Myths of Strategy Summary and key ideas

Myths of Strategy, by Jérôme Barthélemy.

Managers often want a recipe for success. A famous company provides an attractive model: identify what it does, then repeat those practices. But studying winners alone leaves out the failures. If successful firms share a trait, that does not show the trait caused their success. We also need to know whether firms that adopted it failed, or whether firms without it succeeded. Without those comparisons, a success story can turn coincidence into advice.

Consider the claim that companies should focus on their core business. One analysis found that 78 percent of a group of high-performing companies did so. But focus can magnify the effect of the industry: a firm in a strong business may earn more, while one in a weak business may suffer more. Studies that examine companies more broadly suggest that the most successful firms diversify, though not excessively. The lesson is not that every firm should diversify. It is that a pattern among winners cannot settle the question for everyone.

A strategy is a set of choices about whom a firm will serve, what it will offer, and how it will deliver it. Those choices give a company a distinct position. They also give managers questions to test. Even if a firm can answer all three, it may not know whether its answers are right until results arrive.

Nespresso illustrates how those answers can change. It began by targeting businesses and restaurants through a joint venture, but performed poorly and came close to cancellation. Jean-Paul Gaillard redirected the offer toward affluent individuals, emphasized the more profitable coffee pods, and sold through a membership club rather than mass retail. He tested sales in a few outlets. His target was to sell 100 machines in a week; the trial sold 58, a shortfall he concealed from his boss. The case shows a new direction taking shape under uncertainty, not a formula whose success was obvious in advance.

Distinctive choices create what Michael Raynor calls the strategy paradox. A firm needs choices that set it apart to have a chance at exceptional performance, but those choices can fail. Avoiding sharp commitments may lower the risk of a disastrous bet, yet it also makes outstanding results less likely. Having a strategy does not guarantee that it is a good one; even a sensible direction cannot ensure that every decision or product will work.

Benchmarking can obscure this risk when it treats a leader’s visible practices as universally best. J.C. Penney tried to move upmarket and appeal to younger shoppers, drawing on Ron Johnson’s experience at Apple. The retailer reduced its house brands and eliminated promotions. Traditional customers were alienated, while too few new ones arrived. Johnson was fired, and the company reversed course. The problem was not simply that Apple’s approach had succeeded elsewhere. Practices depend on the customers, image, culture, and operating processes around them. A change can disrupt those conditions without reproducing the original company’s results.

A practical way to assess a borrowed idea is to make its assumptions explicit. What customer response is the practice supposed to produce? Which parts of the original company’s conditions seem necessary for that response? Does the new practice fit the adopter’s customers and way of working? Then try it on a small scale and observe both the expected benefit and the costs or resistance it creates. A local test gives evidence about local fit; it does not prove the same change will work everywhere. Interpret the result in light of what the trial actually changed and what it could not establish. Nespresso’s early sales, for example, were a clue, not a complete verdict on its revised direction.

Testing can also uncover opportunities that were not part of the original plan. Managers can start with what they know, form a hypothesis, act on it, and learn from the response. They need not wait for a perfect idea before trying something. Active search matters because useful possibilities often appear while people are working on a problem, not while they are simply copying competitors.

That is one way to understand serendipity. It is not luck by itself. It combines an active search, an unexpected event, and the knowledge or judgment needed to recognize and use what happened. YouTube began as an unsuccessful dating-video site. Practical difficulties with sharing a dinner video and finding a desired television clip helped its founders see a broader video-sharing opportunity. Their earlier work and technical knowledge helped them act on that opening. The accidents mattered because the founders were searching and could interpret them.

The useful discipline is therefore to make clear choices, question the evidence behind admired examples, and test ideas where they will be used. A strategy can be distinctive without being certain. Experiments help assess its fit, while attentive searching can reveal opportunities the initial plan missed.