Category Archives: Theory

Constructing Cassandra Now Available

Our new book on strategic surprise, Constructing Cassandra:  Reframing Intelligence Failure at the CIA, 1947-2001, is now available for pre-order worldwide.

CC

Interested readers in North America can read reviews and order it via  Amazon.com or Barnes&Nobel;  in the UK you can use Amazon.co.uk; in the rest of the EU, you may wish to use Amazon.fr or Amazon.de; and in Asia you may wish to use  Amazon.jp.

If you do order it thank you.  Naturally, if you have any questions about the book, please ask us.

Advertisements

The Four Drivers of Geostrategy : 1) Demographic change

In a previous post, Milo argued that strategic thinking should begin at the level of Geostrategy (See Start with Geostrategy or call it tactics). Geostrategy looks at how geopolitical factors inform, constrain, and affect business over the long term.  For convenience, you can place these geopolitical drivers into four categories that interact, evolve and change over time:  Demographics, Geography, Technology, and Culture.  It is “climate change” at the level of these geopolitical drivers– and especially the interaction among them – that create the economic and political “weather” of your firm.  These are often same forces that fund managers harness to generate “alpha” for their funds.  It is at their level that true strategy begins.   In this post, we’ll look at the first one, Demographics.

The Foundations of Lasting Strategy

The Foundations of Lasting Strategy

Continue reading

Crafting Non Predictive Strategy, Part III: Acknowledge the Nature of the Problem

Despite formidable developments in business strategy over the last fifty years, organizations keep being disrupted by events they should have seen coming, but didn’t, or by events they saw coming but were unable to avoid or take advantage of. In 1971, NCR was surprised by the rapid rise of electronic cash registers and lost its leadership of the market. In 2007, Nokia was unable to react to the launch of the iPhone, an event the Finnish firm dismissed as minor, and is now struggling to survive. In 2011, the Arab uprising came as a complete surprise to everybody, not just business and governments but the people involved as well. And the list goes on:  if strategy is about addressing the key challenges an organization face, then the general lack of preparedness (if not prevention of) the economic and political crises that the world has been facing since 2008 is a massive failure of strategy. Hence it’s no surprise that in a survey conducted in 2011 by consulting firm Booz, fully 53% of senior executives did not think their company’s strategy would be successful. Houston, we have a problem…with strategy. Continue reading

Crafting Non-Predictive Strategy, Part II: Start with who you are

In the first part of this series, Milo and I examined the complexity of nonlinear environments and tried to show how, when confronted with such an environment, energy spent on a deep understanding of the present beats attempts at predicting the future.  Hence our call for a non-predictive approach to strategy.

Nonlinear systems can be found in nature, but they are particularly common and problematic when they involve human issues.  While such human nonlinear systems can display regularities over long time periods, most major political, economic and business issues are essentially nonlinear and permeated by social facts.  What such human-centered, nonlinear systems have in common but which is often overlooked is that one cannot deal with them as if they were natural science problems.  For one thing, and as we have argued in a recent Forbes article with the example of Usama bin Ladin, how you define the issue you’re dealing with depends on who you are.  This is also the reason that “genius” fails.

Continue reading

Repeat after me: “Why won’t the price mechanism work?” – Energy independence and neo-Malthusian commodity fears

I’m not supposed to be blogging.  Philippe and I have a book deadline at SUP this week.  We have a Forbes piece due soon, too.  And I have a speech to prepare for an Institutional Investor Forum in mid-September.  So I’m going to make this quick…

Tonight I went out for dinner with a stack of reading to catch up on.  Over indifferent Italian, I read two articles that I have to share.  One I want to share because it’s so smart, and the other I want to share because it’s the opposite, but it parrots several popular misconceptions.

Continue reading

Crafting Non-Predictive Strategy, Part I: Deep Understanding Beats Prediction

As Milo and I have argued before, the environments and issues businesses deal with are more complex than traditional strategy models admit.   Business issues today display high levels of uncertainty, they can behave non-linearly, and they can be vulnerable to “Black swans”, i.e. low-probability but high impact events that disrupt even the best formulated strategies.  The added difficulty for strategists and managers is that nonlinear environments often appear linear for an extended time period (think US house prices).  As a result, some conclude that what seems to be an essentially linear pattern (prices fluctuate a bit around a ‘long term trend’ but always rise), are linear in reality – before a radical change occurs that completely disrupts previously assumed patterns (e.g. prices fall dramatically).  In short, people often assume an environment is linear and predictable when in fact the continuity we observe is only a particular case of limited duration.  To make matters worse, with many nonlinear systems change is not nicely spread over the years:  most of the cumulative change occurs in one, single – often dramatic – occurrence.  In the language of engineering, some things don’t “fail gracefully” (e.g. a bridge that breaks suddenly instead of bending slowly).

Not a “graceful failure”.

Continue reading

Workshop on ACH – Analysis of Competing Hypotheses

Milo and I organize a workshop on Tuesday, May 29 on ACH (Analysis of Competing Hypotheses). ACH is a tool originally developed by Richards Heuer at the CIA to analyze complex and uncertain situations. It is widely used in intelligence and international politics, but Milo and I think it applies equally well to business for strategic decision making. ACH uses a deceptively simple framework to use ideas from the scientific method, cognitive psychology and decision analysis to overcome a common but immensely important bias:  the fact that we tend to perceive what we expect to perceive rather than what actually exists.

Continue reading