Joseph Nye, an eminent political scientist at Harvard, wrote a book about “soft power” a few years ago. He followed that volume up by devoting a chapter to the concept in last year’s book The Future of Power. So what is “soft power”?
According to Nye, whereas “hard power” grows out of a country’s military or economic might, soft power, “Arises from the attractiveness of a country’s culture, political ideals, and policies.” In the Future of Power Nye examines what it means to be powerful in the twenty-first century, and how the US might set about retaining its place in the world. He thinks soft power will be an important part of the mix, and I tend to agree.
But while I’m generally optimistic about the future of America’s place in the international order , one historical parallel related to soft power disturbs me: the degree to which the threat of terrorism has led the US to create embassy buildings that appear to cower before contemporary threats.
Many business people seem to operate under the unconscious assumption that they’ll gain a competitive advantage through a careful daily reading of the business press. They won’t. The same goes for fund managers seeking to generate “alpha”: the business press alone certainly won’t get you there.
They’re also unlikely to gain a decisive edge by combining the daily parade of conventional economic data with stale “strategic” frameworks like the BCG Matrix (which dates back to 1968), Porter’s Five Forces (created in 1979), or Value Chain Analysis (introduced in 1985). Anyone who has studied business in the last 30 years – including your competition – uses these. They also probably read the same newspapers and buy the same economic data. In short, the old-school “Business Strategy 101” toolkit is like a white shirt in your closet: always safe, sometimes useful, but not a decisive business edge. Face it: apart from their other limitations (see below), these old strategy models are fully depreciated. How is the unconsidered imitation of commonplace ideas “strategic”?
Fully Depreciated Thinking
There is no clearer path towards creating a strategically autistic culture or organization than by mistaking the very definition of strategy. That’s why to gain a competitive advantage in today’s world, you have to do more. In my view, that “more” starts by gaining an understanding of what actually constitutes business strategy, i.e. understanding the deep, structural forces that bear on the long-term success of firms, and how these forces can be engaged and harnessed. In the classes that I teach at IE, I argue that these deep forces are geopolitical. The metaphor that I use to explain my approach is that geopolitics shapes the climate of business, whereas the daily news and conventional economics – even macroeconomics – simply address the weather of business.
Posted in Methodology & Tools, Theory
Tagged BCG Matrix, culture, demographics, geography, geopolitical alpha, Geopolitics, Geostrategy, Integrated Strategy, non market forces, non-market strategy, Porter's Five Forces, resources & routes, strategic autism, Tactics, technology, Value Chain Analysis
Today I was reminded of the perils of forecasting while reviewing a Department of Defense document, the Joint Operating Environment 2010.
“JOE 2010” as it’s called, is designed to provide the various branches of the US Armed Forces a joint perspective on likely global trends, possible shocks and their future operating environment. If you’re interested in geopolitics and strategy, I recommend that you take a look.
Apart from its inherent interest, JOE 2010 opens with a defense planning timeline that business and financial strategy practitioners – and anyone who consumes their work – would do well to bear in mind. I have reproduced it verbatim here:
1900 If you are a strategic analyst for the world’s leading power, you are British, looking warily at Britain’s Age-old enemy, France.
1910 You are now allied with France, and the enemy is now Germany.
Posted in Case study, Theory
Tagged black swan, China, Defense Planning, DOD, forecasting, France, Geopolitics, Germany, grand strategy, Internet, JOE 2010, Korea, NATO, non-predictive strategy, prediction, strategic autism, strategic surprise, strategy, UK, USSR, Vietnam
Near the end of a seminal essay on strategic surprise, Richard Betts writes, “The intelligence officer may perform most usefully by not offering the answers sought by authorities, but by offering questions, acting as a Socratic agnostic, nagging decision makers into awareness of the full range of uncertainty, and making authorities’ calculations harder rather than easier.” I believe that the same should be true for corporate strategy consultants: often their job is to make long-range calculations harder rather than easier.
Why then, is the opposite so often true? In a world in which surprise, disruption and the unanticipated are rife, why do strategists who promise to make calculations easier rather than harder often succeed? I think a phenomenon that I call of “Gresham’s Law of Strategic Advice” is at work.
E pluribus unum
Posted in Theory
Tagged BCG Matrix, Betts, Cicero, complexity, forecasting, Gazit, Gresham, Integrated Strategy, non-predictive strategy, Porter's Five Forces, prediction, strategic surprise, strategy, uncertainty, Value Chain Analysis
One of the things that I enjoy most about the summer break is a chance to reflect upon my goals, and how I’m doing on my path to achieving them. Though sometimes mistaken for its superficial relative “self-help” literature (beset by fads and pop-psychology), the systematic study of self-management is important for any professional. In fact, I wish I’d paid more attention to the topic during my MBA. Anyway, in pursuit of both summer self-reflection and preparing to teach in the autumn, I thought I’d offer my four favourite tools for managing oneself.
Many people are either beginning their holidays or are already in the midst of them. If you’re the type of person who reads a blog like this, you probably already know what you’re hoping to read on your break.
Therefore, I thought I’d try a different approach and offer a summer watching list rather than summer reading list. This list recommends three videos that you might consider for your travels or during your “down time”. All address different aspects forecasting, uncertainty, strategic surprises and decision-making. When you feel like a break from reading, give them a try.
Posted in Methodology & Tools, Theory
Tagged forecasting, foxes and hedgehogs, Gavin, Geopolitics, intelligence, judgement, non-predictive strategy, Saffo, strategic surprise, strategy, Tetlock, Use of history