Your Business Strategy Is a Theory

I think of strategy as the celebrity everyone wants a selfie with. People crowd around it, hoping the fame rubs off so they look like 'big thinkers.' In reality, their 'strategy' is a mask for daily execution, hiding the fact that they are simply managing priorities and workflows.

Strategy has the best seat in the house, but it paid a high price to get there. Every ‘selfie’ with the word has diluted its real purpose. Especially in the business world, we hear phrases like 'strategic decision' and 'content strategy' so often that the word is starting to lose its meaning. People use it to emphasize the enormity of what they are doing, even when doing daily chores.

The Cost of Fame

The consequence of overusing the word is simple: Organizations are often left with no real strategy at all. Even when leaders try to craft one, they are distracted by a mountain of misinformation. To see this in action, just ask an AI about strategy. Because it has "swallowed" so much buzzword-filled data, don't be surprised if it simply gives you a DIY checklist or a generic "How-To" guide.

Strategy is inherently hard. There is no consensus among military or political strategists, even on its basic definition. The noise in the business world only makes it harder to create, examine, or execute based on.

In this article, I will explore how you can ensure you have actually achieved a strategy—and how to stress-test it to make sure it works.

In Search of a Real Strategy

Many of my best ideas come from a colleague’s simple question. Recently, after I presented a strategic framework for our business, someone asked: 'Why this perspective? Why not alternatives A or B?'

I answered immediately, but I wasn't satisfied. It sparked deeper questions in my mind: How do we actually know when we’ve 'achieved' a strategy? And how can a company reach a consensus when everyone defines the word differently?

How to Examine a Strategy

Assume you have been presented with two or more strategies. How would you choose which one to adopt? How would you pick the one that matches your company's identity and requirements?

In the midst of these questions, I wrote down a messy list of criteria with which I would examine a strategy: “I would consider the one that...

• is more than a guess,
• addresses major business concerns,
• has clear answers to key questions,
• is evidence-based,
• is business-specific, not generic advice for every player in the market,
• is testable/falsifiable,
• has a clear definition of the problem,
• is simpler,
• considers the company’s and rivals’ core competencies,
• and more!”

Then, I took a step back and looked at the list for a few seconds. For me, it was strongly reminiscent of what I would expect from a theory. I thought, “Definitely, I could not be the first to notice these similarities.” So I asked ChatGPT to gather more information on this resemblance. ChatGPT surfaced three thinkers whose definitions resonated with my criteria.

Peter Drucker’s famous notion of “The Theory of the Business” was one its prominent suggestions. Despite the outward resemblance, however, they are fundamentally different. Drucker’s theory of the business concerns the core assumptions on which a company is built. He argues that when these assumptions no longer align with reality, the business becomes vulnerable to decline.

Fortunately, the list yielded more promising results. Richard Rumelt, my favorite architectural strategist, argues that 'a strategy is, like a scientific hypothesis, an educated prediction of how the world works'—even if he doesn't explicitly use the word 'theory'.

Just as a theory in science explains why something happens, a Rumeltian strategy explains why a specific "guiding policy" will solve a "diagnosis." If the results don't match the prediction, the "theory" (strategy) is proven wrong and must be adjusted.

And finally, the most striking resemblance was this:

Strategy: A Theory of Success

Jeffrey W. Meiser, professor at the University of Portland, explicitly draws an analogy between strategy and theory. Unsurprisingly, Meiser writes within the tradition of strategic studies, politics, and war. He argues: “All strategies must be identifiable as theories of success or they are not strategies.”

A strategy predicts which actions will lead to particular results—and explains why.

In his article “The Delusion of Strategy”, he references prior scholarship and provides two definitions of theory: “statements predicting which actions will lead to what results—and why,” or more simply, “causal explanations”. These definitions clarify what it means to treat strategy as a theory.

A Framework for Examining your Business Strategy

After noticing the similarities between a strategy and a theory, I realized that a strategy should be validated like a scientific theory; it requires plausible facts and inductive reasoning to support it.

When I discovered Jeffrey Meiser’s articulation of strategy, I felt a quiet sense of pride. My initial thoughts on strategy examination were perfectly aligned with his approach, which was quite rewarding. Meiser states that conceptualizing strategy as a "theory of success" provides the foundation for strategic analysis. He offers three main tasks for this analysis:

1. Identify theories of success, which may be explicit or implicit;
2. Assess the conceptual clarity and logic (in terms of causal reasoning) of the strategy; and
3. Assess the quality and accuracy of the strategy through empirical testing or comparison with other well-evidenced strategies.

As a product person, I am a huge proponent of clarity. While theories of success might be stated implicitly, an explicit articulation makes a strategy much easier to understand and adopt.

Meiser uses this framework to analyze the 2017 National Security Strategy of the USA. Interestingly, it seems that President Trump's specific strategic approach has remained largely unchanged since then. While the domain is different, his method can inspire us in a business context. It is a great example of how leaders should go through their organization's strategy with a fine-tooth comb.

I strongly recommend that you read the entire article.

What’s the core theory driving your next move?