I will define strategy as a systematic effort to change dreams into reality.  Destiny is defined by one online dictionary as:

  • an event (or a course of events) that will inevitably happen in the future
  • The ultimate agency regarded as predetermining the course of events. “we are helpless in the face of destiny”
  • Fortune: your overall circumstances or condition in life (including everything that happens to you); “whatever my fortune may be”; “deserved a better fate”; “has a happy lot”; “the luck of the Irish”; “a victim of circumstances”; “success that was her portion”

Strategy and destiny are polar opposites. One woman says that she is in charge of her fate and another man says “it was destiny.”  One man says “I made it happen” and another says “He got lucky.”  I have a good friend who argues that there are no choices in life. Everything is preordained. Success, failure, happiness and sadness are all controlled by fate. There are no decisions and no alternatives. If someone makes a fortune, it was destined to happen. No matter what they did, they would have made the fortune anyway.  In my friend Bruce’s’ world, there are no mistakes, since we could not have chosen differently. What does any of this have to do with business?  I will get to that shortly. 

First a question for you: How many of you saw the inevitable demise of GM or Blockbuster?  I will bet that roughly 1/ 3 of you can honestly say that you saw the writing on the wall ten years ago.   My ex-boss and friend Lou Schultz says that he saw the writing on the wall 20 years ago when our consulting firm was working with GM.  Was Lou a prophet? Did Lou see things that no one else saw? Was it destiny or divine fate that made GM declare bankruptcy? Was it inevitable that they lost over 30 percent of their market share and hundreds of thousands of jobs?  If so, why have Honda and Toyota prospered in the same market? 

Fortune Magazine ran an article describing the mindset at GM and how a lack of imagination and vision ran the company into the ground.  According to the Fortune analyst, it was not destiny, bad luck or fate that caused the bankruptcy of GM.  It was simply narrow-mindedness and lack of foresight.  Philippe Silberzahn (April 1, 2010) in a very insightful blog compares the reasons that civilizations decline (noted by Arnold Toynbee) to the eventual bankruptcy at GM.  He writes:

“What, for instance, is the cause of General Motors’ bankruptcy in 2009? Clearly, this comes at the end of a long decline that visibly started back in the early 1970s. It could be the entry and success of the Japanese cars in the US at that time. But we suspect this would be more the symptom than the cause. In fact, some researchers (Santos, Spector and Van der Heyden) attribute GM’s breakdown to a decision made by its new CEO back in… 1958. That year, the divisional managers of the company stopped being part of the company’s policy (i.e. executive) committee. This marked the end of the interweaving between strategy and operation. From then on, the disconnect between the two grew: strategy became increasingly detached from the field, while operations only sat at the receiving end of decisions made “upstairs”. Instead of being fully engaged in policy decisions, divisional managers were told what to do and how to do it. The creative interweaving of strategy and operation was broken.”

No destiny here!  GM’s case is simply a failure of strategy and decision making.  Peter Drucker said in a conference on Knowledge Management in San Diego several years ago that the major reason for the demise of all organizations was a failure to correctly perceive reality.  If you think of decision making and reflect on the perils of illogical reasoning that I posted in my last blog, you might wonder if it was possible to make any good decisions. However, I think reality would show that at least as many right decisions are made as wrong decisions. For the sake of simplicity, we can summarize all of Kahnemans and Tverskys “errors in judgment and reasoning” into two major categories as follows. 

First.  Denial:  We do not want to admit that the world has changed and that our cheese has been moved.  “Who moved my cheese? I want my cheese back.”  “It is simply not true that all videos will eventually be on demand and downloaded by satellite or cable connections.” “If I can only hang in there long enough, maybe the competition will go away or maybe my customers will ignore the higher quality of my competitors.”  “We have always done it this way, why should we change.”

Second. Perceptual Bias:  We see the world that we want to see and not the world as it is.  “Our quality is just as good as their quality.” “We are just as innovative as the competition.”  “Nobody could understand our business.”  There are many errors in decision making that can be categorized under the label of “biases.’  T. K. Das and B. S. Teng have a paper titled: Cognitive Biases and Strategic Decision Making Process: An integrative Perspective (Journal of Management Studies, November, 1999) that does an excellent job of describing many of these biases and their effects on strategic decision making. 

Unfortunately, there are no pills or simple rules for avoiding either of these two systemic categories of problems.  No one is immune to denial or bias. I would love to be able to tell my clients that by hiring me, their success is assured. “I have the remedies to all of your problems and for a small fee I will guarantee that you will never make another strategic error.”  Many of you are familiar with the Monday morning quarterback syndrome and are rightfully skeptical of consultants and other prophets who come around after the fact with the “correct” solutions.  On the other hand, what of Peter Schiff, Nouriel Roubini and Charles Morris who all precisely and accurately described the present “Great Recession” BEFORE THE FACT?  What of Juval Aviv’s warnings to the Bush Administration that terrorists would use planes as bombs and target high profile buildings and monuments one month BEFORE 9/11? Were these people just lucky?  Do you still believe in luck? If so, then would you note all of these situations as simply fate or destiny or karma?  Then there is no reason to work on strategy.

My definition of luck is stolen from someone whom I no longer remember.  It goes like this:  “Luck is where preparation meets opportunity.” In part 2 of this blog, I will look at the methods and reasons that enable some leaders to describe scenarios and future events that seem to elude the rest of us.  Why did Churchill see the danger in Hitler that was ignored by other leaders in Europe? Why did Honda see the opportunities to sell motorcycles in the US that Harley Davidson missed?  Why did Southwest Airlines remain profitable while the rest of the US airline industry was going bankrupt? How come the three largest American Brewers are now foreign owned but we have over 400 craft brewers in the US making a living selling beer?  Tune in to the next installment for answers to these and other questions concerning strategy and destiny.

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