Setting up the strategy

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Consider this military wit, and put it in the context of a PMO.  

"There is an old—and misleading—bit of conventional military wisdom which holds that “amateurs study tactics, while professionals study logistics.”

The truth is that amateurs study only tactics or logistics, while professionals study both simultaneously.

The most brilliant tactics ever devised are pointless when the supplies needed to execute them do not exist, while all the supplies in the world are useless when a commanding officer has no idea how to effectively employ them."

Quote from "Field Marshal: The Life and Death of Erwin Rommel"

by Daniel Allen Butler

Are you the professional or the amateur?

Consider what are "logistics" in the project domain:

• Supplies and materials, of course
• Utilities, communications, and facilities (you gotta sit somewhere)
• Tools and training
• Supporting activity from Finance and Accounting (they have the money!) 
• Supporting activity from purchasing, inventory management, and receiving (they have the goods!)
• Supporting activities from the various "ilities"

If you can get that wagon train all connected and working for you, then of course there is the small matter of strategy:

• How strategic are you? Anything less than a year probably qualifies as tactics. Anything over three years and you should build in some tolerance for some business instability.
• What is the lay-line to your strategic goal, and of course, what is your goal?
• How much deviation from the lay-line can you tolerate for agile tactics (zig and zag along the lay-line)
• Can you be strategic on some elements of the 'balanced scorecard' and simultaneously tactical on others(*)?

Got all of the above together? 

Good. Now(!) you can entertain tactical moves, knowing the support is there.

_________________________

(*) Balanced scorecard: Finance, Customer, Product, and Operating Efficiency

Tactically strategic

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It's a familiar refrain: "Think strategically; act tactically"

Sounds good

What does it mean day-to-day?

Two thoughts always in mind:

The first thing is that you hold two thoughts in mind all the times:

1. First, what strategy are you on; what is your strategic objective, and 
2. Second, in the moment what is the optimum thing to do which is at worst no more than a suboptimization of the strategic plan.

Suboptimization

• Whatever you are doing is not directly within the planning parameters of the strategy
• Whatever you are doing, you can justify it for its immediately optimum benefits
• Whatever you are doing, you can see your way back to the strategy

Thinking strategically

ChatGPT says this: Thinking strategically refers to the cognitive process of analyzing and planning actions, decisions, and goals in a way that considers the long-term implications and maximizes the chances of achieving desired outcomes. 

It involves taking a holistic view of the situation, understanding the potential consequences of various options, anticipating changes and uncertainties, and identifying opportunities and risks. 

Strategic thinking involves assessing the current circumstances, envisioning future scenarios, and formulating effective strategies that align resources and capabilities to achieve a competitive advantage or desired objectives. 

It requires a combination of critical thinking, creativity, problem-solving, and the ability to adapt and adjust plans as needed.

Act tactically

Well, if you are doing all the stuff mentioned above, is there room for tactical actions?

There should be

Whatever is right in front of you probably requires "action this day" as Churchill used to say. 

You may have to divert resources into tactical planning, training, experimentation, modeling, and building prototypes, stubs, and other stuff that may be debris at the end of the day. 

You may have to roll-out an earlier version to meet some milestone, only to pull it back and press on along a somewhat different track to get to back to the strategy. 

Sometimes a tactical response is a dead-end, but it takes a threat off the table, reduces a risk, and may clear an obstacle or constraint that's holding up more strategically compatible actions. 

Of course no one wants to be the tactical sacrifice, or work knowing their outcomes are just throw-aways. But if messaged properly, these tactics can be shown to have overall value-add to the strategic out come.

 

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Setting strategy

---

Consider this military wit, and put it in the context of a PMO.  

"There is an old—and misleading—bit of conventional military wisdom which holds that “amateurs study tactics, while professionals study logistics.”

The truth is that amateurs study only tactics or logistics, while professionals study both simultaneously.

The most brilliant tactics ever devised are pointless when the supplies needed to execute them do not exist, while all the supplies in the world are useless when a commanding officer has no idea how to effectively employ them."

Quote from "Field Marshal: The Life and Death of Erwin Rommel"

by Daniel Allen Butler

Are you the professional or the amateur?

Consider what are "logistics" in the project domain:

• Supplies and materials, of course
• Utilities, communications, and facilities (you gotta sit somewhere)
• Tools and training
• Supporting activity from Finance and Accounting (they have the money!) 
• Supporting activity from purchasing, inventory management, and receiving (they have the goods!)
• Supporting activities from the various "ilities"

If you can get that wagon train all connected and working for you, then of course there is the small matter of strategy:

• How strategic are you? Anything less than a year probably qualifies as tactics. Anything over three years and you should build in some tolerance for some business instability.
• What is the lay-line to your strategic goal, and of course, what is your goal?
• How much deviation from the lay-line can you tolerate for agile tactics (zig and zag along the lay-line)
• Can you be strategic on some elements of the 'balanced scorecard' and simultaneously tactical on others(*)?

Got all of the above together? 

Good. Now(!) you can entertain tactical moves, knowing the support is there.

