Introduction to Strategy

From the early 1990s to 2003, LEGO Group recruited two CEOs who tried a similar approach toward the same goal: saving it from bankruptcy by investing in innovation. As detailed in the case study Rising Like a Phoe-nix, one was Poul Plougmann, a seasoned CEO with an outstanding reputation for reviving a well-known or-ganisation. The other was Jorgen Vig Knudstorp, a 36-year-old without prior CEO experience. Conventional wisdom would suggest Plougmann to be the one solving the problem. Yet, he drove LEGO Group to the brink of bankruptcy, whereas Knudstorp rose to become the top toy-manufacturing organisation.

These two CEOs may not indicate any resemblance. They had different personalities, ages, and ex-periences. They also worked in different industries. However, they had a denominator in common that played a pivotal role in how their result turned out: strategy. Except that one had a good strat-egy, and the other had a bad one. Plougmann’s mistake was not about innovation per se. Knud-storp had invested in innovation as much as Plougmann did. The problem was that Plougmann had already decided what LEGO Group needed and did so without much thinking. He saw innovation as a magic wand that could miraculously save anything. Knudstorp knew that innovation per se does not solve the problems; he knew he needed a good strategy behind it. Plougmann innovated; in contrast, Knudstorp innovated strategically.

Knudstorp's success led many scholars to find his magic formula. To their surprise, they found no magic formula. He articulated an effective strategy with no secret sauce. It was built on a rigorous thinking process, correct research, carefully articulated plans with deep analysis, action more than words, and proper reactions. Like the case of Knudstorp, success and salvation are seldom the out-comes of magic and luck. Nor is there superiority in endowments of resources and skills. The senior employees were sceptical about Knudstorp. He seemed too young for such a position. However, the strategy does not discriminate against anybody if the individual utilises its six ingredients proper-ly: thinking, researching, analysing, planning, acting, and reacting.

An effective strategy can explain how some organisations thrive even in situations of uncertainty and chaos. It enables exceptional performance in adverse circumstances, like when faced with a seemingly inevitable bankruptcy.

The business world is akin to embarking on a journey where you move from one point to another, from where you are at present to where you aspire to be. However, it is a journey with a fair share of uncertainties because you cannot predict your future nor control your environment. As you traverse this journey, you will encounter certain obstacles that may inhibit you from reaching your desired destination. These obstacles can come in various forms, like financial constraints, lack of resources, competition, or unforeseen circumstances.

There is no guarantee that you will reach your destination, and you may also run out of time to get to each one. This makes the journey even more challenging and unpredictable. However, a strate-gy can reduce some of the uncertainties associated with the journey. A strategy involves a de-tailed plan of action with clear objectives, timelines, and milestones for you to achieve. It helps you anticipate possible challenges and risks that may arise along the way and provides contingency plans to mitigate them. With a well-crafted strategy in place, you can navigate the uncertainties associated with the journey of business and increase your chances of reaching your desired desti-nation. It can help you in your journey by showing you the paths to follow and those to avoid. It does not change the journey, but it can change how you travel by giving directions to increase your chances of accomplishing your goals.

The more effective your strategy is, the better the directions. The most effective strategy shows the best option. It provides the most likelihood of reaching and the shortest route to a desired destina-tion with the available means. Indeed, Plougmann’s failure came from an ineffective strategy and not from innovation. His strategy did not provide a feasible direction. It even gave him a harmful one because LEGO Group’s losses increased so much that it was on the brink of bankruptcy.

Plougmann showed that an ineffective strategy is not only useless but also dangerous. Thus, you may wonder, “How can you develop an effective one?” Suppose an effective strategy is a recipe; its six ingredients are thinking, researching, analysing, planning, acting, and reacting. To ensure that you have applied all the six ingredients for an effective strategy, there are also four basic questions that you should ask yourself: