Strategic minds at work

Lowell L. Bryan. Developing sound corporate strategy has become both more important and more difficult as the euphoria of the 1990s has yielded to the realities of managing a company in today's uncertain and confusing business environment. With the world economy becoming increasingly integrated and geopolitical tensions continuing to rise, the challenge of crafting and implementing strategies successfully grows ever more daunting. True, the technological advances of the 1990s were followed by a massive merger movement, which continued to create new economies of scale. But with the help of a stagnating global economy, those developments have generated crushing overcapacity in industry after industry - telecommunications, high-tech equipment, and airlines, to name just a few.


Business leaders now face deflationary pressures, which are squeezing profit margins and the availability of capital for investment. Indeed, many companies wonder if their long-standing business models are sustainable. During the past year, for example, the Quarterly has explored the near collapse of the hub-and-spoke system of many US airlines, the troublesome new meaning of quality for US automakers, and the need for pharmaceutical companies to overhaul a sales and marketing approach that served them immensely well for decades.

Such challenging times make it particularly necessary for strategists to think clearly and soundly. But as Charles Roxburgh notes in "Hidden flaws in strategy," those qualities may be a lot rarer than we think. Drawing on insights developed by behavioral scientists, this article helps explain why so many smart people develop and execute bad strategies. Hardwired into our brains, it seems, are biases and shortcuts that were once essential to our survival as a species but can now inspire strategies that are doomed even before launch. Often, for example, we overestimate our ability to make "reasonable" assumptions, so strategies based on them fail when they prove false. We succumb to fuzzy "mental accounting" that leads us to make illogical decisions. We take comfort in following the herd even though "me-too" strategies usually produce merely mediocre results.

One man who stood far above the herd was Marvin Bower, who died on January 22 at age 99. Marvin was in essence our firm's founder and served as its spiritual leader throughout his long, productive life. This issue of the Quarterly includes an excerpt entitled "Company philosophy: 'The way we do things around here'" from his 1966 book, The Will to Manage. As this excerpt shows, Marvin was always eager to take the high ground. In particular, he relentlessly emphasized the value of high ethical standards, believing that they were not only morally desirable but also good for business: they help employees to make the right decisions, and they help businesses to attract high-caliber people and to have good relations with customers, competitors, and the general public.

Marvin's ideas on the art of management are as relevant today as when he wrote about them. All of us who knew the man as a mentor and leader are going to miss him. But his ideas will endure.

Lowell L. Bryan is a director at McKinsey's New York office
Email: editorial@e.mckinseyquarterly.com

Source: http://www.mckinseyquarterly.com/article_page.aspx?ar=1303&L2=21&L3=37