Strategy as Love, Not War

MIT Sloan School professor Arnoldo C. Hax, a well-known strategy expert, thinks companies need a different approach to thinking about strategy.

Professor Arnoldo C. Hax

Most executives have probably, at one point or another, sat through a strategic planning session that focused on their organization's position in the marketplace -- its mission and objectives, its strengths and weaknesses, and the opportunities and threats it faces.

But what if there's another way entirely of thinking about strategy?

I had an interesting conversation recently with MIT Sloan School professor Arnoldo C. Hax, a well-known strategy expert and one of the authors of the book The Delta Project.  We spoke about his approach to strategy, called "The Delta Model" (which, incidentally, is the title of an article he coauthored for MIT Sloan Management Review back in 1999).

Here are a few (edited) highlights of some of Hax's current thinking about strategy.

Professor Hax, can you tell us a little bit about how the Delta Model differs from traditional strategic planning models?

Conventionally, all of the major frameworks of strategy start by recognizing that the essence of strategy is to achieve superior competitive advantage.  That is what everybody adheres to.  We found that that as a concept and as a mindset is extremely dangerous, because it puts competitors at the center. And if you do that, then there is a tendency to watch your competitors and try to imitate them.

And that imitation creates sameness.  Sameness will never bring greatness, and, even worse, its final result is something which is the worst thing that could ever happen to a business: commoditization.  Commoditization means a business in which there is nothing that you can claim that differentiates your offering, and therefore, all you can do is to fight for price. That leads to a very aggressive rivalry.  In order for you to win, you have to beat somebody.

It is like strategy as war, and that, as we know very well, is not really the most effective way to manage a business.  Wars just create complete devastation; they are the worst thing that could happen to mankind, yet we use that as a simile for management!  We felt it was the wrong simile.

Now, if competitors are not at the center of management, then who is at the center?  For us, the answer was obvious.  The customer is.  Therefore, the customer is the driving force.  You have to start deeply understanding what the customer's requirements are and how you can help the customer in the most effective way. This changes completely the way you figure out what actions to do.

Now, instead of trying to imitate somebody, you are trying to separate yourself from the rest of the pack.  You try to produce a value proposition which is unique, which is differentiated, which adds value to the customer and expresses a great deal of care and concern for the customer. That value proposition should be based on mutual trust, mutual learning, mutual benefits, and transparency.  And, incidentally, strategy now, with all of this advent of new technology, can be made one customer at a time, in what we call a granular way -- understanding each individual and providing that individual with a creative value proposition.

Can you imagine the difference in mindset?  Instead of strategy as war, the Delta Model tells you to think about strategy as love.

In addition to that, in the concept of the Delta Model, you are not alone.  You have to play with what we call the extended enterprise.  What is that?  It is you.  It is your customers.  It is your suppliers, and a very important original player that we call the complementors.  Who are the complementors?  The complementors are firms that are engaged in the delivery of products and services that enhance the delivery of your products and services.

So, that's what it is, you see, in a nutshell.  Forget about imitation, congruency, rivalry.  Embrace the customer as a centerpiece of strategy, and play with the extended enterprise. And the Internet facilitates that.

How has your thinking about the Delta Model evolved over time?

It's interesting.  We wrote our first book in 2001.  Incidentally, I'm about finished with a new book, where now I am the sole author.  In our first book we deliberately tried to just be conceptual.  We wanted to present these ideas.  We thought the ideas were important enough.  But now we have, through the process of consulting and research, developed a lot of phenomenal tools for managers to implement the concepts.

A final comment about a very important trap that many managers fall into: the dangers of commoditization.  At the beginning of my work on the Delta Model, I coined a silly statement, thinking it was a joke: "Commodities only exist in the minds of the inept." It turns out it isn't a joke.  Obviously a product could be a commodity. Take copper. The product cannot be differentiated, which makes it a commodity.  I cannot say that the Chilean copper is superior to the American copper. But copper as a business -- the way that Siemens uses copper in their power plants, the way that GM uses copper in their cars, the way Carrier uses copper in their air conditioning units -- is completely different.

