The question is whether such approach is still valid in today’s world, which is characterized by volatility, uncertainty, complexity and ambiguity (VUCA). In two earlier articles I briefly outlined the demands put on strategy by a world that is volatile and uncertain. In this article I continue the discussion with the next element of VUCA, complexity, and ask: What should strategy look like in a world that is complex?
Complexity refers to the number of factors that we need to take into account, their variety and the relationships between them. The more factors, the greater their variety and the more they are interconnected, the more complex an environment is. Under high complexity, it is impossible to fully analyze the environment and come to rational conclusions. Thus, the more complex the world is, the harder it is to analyze. This can be illustrated with the following picture:
High and Low Complexity
It is popular to argue that the increased complexity we are facing, should lead to even simpler strategies than in the past. Along those lines, Eisenhardt and Sull, in their 2001 Harvard Business Review article “Strategy As Simple Rules”, argue “When the business landscape was simple, companies could afford to have complex strategies. But now that business is so complex, they need to simplify.”
This sounds nice and intuitive. And it is something we like to hear. Simplicity is good – who would object? Also, Eisenhardt and Sull’s article is interesting and it makes sense. Using simple rules rather than an overall complex master plan to guide strategy is not a bad idea. But it doesn’t imply that simplicity is the only or even the best answer. Yes, things should always be as simple as they can. But not simpler than that . And how simple can your strategy be in a a world that is increasingly complex?
Like in many other areas of life, also in strategy the devil is in the details. Yes, you could adopt a “customer intimacy”, “operational excellence” or “product leadership” strategy. But the real work only starts when you start thinking about how to realize such strategy in a way that matters to your customers and that is different from your competitors. So, your real strategy is in the nitty-gritty details. This was the case in the past (when the business landscape was supposedly simple) as well as today (now that business is so complex).
For a strategy approach this means that it needs to be able to connect the small pieces and details to an overall picture. You need both detailed insights and integrative oversight. Or in other words, an effective strategy approach pays attention to both the forest and the trees. Given the aforementioned current focus on simplicity, this implies a greater attention to detail and embracing more complexity in strategy than we are used to.
This is an important shift in perspective. And probably one we prefer not to hear. Making strategy more complex? Focusing on details? No, this does’t make strategy easier. But it does make strategy more realistic – and easier to execute. After all, if we know the details and see how they add up to a whole, people know better what is expected and how what they do contributes to the organization.
An effective way to make sure that the details add up to a coherent whole, is to look at cause-effect linkages between the various elements of which strategy is composed. When we understand such causal linkages, we see how one thing leads to the other and how the various parts of strategy are connected.
This is not easy. But it can be done. Especially with today’s advances in IT and data analytics, strategy need no longer be limited by our individual capacity to understand things. Using technology and the intelligence of the people in your organization, you can handle much more complexity in strategy than is usually done. I return to how this can be done in future articles. But for now let me conclude that a third demand for strategy in a VUCA world, is that it can effectively combine and causally link detailed insights with integrative oversight.
This post was published earlier here on my forbes.com page.
Image credit: Getty