do in the future, strategy is
about what we are going to do now in order to shape the future to our advantage.

Myth 2: Disruptors change strategy all the time

Why it's plausible It looks as if Amazon and the platform giants like Google and Facebook keep
changing strategy because they use the massive amounts of cash they generate to innovate,
bringing out new products and services every year. Why it's wrong In the case of Amazon and
the rest of Big Tech, most of the innovative new products and services reflect a single, consistent
strategy, one that's been familiar to business people since at least the 1960s. That's when Bruce
Henderson, the founder of BCG, observed that in many businesses, costs decline by a predictable
amount with every doubling of cumulative volume. The strategy was captured in the imperative:
'Cut price and add capacity'. That's basically what today's platform businesses are doing - though
do they use more jazzy vocabulary like 'blitzscaling' or 'hypergrowth' and add some twists. For
today's platform businesses for instance, the imperative could be called 'Give it away and add
users'. It's just a more radical version of a strategy that's more than half a century old.

Myth 3: Competitive advantage is dead

Why it's plausible There is evidence that the time period over which advantage can be sustained
is shortening, which suggests that achieving defensibility is harder, which in turn implies that
barriers are more flimsy and easier to surmount. Why it's wrong Reports of the death of
competitive advantage are vastly exaggerated. The competitive advantages of Amazon,
Alphabet, Apple, Facebook and Microsoft are so massive and the barriers to overcoming them so
high, that public discussion of them revolves around the use of regulation to break them up to
reduce their power. In a very short time, it has become hard to imagine how market forces alone
could tame them. The full truth is not that competitive advantage is dead, but that you need to
rely on multiple advantages rather than just the one. Part of the reason that Amazon & Co will be
hard to unseat is that they have realized this. They are not betting on a building a single big wall,
but on building up lots of smaller ones.

Myth 4: You don’t really need a strategy; you just need to be agile
Why it's plausible Agile firms - especially start-ups - are always turning on a dime and they
certainly don't seem to be following any kind of plan. It is a capability, a very valuable one
which has immediate operational benefits, but that cannot permanently affect a firm's
competitive position unless there is a strategist taking the right decisions about where to direct
that capability. The seeming absence of a plan doesn't mean that successful start-ups don't have
strategies. Most start-ups fail because being able to turn on a dime doesn't mean that you'll turn
in the right direction. Successful start-ups actually do a lot of hard thinking about fundamentals,
questioning and testing basic assumptions with a rigour that incumbents would do well to
emulate. Start-ups have to, because their resources are extremely scarce. If they don't have a
coherent strategy, they will make poor resource allocation decisions, and for them that will not
mean a fall in earnings, but death.

Myth 5: You need a digital strategy

Why it's plausible Digital technology is a way of collecting, storing and using information, and
information is everywhere. You don't want a strategy for digital, IT, finance, HR or anything else
- just a strategy for the business. So don't imagine you can develop a strategy for the digital part
of your business and leave the rest alone. Digital technology and the more specific technologies
to which it gives rise fundamentally change the sources of customer value and the cost of
delivering it. The way to address digital is to think through and lay out all the fundamental
assumptions you have about how your business works and ask yourself if they are still valid.
That's what strategy has always been about. Strategy is still what it has always been: the art of
taking action under the pressure of the most difficult conditions.