Credit Stephen Bungay
There are lies, there are big lies, and then there are myths. And myths are the worst of the three.
Unless you have sealed yourself off in a social media echo chamber, lies are easy to spot. Except, that is, when the lie is a big one. People hearing or reading big lies start to doubt themselves and think ‘maybe I have got things completely wrong’. That’s why politicians and propagandists tell big lies. They’re not trying to assert a truth so much as sow doubt and confusion about what is true. That’s bad, but a smart person can resist a big lie by looking at the evidence at hand.
Myths present a different, subtler trap, which is what makes even smart people fall for them. They are usually based on a plausible half-truth, and they do not immediately lead you astray if you start to act on them. It’s only with the passage of time that you realize that you’ve made a mistake, but by then your wrong choices can’t be unmade and the damage is done.
We encounter myths in most realms of human endeavour, and the discipline of strategic thinking is no exception. Here are five of the most pernicious ones I’ve encountered in a long career studying strategy and advising companies about it:
Myth 1: Strategy is about the long-term
Why it’s plausible
In some industries, the basis of competition can remain unchanged for decades, and leaders who stick to their strategy through downturns as well as upturns and ignore surface noise do very well.
Why it’s wrong
It is precisely when long-held assumptions about an industry are challenged that strategic changes happen. And you will need to make those changes very quickly. Thinking about strategy as some kind of long-term commitment can blind you to that need Strategy is not about the long term or the short term, but about the fundamentals of how the business works: the sources of value creation, the drivers of the cost to deliver it, and the basis of competition. To get a grip on strategy, we do not need to lengthen the time horizon of our thinking, but its depth. Far from being about things we are going to do in the future, strategy is about what we are going to do now in order to shape the future to our advantage.
Myth 2: Disruptors change strategy all the time
Why it’s plausible
It looks as if Amazon and the platform giants like Google and Facebook keep changing strategy because they use the massive amounts of cash they generate to innovate, bringing out new products and services every year. Innovation is easily confused with a change in strategic direction, and sometimes it does indeed trigger such a change.
Why it’s wrong
In the case of Amazon and the rest of Big Tech, most of the innovative new products and services reflect a single, consistent strategy, one that’s been familiar to business people since at least the 1960s. That’s when Bruce Henderson, the founder of BCG, observed that in many businesses, costs decline by a predictable amount with every doubling of cumulative volume. The implication was that by pricing ahead in anticipation of those cost declines, a company could sacrifice current margins to gain share, achieve market leadership and then reap the gains. The strategy was captured in the imperative: ‘Cut price and add capacity’. That’s basically what today’s platform businesses are doing – though do they use more jazzy vocabulary like ‘blitzscaling’ or ‘hypergrowth’ and add some twists. For today’s platform businesses for instance, the imperative could be called ‘Give it away and add users’. But it’s just a more radical version of a strategy that’s more than half a century old.
Myth 3: Competitive advantage is dead