Why Good Arguments Make Better Strategy

Formal processes, constructive debate, and logical rigor are the key ingredients to crafting consistently great strategies.

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Image courtesy of Phil Wrigglesworth/theispot.com

Strategy is hard — really hard — to do well. Many leaders will admit this privately: In an anonymous 2019 survey conducted by Strategy&, 37% of 6,000 executive respondents said that their company had a well-defined strategy, and 35% believed that their company’s strategy would lead to success.1

Great leaders create ways of engaging their teams that can cut through this strategic fog. They may adopt frameworks to guide their analysis, but they expect participants in strategy discussions to contribute coherent reasoning and defensible ideas. Amazon is well known for its requirement that major initiatives be proposed in the form of a six-page memo. The virtue of the memo — versus a slide deck — is that writing in full sentences and paragraphs forces leaders to clarify how their ideas connect to each other. Similarly, Netflix has driven stunning transformations in the media landscape in part through its success at encouraging its leaders to debate ideas frankly and its willingness to empower them to take risks without waiting for an annual strategy planning process. It is no surprise that CEO Reed Hastings views working from home as “a pure negative” for the company, in part because “debating ideas is harder now.”2

The emphasis on vigorous debate at Netflix and Amazon clarifies a truth that many approaches to strategy obscure: At their core, all great strategies are arguments. Sure, companies can and do get lucky; sellers of hand sanitizer, for instance, have done very well during the pandemic. But sustainable success happens only for a set of logically interconnected reasons — that is, because there is a coherent logic underlying how a company’s resources and activities consistently enable it to create and capture value. The role of leaders is to formulate, discover, and revise the logic of success, making what we call strategy arguments.

Many leaders would agree with this claim but struggle with how to translate the insight into practice. What does it mean to construct a strategy argument? How does one evaluate such an argument?

In helping executives answer these questions, we have developed a flexible system of three activities: constructive debate, iterative visualization, and logical formalization. This system is facilitated by a set of concrete activities that can be used to develop a great strategy and execute it on a day-to-day basis.

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References

1.The Strategy Crisis: Insights From the Strategy Profiler,” PDF file (New York: Strategy&, 2019), www.strategyand.pwc.com.

2. J. Flint, “Netflix’s Reed Hastings Deems Remote Work ‘a Pure Negative,’” The Wall Street Journal, Sept. 7, 2020, www.wsj.com.

3. P. McCord, “Powerful: Building a Culture of Freedom and Responsibility” (Jackson, Tennessee: Silicon Guild, 2017), 52-53.

4. Our use of the term “strategy map” should not be confused with that of Robert S. Kaplan and David P. Norton in “Strategy Maps: Converting Intangible Assets Into Tangible Outcomes” (Boston: Harvard Business School Press, 2004). They use the term to refer to a diagram based on a balanced scorecard approach to strategy.

5.Airline Industry Overview,” Global Airline Industry Program, Massachusetts Institute of Technology, accessed April 12, 2021, http://web.mit.edu.

6. Logicians call this “denying the antecedent,” and it takes this form: Premise 1: If X, then Y. Premise 2: Not X. Conclusion: Not Y.

7. S. Gilbertson, “IPhone First Impressions: Not Worth the Money,” Wired, June 29, 2007, www.wired.com.

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juan manuel ugarte chavez
the high quality of every essay I have received during the last 4 months has been constant. I have translated some of those related to digitalization processes as well as managing innovation in the financial sector.