The classical definition of strategy, as it was coined by Alfred Chandler in 1962, is that “strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”
While almost sixty years old, this definition is still top of mind. Whenever I ask executives and students for their own definitions of strategy, their answers are mostly variations of this definition.
The view on strategy reflected in this definition can work in stable, “normal” times, when you can look ahead and predict reasonably well what is going to happen the next year or two—or preferably even longer, so that you can make three or five-year strategic plans.
But, the value of strategy today, in times of crisis, is not at all evident. Because, how can one determine basic long-term goals, and choose the right actions and resources to achieve them, if it is not even clear what next week looks like?
The unpredictable situation that many organizations are currently in, seems to question the whole point of having a strategy.
And yet, times like these are times when strategy may be needed more than ever. To see how and why, we need to have a closer look at what strategy actually means, and what the role of strategy is for organizations.
Redefining ‘strategy’ is not the solution
There are literally hundreds of definitions of strategy.
And among these definitions, there are ones that seem clearly more relevant today. Examples are “a pattern in a stream of decisions.” (Mintzberg, 1978), “a deliberate search for a plan of action that will develop a business's competitive advantage and compound it.”
(Henderson, 1989), and “deliberately choosing a different set of activities to deliver a unique mix of value.” (Porter, 1996).
Each of these alternative definitions puts less emphasis on the planned and long-term nature of strategy. Mintzberg is most explicit about this by seeing strategy—as early as 1978—as an iterative learning process of adapting the organization’s course of action.
But also Henderson’s, Porter’s, as well as many other authors’ definitions, embrace the more unpredictable side of life. While they emphasize the deliberateness of strategy, they don’t necessarily assume long-term goals and plans.
Along the lines of the alternative definitions of strategy, one could redefine strategy as something agile, adaptive, responsive, or otherwise flexible, to make it fit the unpredictability associated with times of crisis.
The question, though, is whether this is a good idea. Because, if we do so, we might lose some, or even all of the important functions that strategy has for organizations.
Therefore, it is useful to have a closer look at the traditional view on strategy along the lines of Chandler’s classical definition and assess whether it is still applicable today.
The six functions of strategy and their relevance in crisis times
In an earlier article, I wrote about the six key functions of strategy.
To assess the role and added value of strategy in times of crisis, it is useful to review these six functions and see to what extent they are still relevant.
- Strategy helps preparing an organization for the future. Looking forward, into the future, and beyond the scope of the current crisis—or any crisis—is key to any organization. The main reason is that crises represent extraordinary times that are not representative of the circumstances an organization will face in the future. Therefore, it is important to not just focus on the day-to-day issues of the present, but to also keep an eye on the time after a crisis. Otherwise, an organization will easily overcompensate or over-respond to a crisis, thereby worsening its impact, especially in the long-run.
- Strategy helps distinguishing an organization from others. Making sure that one’s products and services appeal to customers and stand out compared to the competition is always important, also in times of crisis. And perhaps even more so, because in times of crisis, customers stick with those products and services that really matter to them, and that they can trust. This means that they are more selective and go for those products and services that stand out—because of their value, or because the organizations supplying them are solid and reliable.
- Strategy provides an organization with some stability. In times of crisis, people—customers, employees, investors, or any other type of stakeholder—are looking for stability. In all the turmoil, they look for things they can depend on. Strategy has this role. One of its core purposes is offering stability when everything else is uncertain. This means that this third function of strategy is crucial; in “normal” times, but especially in times of crisis.
- Strategy serves as a common frame of reference. Crisis challenges taken-for-granted assumptions. It thereby takes away part, or even much of the common ground that previously connected people. At the same time, people are looking for something shared; for something that binds them and keeps them together. Given that strategy creates a common frame of reference, this fourth function of strategy is also still very relevant during crisis.
- Strategy supports internal and external alignment. Strategy aims at making sure organizations are lined up with their environment, as well as internally. A crisis—internally or externally caused—disturbs this alignment. Strategy has an important role in restoring the alignment as quickly as possible so that the organization will remain relevant and doing the right things.
- Strategy guides organizational action. A crisis requires timely and decisive responses. This maans that taking action is more important than ever. A good strategy tells people what to do; how to act and respond. And not only in the light of a single predefined plan, but also in a more responsive, dynamic way, for example based on alternative scenarios. A good, “crisis-proof” strategy prepares an organization for such alternative scenarios.
The conclusion about these six functions of strategy is clear: they all remain important in times of crisis, and some of them may even gain in importance. So yes, organizations do need strategy in times of crisis and there are at least six reasons why.
Back to the classical definition
Having established that strategy is still relevant in times of crisis, and knowing why, the remaining question is whether organizations also need the kind of strategy that is described in Chandler’s classical definition: “Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”
If we mean that organizations need a stable and detailed long-term plan telling people exactly what to do over the next few years, then the answer must be a clear “no.”
Even in “normal” times such plans have little use, simply because things are changing too fast and too much. They are too unpredictable for any detailed plan to remain useful more than a couple of months.
In times of crisis, things are disrupted and even more uncertain, implying that such long-term plan is immediately useless.
But this is not what the definition actually says. It talks about long-term goals, courses of action, and allocating resources—not about detailed long-term plans. And long-term goals that guide an organization’s courses of action and resources allocation are still very relevant in times of crisis.
The main reason—along the lines of the six functions—is that it helps organization not to lose themselves in the issues of the day, in overreacting and taking panic-driven decisions that they regret tomorrow and that they could have avoided when thinking things over a bit more carefully.
In other words, strategy makes sure an organization doesn’t lose itself and keeps being focused on the bigger picture, also, and especially, in times of crisis.