By Carlos Fuentes
The SOA's Entrepreneurial Actuarial Section (EAS) sponsored three presentations during the 2015 Annual Health Meeting: “Business Networking for Actuaries, Strategy―A Historical Overview and the Women's Leadership Forum.” The sessions were well received. The EAS asked the speakers to summarize the content of their presentations in articles to be published in The Independent Consultant.
For more details on strategy see, “A Lesson From the Greeks,” Contingencies, Nov-Dec 2014, and “The Connection Between Business and Military Strategy,” Contingencies, May-Jun 2015.
Now then, I have studied, in my time, the plans and minds of great ones by the scores―King Menelaus in Homer’s Odyssey
In the current business lingo there are concepts that are popular to the point of almost having lost their meaning. Strategy and leadership are probably the prime examples. The problem with a devalued concept is that its meaning is murky at best and, in some cases, outright misleading. For example, given the popularity of the word "leadership" many believe that a seminar or a book will transform them from non-leaders to leaders or from leaders to great leaders. Similarly, the proliferation of cookbooks on strategy suggests that a great number of people adhere to the idea that strategy can be learned quickly and with minimal effort. This belief is akin to thinking that one could become an FSA with little effort and no stress in a matter of months. Fast tracking ideas have always been appealing, but those who have taken actuarial exams recognize them as wishful thinking.
The situation with strategy is similar except, perhaps, for the fact that certain phrases make us sound smart and might even convince us that we are. Should you develop a forecast or a strategic forecast? Should you present a business plan or a strategic business plan? Should you call for a pricing meeting or a strategic pricing meeting? In the vast majority of cases the adjective “strategic” is superfluous; but nonetheless it conveys a sense of deepness of thought that, however imaginary, is fashionable and makes us feel good.
A sensible approach to understand the meaning of strategy is to reflect on its historical roots. In Classical Athens, a strategos was an army’s Commander in Chief and also a high ranking politician. This characterization shows the link between purpose and force, suggests that strategic goals are far reaching (in contrast to tactical objectives), and hints at the interplay between leadership and strategy. It also suggests that becoming a strategos required education, experience, technical ability, foresight, ability to relate effectively with others, political sophistication and a bias towards practical results. Thinking like a strategos, that is, thinking strategically, could not be achieved in a few months with little effort. That was true then and it is true today despite the proliferation of popular strategy in many business schools, seminars and bookstores.
The central theme of military strategy is to improve one’s chance of winning when much is at stake, when the best course of action is elusive. Despite popular conceptions, strategy is not akin to a master plan or to infallible deduction. Perhaps a sensible way to characterize military strategy is as follows:
- War is unpredictable, it involves chance and skill. It resembles more a poker game than a chess game;
- War is dynamic, it demands constant reassessments, adaptation and management of resources;
- Strategy involves general principles and frameworks that must be adapted to particular conditions, not recipes for success;
- Strategy involves the ability to assess any given situation, craft plans that are suitable for that situation, and deploy resources accordingly;
- Strategic thinking requires foresight; and
- Strategic action demands the ability to relate well with others.
If in the list above the noun “war” is replaced by “business competition” all items would be equally relevant. This is one of the reasons why academics, consultants and business managers adapted and mal-adapted strategic war concepts to the business world: business, like war, involves competition, chance and skill; the objective is to win. Thus, it is not surprising that many of the strategic tools that are taught in business schools had their origin in military thinking. Examples abound, such as: operations research; the learning curve; distinctive competencies; strengths, weaknesses, opportunities, and threats (SWOT) analysis; scenario analysis; game theory, etc. For example, the concept of distinctive competencies, which many consider quintessential to business education, was developed by the Navy when some proposed to unify the Army, Navy, Air Force and Marine Corps. The question under consideration was whether a unified body would be more effective than four separate units. Much research was carried out, but the short answer was that the best course of action required the development of specific skills, hence the units should be kept separate. Interestingly, some business writers have espoused this general idea almost regardless of context and thus adhere to the general principle of developing distinctive competencies. As in war, the correct approach depends on the particular circumstances of the situation. This might sound like an obvious statement―that actions should fit the context―but judging by what some recommend, it is not.
Perhaps part of the problem is that the desire for shortcuts to strategic education has fueled the demand for popular strategy which in many cases can be boiled down to recipes. The popular strategy industry is pervasive to the point that those with any knowledge of strategy are vastly outnumbered by those exposed to popular strategy. Furthermore, popular strategy has gained some respect among many professionals as attested by the success of books like From Good to Great and schools that teach frameworks such as Blue Ocean Strategy.
Leaving aside popular strategy (because formulaic approaches don’t work), the question is whether strategic thinking indeed increases the chance of success. The answer is a clear “yes” in the military sphere and a qualified “yes” in the business world. Why the difference? Many ideas come to mind, but one that resonates was offered by a friend, Michael Mitchell: the stakes are much higher in war where defeat could mean death and worse, whereas in the business world the consequences are usually limited to truncated careers with parachutes. For this reason, Michael continued, strategy is essential in the military realm and more or less optional in the business world.
Carlos Fuentes, FSA, MAAA, MBA, is president of Axiom Actuarial Consulting. He can be reached at email@example.com.