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Building great strategies

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Article

Whittington, Richard. “Greatness Takes Practice: On Practice Theory’s Relevance to Great Strategy.” Strategy Science, Vol. 3, No. 1, March 2018, pp. 343-351.

Summary

The author explores strategy as practice principles to identify five key principles that are capable of building great strategies. The five principles are value the ordinary, see past markets, embrace diversity, allow for the bottom up, and accept different forms of greatness. The article points out that great strategies don’t have to come from the extraordinary. In fact, most great strategies born from the extraordinary are subject to survival bias—that is, they are recognized as great and extraordinary precisely because they are the one example that survived using that strategy. Instead, Whittington argues that great strategy can, and often does, come from the mundane.

What this means for food and agribusiness

I have written in recent reviews about disruption in the agriculture and food markets and the need for our businesses to embrace innovation and maybe even new business models. But I have always approached this with some trepidation toward being too radical in our approach. Our businesses have been successful and while change is inevitable and we have to be able to adjust to the forces that are driving our industry, we should do this with a clear eye on our roots. I believe the authors in this article have highlighted some key principles that underscore the development of a winning strategy that give us the greenlight to not reach for the radical. Below I will highlight these key principles with an eye toward our industry.

The first principle is to value the ordinary. Whittington points out that “greatness” in strategy is often linked to drama with notions like “blue oceans” and “disruptive innovations.” But more often, winning strategies are derived from the ordinary or routine. In particular, great ideas often come from recognizing the mundane, every day, small problems that frustrate our customers in their daily lives. Can we borrow from the field of anthropology and observe our customers in the routine of their daily lives with an eye toward what seems frustrating and yet taken for granted as “just the way it is?” Could this provide insights that allow us to create value for them in new ways? After all, if Steve Jobs had asked people what they wanted in their cell phones, we would not have the iPhone today. He instead noticed their struggles with small key pads, small screens, and the desire to use them as information devices not just phones.

The second principle is to see past markets. The author notes that our standard strategy tools, such as Porter’s Five Forces and transaction cost economics are boiled down to the calculation of economic advantage. Yet, this boiled down version of strategy often misses some important connections beyond prices and transactions. In particular, underlying regular relationships can create enduring patterns of connection that muddy the calculations of costs or prices. How often do we hear in our industry how “it’s all about relationships?” I am guilty, at times, of pushing back on this notion of relationships as a strategy. But, the reality is that the day-to-day business of our industry is as likely to be relationship driven as economics driven. Often, success in our industry is connected to a group of individuals who “grew up together,” have shared experiences, and built trust over time. These kinds of connections are invaluable strategic resources that can be leveraged to create winning strategies even in the face of dynamically changing markets.

Whittington identifies embracing diversity as another key principle of developing great strategy. He notes that strategy tends to focus on the efficiency advantages of specialization. But innovation gains are most often derived from diversity not specialization. Whittington notes immigrants account for only 15 percent of the workforce in the U.S. but 27 percent of entrepreneurs. Research on migrant entrepreneurial success traces back to the willingness to embrace diverse social practices in their businesses. Diversity is clearly a key part of strategy in many of our large agribusiness and food firms. However, for the smaller and mid-size companies that make up the majority of our industry are we embracing the diversity of thought, diversity of experience, and diversity of culture that can lead to new ideas? It’s is very easy, in my experience, to fall into the trap of wanting to hire talent that looks and thinks just like us, but this may be what hinders us from becoming a truly great company.

The author argues that strategy should allow for bottom-up participation. Much of the strategy literature would suggest following a strategy cascade where strategy is derived in the executive ranks and cascade down through the organization with appropriate structures and incentives to induce the necessary behaviors from people in the organization. Often, in practice, the talented people in an organization seek ways to circumvent the structures and incentives of the top down strategy. They don’t do this out of spite but instead out of a desire to seek value creation for the company from a perspective they might see that was not seen from above. The key takeaway here is to not abandon top management direction, but as we develop strategy we should leave room for initiative and reinterpretation of the strategy at the ground level. We know that winning in today’s agribusiness and food industry is primarily about talent. Talent doesn’t just reside in the executive suite. Deriving tight strategy directives at the top stifles the talent in the organization precisely at a moment in time where we need to unleash our talent to search for value creation in creative ways.

My favorite insight from this article is the fifth principle of accepting different forms of greatness. I am an economist by training. As such, the concept of profit maximization has been drilled into my subconscious. But, profits aren’t the only measure of greatness. Whittington refers to the Mittlestand companies of Germany as an example. These companies are family-owned and controlled, with long-run investment and deep roots in local communities. Sound familiar? Today’s fast-paced and dynamic environment can easily lead us to the narrow impatient view of profit maximizer. But often, as I work with the great family companies that form the back bone of much of our great food and agriculture industry, I am reminded that metrics such as reputation, sense of community, long-lasting relationships, and a desire to give back to those in need can and should coexist with financial goals. While focusing on metrics beyond profits may not provide a direct path to immediate profit maximization, I have found that it does lead to companies that endure through the inevitable ups and downs of our industry. And perhaps true greatness in our industry is a company that not only survives the turbulence, but does so with an ever-increasing recognition of its integrity, relationships, and contributions to the industry—not just its profitability.

AUTHOR
Allan Gray
Allan Gray
June 27, 2018