b-school, Business, Economics, History, Macroeconomy, Management, MBA

Thinking strategic (from organisations to the economy)

Coming from strategos, the greek word for general or commander, this is one of the most used -and missused- words all around. People use the world strategy to make their position more sexy, combining it with words like direction, information, product, customer or even online, web 2.0 and blog. Always followed by strategy. That way you can give your card proudly.

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In this card you can also read the strategy!!!

The Chinese had their say with Sun-Tzu, that was the first strategy writer ever to be known. He was so good that his book, The Art of War, is still widely read today. His ideas are about winning the battle before the battle is even fought. For that you need to convince your enemy that you’re strong in places you are not, and hide your strongest points, so that he is moved to a position of weakness. In this position of weakness you can overcome a stronger enemy.

And then, when the battle is fought, we move from strategic to tactics. That means we associate the strategy concept with planning, and tactics are closely related to execution. Long run against the short run.

Another point of view, strategy sees the big picture, the systemic view. (See the Why systems thinking? post). Tactics seek to optimise locally, in execution, right now. Tactics are operational. Think about allocating resources, doing the most of what you scarcely have. Some things that come naturally, decisions you just have to make.

While strategy is not obvious at all. It’s necessary to forget your day-to-day, step back, try to see it all, reflect, interiorise, learn, generate new ideas, evaluate them, multicriterise them, plan.

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I’m not going to focus on Ansoff (or Porter afterwards) that are always referred as father (and nourisher) of strategy. Tracing the roots of economic thought, we can find someone in the 19th century that was already grasping the idea. It was Germany and later in the US, and this man is an economist: Friedrich List. He didn’t live long. After a fortune reversal in America, he committed suicide in 1846.

List defended the idea of national economics, an important rule for the state in the economy. He proposed high tariffs on imported goods to protect the local industries, that is protectionism, plus the government implication building infrastructures and the need for a national central bank. Do those ideas sound familiar to you? In fact, with Alexander Hamilton, he cofounded the American School of Economics that is still alive today, only to be confronted by Keynesianism in the mid-twentieth century.

But the funny thing is that he also had a big influence on the other side. He was offered the editor post of a new liberal newspaper in Cologne, Rheinische Zeitung, that he didn’t accept for health reasons. Guess who accepted? Karl Marx.

Why is that important? List saw the need to plan by the state. There could be no nation letting individuals seek their own interest when that interest could harm colective interests. Freedom meant suicide for nations. There was a need to plan and decide thinking of the big picture: the state.

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When Ansoff wrote about strategy in the mid-1960s, those ideas were heavily assumed by society. Democratic countries also needed central planning. Even companies did. Igor Ansoff, an American professor of Russian origin was the one to collect the imputs of those diverging currents and wrote the first book on strategy planning. Engineer and mathematician, overly analytical, he defined strategic decisions as those that would not generate themselves, opposed to operational and administrative decisions.

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