Therefore, commodities don't really exist.  The customers are all different, and if you do not understand that, you are commoditizing something -- and believe it, there is so much of that happening in business in America.  Typically, when I'm teaching these concepts, I ask the group of executives I teach, "Tell me, among all of you present, how many of you think that a significant percentage of your business comes from commodities?"  And invariably, 100 percent of the hands come up, and I know then that they have come to the right place -- because they are not thinking correctly.

8 Comments On: Strategy as Love, Not War

  • navdeep | May 29, 2009

    Very important point raised by Arnoldo C. Hax, I think while creating the competitive advantage we should focus on the Client ,We can use competitor analysis to understand customer more closely.
    Totally agrees that Client is the center point of all innovation.

  • hernan | May 29, 2009

    That´s the TQC concept for quality products: “compliance with the customers needs”
    I understand that Mr. Hax proposal is to extend this concept to business strategy. I wish success to this “Delta Model”.

  • shukiw1 | May 29, 2009

    Dear Arnoldo
    I am a prctitioner in organizational and business consultancy, and am involved in strategic thinking and development on one hand, and in organizational love as a major currency of people’s communication and cooperation.
    I deeply value the reasoning behind Delta Model, as this gets one thinking of all the alternatives to competition, clearing the way to a higher form of humanistic creativity.

    Three important remarks if I may:
    1. It is easier to implement your concept if a leader can imagine himself and his organization as a channel or pipe of Universal bounty, instead of battery/accumulator of wealth.

    2. In an excellent article in MIT Sloan Mng. rev. 2006 x Frederic Frery :”The fundamental Dimension of Strategy” ,extend a new face of strategy
    As a coherent interplay of these dimesions(Value, Imitation , Perimeter).
    Where as you suggest that value is a context to use love , Frery implies, that “Imitation” has also qualities , that when taken his way-imply love to competitors and oneself.
    Most reveling now (under your inspiration) is, to find that “Perimeter” (the third dimension) , is also most effective when you “draw” it from love.
    The ebay example in his article “rings” exactly that.

    3. In an outstanding opinion expressed in the same magazine,Christian Mitreanu questions the word “Strategy” itself as implying short term victory over long lasting success. Your concept makes it clear that for long lasting results, one must not defeat his competitors and God-forbid his vendors. He is going to live with them many years after “the victory”.
    How in Heaven is the “conqueror” going to manage that without love in such a complex and media ridden world???

    Cordially yours
    Shuki Weiss
    Rehovot
    Israel

  • Tom Gibson - Creating Outstanding Customer Value | May 29, 2009

    [...] Strategy as love, not war – MITSloanReview [...]

  • La diferenciación es clave para definir las estrategias | AlgoEstaPasando.com | June 2, 2009

    [...] editora del MIT Sloan Management Review, Martha E. Mangelsdorf, publica en su artículo “Strategy as love, not war” algunos apartes de una conversación que tuvo con Arnoldo C. Hax, experto en estrategia y profesor [...]

  • ssavaram | June 6, 2009

    This is excellent. Prof. Hax has given a new insight into thinking about strategy. As Mr. Weiss, one of the readers, commented, the humanistic possibilities in this approach can lead to a win-win for everyone. Thank you.

  • isatash | June 7, 2009

    Please note I don’t disagree with Delta model. However, competitive advantage is not putting competitor in the center. It doesn’t need to lead us to imitation. Customer is the key. However we need a good strategy to serve that customer effectively so that we obtain the coveted ROCI. In non monopolistic world, more than one company want to acquire the same customer. What we are going to do differently in serving that customer and effectively get & retain the business is important for ROCI. In my humble opinion that is the competitive advantage. Our unique routines and politics different from others to serve one’s customers and earn the ROCI is what I think is competitive advantage.

  • rafeh | October 18, 2011

    Professor Hax’s is also aligned with Norton-Kaplan’s strategy maps approach if you consider the customer perspective as your key focus area.
    Looking forward to the next Delta model book.

    Rafeh Saleh
    CID Consulting
    http://www.cid.com.eg

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