Robert McNamara, one of Harvard’s most famous MBAs spelled out the following approach to military strategy:
“We must first determine what our foreign policy is to be, formulate a military strategy to carry out that policy, then build the military forces to successfully conduct this strategy”.

This was the classic case study approach to strategy.  Students assess the external environment, identify distinctive competencies, generate alternative strategies and recommend the best, all without ever having met the ‘customers’, visited the ‘sites’ or seen the ‘products’.

The rest of this formal and analytic approach to the engagement in Vietnam is history. The outcome is aptly described by Edward N. Luttwak of Time magazine. “The customary reward of defeat, if one can survive it, is in the lessons thereby learned, which may yield victory in the next war. But the circumstances of our defeat in Vietnam were sufficiently ambiguous to deny the nation (that) benefit.”  To which we could add that the lessons would only come to those who can add a learning lens to their spectacles.

The design school continues to influence teaching and consulting in strategy today.  The design school strategy model seeks to fit internal capabilities to external possibilities. External analysis (T and O leading to key success factors) and internal analysis (S and W leading to distinctive competencies) feed into a process of strategy creation. Implementation is a separate process.

Premises:

  1. Strategy formation should be a deliberate, tightly controlled process of conscious thought. Strategy is neither intuitive nor natural but must be learned formally.
  2. Responsibility lies with the CEO who controls the strategy in a single mind and carries the responsibility to decided on and then teach the strategy to the organisation.
  3. The model for formulating strategy must be kept simple and informal (allowing for control). The CEO treads a knife edge between intuition and formal analysis.
  4. Each strategy is unique, developed as a creative act, dictated by situation and built on distinctive competencies.
  5. Strategy must be explicit.
  6. The strategy is presented as a fully formulated grand conception, leaving little room for incremental or emergent strategies.
  7. Thinking precedes action. Implementation can only happen after the unique, full-blown, simple and explicit strategy has been fully formulated.

Thomas J Watson, chairman of the board of IBM and famous for his quote, “I think there’s a world market for about five computers.” epitomises the Design School.

Strengths and weaknesses

The centrepiece in the strategic toolkit is the SWOT. This remains popular in textbooks and amongst consultants in spite of new strategic techniques. The SWOT with the design school model is a convenient tool allowing a consultant drop into an organisation, do a SWOT analysis, compile a strategy and move on.

But:

  • Listing strengths on paper is prone to bias and over-confidence and is very different from testing the organisation and experiencing the strengths at work. Research and popular press alike show that listed strengths are of uncertain value.
  • Experience shows that strengths are narrower than expected and weaknesses broader.
  • ‘The business we are in’ cannot be discovered in a paper exercise but requires testing and experience.
  • SWOT information is usually not used in strategy formulation (perhaps just as well).
  • Business literature is full of references to events where assumed strengths either did not materialise or where they did but turned out to be hindrances.

Structure and strategy

Structure should follow strategy and be determined by it. But Structure and the competencies embedded in a structure cannot be easily changed, and structure provides input into strategy. In reality structure and strategy follow each other like your left and right foot in walking.

Making strategy explicit.

Summarising and fixing your strategy requires that you to know exactly where you are going with few serious doubts. This leaves little room for uncertainty, change and learning. Explicit strategies are blinkers designed to focus direction and block out peripheral vision and build resistance to change.

Separating formulation from implementation – detaching thinking from action

Behind the separation of thought and action lies the ambitious assumption that environments are stable, predictable and can be understood and that formulated strategies remain viable and can be transmitted to those who implement.

Developing a niche

Locating an organisation in a niche can narrow its perspective and short-circuit learning about what it could become. Thinkers in the design school try to circumvent this by broadening definitions.

Most have heard the wisdom that McDonalds is the real estate business rather than fast food. In 1960, Theodore Levitt wrote “Marketing Myopia”, urging firms to define themselves in terms of broad industry orientation and underlying generic need, rather than narrow product or technology terms. Railroad companies are in ‘Transport’ and oil refiners in ‘Energy’.

Companies, academics and consultants had a cerebral fiesta based on over-ambitious assumptions about the strategic capabilities of organisations. A ball-bearing company was ‘reducing friction’, a chicken farm, ‘providing human energy’ and garbage collection was ‘beautification’. And the classic suggestion that “buggy whip manufacturers might still be around if they had said their business was about self-starters for carriages”. What material supply, technology, production process, competency or distribution channel could ever facilitate such a change? A more logical generic categorisation would be ‘flagellation’ wherever that leads.

The external environment is not a fruit that can be plucked from the tree of external appraisal. It is a major, sometimes unpredictable force to be reckoned with, including unexpected change and resistance from those who implement (wrongly or rightly).

Conclusion

In spite of criticising assumptions and application, the design school provided strategic vocabulary to discuss grand strategy and introduced the central concept that strategy represents a fundamental fit between external opportunity and internal capability. This concept of ‘fit’ is being developed today into a dynamic process of adjustment.

There are perhaps four conditions in which an organisation could benefit from the design school approach:

  • When a single brain can handle all the information relevant to strategy formation.
  • When that brain has a full, detailed, intimate knowledge of the situation (facts and emotions).
  • The situation will remain stable or at least predictable during the strategic period.
  • The organisation is prepared to cope with a centrally articulated strategy.

These four conditions bring to mind Apple and Steve Jobs, described in a previous post.

From “Strategy Safari” Henry Mintzberg, Bruce Ahlstrand and Joseph Lampel  who have compiled a ten-schools model of strategy.