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Strategy is about asking the right questions

The Schumpeter columnist in The Economist recently noted that bosses have ended up “confused and cynical” in response to the diversity of advice on strategy—including advice regarding blue oceans, first movers, and fast followers, for example.[1]

One approach, in response to this confusion and cynicism, is to develop a new over? arching strategic framework, such as Boston Consulting Group’s new “strategic palette”, which is reviewed by the Schumpeter columnist.

Seven Strategy Questions Book CoverBut another approach would be to abandon the quest for one strategic framework to rule them all, so to speak, and simply to advocate asking the right questions about a business’s strategy. This is the simple and profoundly sensible approach advocated by Harvard Business School Professor Robert Simons in his 2010 book Seven Strategy Questions.[2] The seven questions are:

  1. Who is your primary customer?
  2. How do your core values prioritise shareholders, employees, and customers?
  3. What critical performance variables are you tracking?
  4. What strategic boundaries have you set?
  5. How are you generating creative tension?
  6. How committed are your employees to helping each other?
  7. What strategic uncertainties are keeping you awake at night?

The questions force businesses to figure out who they are trying to sell to, how they can sell more, and how they can do it more efficiently and effectively. The questions provide much need clarity, and lead businesses to figuring out solutions to their strategic issues themselves. For example, as discussed in Professor Simon’s book, for many years McDonald’s thought its primary customers were real estate developers who would include McDonald’s stores in their new developments. But, in the 2000s, it figured out its primary customers are actually the people who buy the burgers (or do not buy the burgers because they would rather buy something else). This change in its thinking resulted in menu and operational changes and consequently improvements in sales and profitability.

The seven questions have great appeal to me as an economist who has always been somewhat concerned by the frequent misapplication and over-reliance on such tools as SWOT and PESTEL analyses. These devices are fine for initial brainstorming, but should never be a substitute for analysis of the fundamental issues identified by clear thinking about the strategic issues. I have been somewhat concerned that such approaches simply create a laundry list of issues, generating anxiety, rather than allowing businesses to focus sharply on the few big things that will really matter for profitability and sustainability. Professor Simon’s book encourages the rigorous, clear thinking regarding the important strategy questions that businesses must answer, and hence I cannot recommend it highly enough.

[1] Schumpeter, 2015, “A palette of plans”, The Economist, 30 May, http://www.economist.com/news/business/21652318-choosing-strategy-lot-more-complex-companies-it-used-be-palette-plans.

[2] Simon, R.L., 2010, Seven Strategy Questions: A Simple Approach for Better Execution, Boston, MA: Harvard Business School Press.