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Most people consider strategy to be an event, some magical moment that changes the course of a company and defines its success for generations. The tale goes, some smart people get together (or occasionally one solo genius), they decide what they are going to do, and then they start implementing that strategy. That’s actually not the way the world works.
Strategy is not an event, but a process. People deciding which strategy a company should follow don’t have all the information, and it’s almost impossible to predict what will work or not work without testing it. More important than knowing the right strategy is understanding how to develop that right strategy and which methods to develop such a strategy to use depending on the context you are in. In this article, we will explore two types of strategies: emergent and deliberative, as well as the concepts of good money and bad money.
An Emergent strategy is a type of strategy that emerges as a result of experimentation and learning. It is not pre-planned, but rather evolves, and it’s often used in complex and uncertain environments, where traditional planning is less effective. They allow for innovation and creativity, as a rigid plan does not constrain them.
To develop an emergent strategy, you need to be open to experimentation and willing to learn from your experiences and should be prepared to adjust your approach based on feedback from customers, colleagues, and stakeholders. You need to be comfortable with ambiguity and uncertainty, as emergent strategies are not guaranteed to succeed. However, by embracing emergent strategy, you can typically find new and innovative ways to achieve your goals.
Deliberative strategy, on the other hand, is a more traditional approach to strategy development. It involves careful planning and analysis, with a focus on identifying the most effective course of action. Deliberative strategy is typically used in more stable and predictable environments, where there is greater certainty about the future. Deliberative strategies are more structured and rigid, as they are based on a pre-defined plan.
To develop a deliberative strategy, you need to be analytical and data-driven. You should conduct thorough research and analysis to understand the environment and identify opportunities and threats. You should establish clear goals and objectives, and develop a detailed plan for achieving them. Likewise, you should also be prepared to monitor and adjust your strategy as circumstances change.
Good Money vs. Bad Money#
When developing a strategy, no matter if emergent or deliberative, it is important to consider the concept of good money and bad money. In this theory, money has special characteristics that reflect the requirements of the investors.
Let’s imagine you are starting your own company, you have an idea and a small team willing to join you on that ride. You are thinking about starting small with a small seed investment, testing your idea with small experiments and learning if it actually works. Meanwhile, and investor wants to give you 100x more money and wants you to grow and hire a massive team very fast. Should you take this money? According to the theory, no.
The basic idea of good money and bad money is that the type of money a manager accepts carries specific expectations that must be met. These expectations heavily influence the types of markets and channels that a venture can and cannot target. The very process of securing funding forces many potentially disruptive ideas to get shaped instead as sustaining innovations that target large and obvious markets. Thus, the funding received can send great ideas on a march towards failure.
- As emergent ideas are being nurtured during nascent years, money must be patient for growth but impatient for profits.
- When winning strategies become clear and deliberate ideas need to be carried out, then money should be impatient for growth but patient for profit.
When to apply#
Deciding when to apply a deliberative strategy versus an emergent strategy depends on the nature of the problem or opportunity you are facing. A deliberative strategy is best suited for situations that are more stable and predictable, where there is greater certainty about the future and when there is factual proof that something will work. For example, a company might use a deliberative strategy to develop a long-term business plan to grow a new product line based on positive results from a smaller experiment.
On the other hand, an emergent strategy is better suited for situations that are complex and uncertain, where traditional planning is less effective. For example, a startup might use an emergent strategy to experiment with different products and business models, based on feedback from customers and investors.
In general, a deliberative strategy is more appropriate for situations where you can anticipate the future, while an emergent strategy is more appropriate for situations where you cannot and need to test multiple scenarios.
|What||Unplanned actions from initiatives that bubble up from within the organization. The product of spontaneous innovation and day-to-day prioritization and investment decisions made by middle managers, engineers, salespeople, and financial staff (decisions made by people who aren’t typically in a visionary, futuristic, or strategic state of mind)||Conscious and thoughtful organized action. Generated from rigorous analysis of data on market growth, segment size, customer needs, competitors’ strengths and weaknesses, and technology trajectories. Implemented “top-down|
|When||When the future is hard to read, it is unclear what the right strategy should be. This is typical during the early phases of a company’s or product’s life, or when the competitive landscape is changing.||A winning strategy has become clear because, in those circumstances, effective execution often spells the difference between success and failure.|
|How||Ensure that employees are empowered to surface and elevate new ideas.||The strategy must make as much sense to all employees as they view the world from their context as it does to top management so that they will all act appropriately and consistently.|
In conclusion, developing a strategy requires careful consideration of both emergent and deliberative approaches, as well as the concepts of good money and bad money. The best approach will depend highly on the context you are in and what are you trying to achieve.
If you are trying to start your company and just have an idea, you should use an emergent strategy so that you can experiment and test ideas until you figure out what the right strategy is for your company. During that phase, it’s a bad idea to accept bad money as there is no proof of what works, and you’re turning the whole endeavor into a bet. Focus on getting good money, money that is patient for growth, but that will push you to find the profits, i.e., the right strategy was already tested, you just need to grow it.
If you already tested what works or doesn’t, or know this based on previous work on your company, then you can focus on a deliberative strategy, assessing the data you have and focusing on growth.