_________________________

(*) Balanced scorecard: Finance, Customer, Product, and Operating Efficiency

---

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The problem with strategy ....

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Ideas matter, but they do not matter as much as intellectuals and [market strategists] think they do. What matters far more is [project craft], which is about sensing, adjusting, exploiting, and doing rather than planning and theorizing.

It is the skill of judo player who may have plans but who important characteristic is agility.

It is what philosopher Isaiah Berlin called "understanding rather than knowledge", the ability to "tell what fits with what: what can be done given the circumstances and what cannot, what means will work in what situation and how far"

From an essay by Eliot A. Cohen

Cohen's idea more or less aligns with the oft quoted concept that the first casuality of real work or activity is plans. Which is not to say plans are without value, it's just that their value has a limit, and thereafter comes "sensing, adjusting, exploiting, and doing".

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From strategy to plan to approval

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To state a strategic principle is one thing; to reduce principle to a practical plan is another; but then to get stakeholders to approve and invest in both the principle and the plan is yet another.

General Eisenhower had something to say about this, and one should be fully aware that not only did his strategic principles have to satisfy those with a focus on Europe, but also in the larger context of  two simultaneous wars whose connectivity was largely their overlap of a common source of supplies and resources.

"However -- and here is the rub -- it was easy enough to state [a strategic purpose] as a principle but it was to prove difficult indeed to develop a feasible plan to implement the idea and to secure it's approval by the [controlling investors]

General Eisenhower in "Crusade in Europe"

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Tactics and strategy

---

Consider this military bit or wit, and put it in the context of a PMO dealing with tactics and strategy, as well as tactics and logistics on complicated and complex projects. Are you the professional or the amateur?

"There is an old—and misleading—bit of conventional military wisdom which holds that “amateurs study tactics, while professionals study logistics.”

The truth is that amateurs study only tactics or logistics, while professionals study both simultaneously.

The most brilliant tactics ever devised are pointless when the supplies needed to execute them do not exist, while all the supplies in the world are useless when a commanding officer has no idea how to effectively employ them."

Quote from "Field Marshal: The Life and Death of Erwin Rommel"

by Daniel Allen Butler

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Do you trust the other side of the transaction?

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The other side: the counter-party

In a transactional relationship, the other party to -- or participating in -- the transaction is your counter-party.

 

In project situations, there are usually many counter-party transactional arrangements, such as contractors and suppliers with transactional relationships. And within the business there may be transactional relationships among business units and the PMO. 

 

Oh! And don't forget the money: there may be financiers of the business or project which have a counter-party relationship to the project.

Fair enough. But now comes counter-party risk: the risk that the other party to the transaction, or perhaps you yourself, will not be able to hold up their side of the transaction.

 

About counter-party risk

So, you are about to enter into a transaction with another party. What might be the risks?

• Trust: you may not know the other party well enough to convey trust, a willingness to believe what they say without the protections of a written agreement.
• Ability to perform their side of the transaction may be in question. Do they have all the requisite tools, resources, and experience? Is something required of you in order for the other side of the transaction to be completed?
  
• Willingness to perform their side of the transaction when the whole deal comes under stress may require backup
• Lead, or being led? Really, who's in charge in this relationship? Can you say you really understand what you are getting into?  Warren Buffet famously said words to the effect: 'I never invest in businesses that I don't understand' 

What is your strategy; what are your tactics; what -- or who -- can you trust?

• You might be able to trust if you can verify: Observable, measurable evidence that your counter party is doing their end of the bargain
• Your strategy should be to keep the counter-party fully engaged with intent to fulfill their side of the bargain.
• Your tactics should be to put in place standard risk management tools: Written agreements with incentives and penalties, and opportunity to observe and measure; sober assessments of their track record on similar activities; and perhaps insurance for consequential damages if the counter-party fails.
  
• Always have Plan B in-hand: what if the counter party fails? What then? Can you exist or terminate the transaction? 
• Are the terms spelled out for mutual agreement? Is it 'liquid' or is there a timeline for exit that has to be accounted for in planning?
  
  

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Institutional stability

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Certainly since the dawn of the internet in the mid-90's, and gaining momentum since the millennium, disruptive change has been a fact of business life, to say nothing of the impacts on culture and behavior in the general population.

But, there's a case for institutional stability among all the disruption and debris of change.

And that case is built on the value proposition of strategic outlook:

That is to say: individuals come and go; incumbent leadership teams come and go, but the general framework for business activity changes at a much slower pace, in effect providing strategic stability and security even if there is great tactical maneuvering.

It's not too much to say that this institutional framework, consisting not only of process and procedure, but also cultural norms, actually facilitates effective change in product substance. 

 

How so? Consider this: The new team doesn't need to invent the framework -- at some cost -- while they are inventing the new "thing"; they may only need to bend the framework a bit. 

 

PMO Stability

The thing about strategic stability is that people don't have to keep looking over their shoulder to see if they've been left behind or left out on a limb. 

What does this mean to the PMO? 

• Less overhead, for one thing; and greater throughput for another. 
• Stability means less rework, and 
• It means that remote teams can get the job done with a much less onerous overlay of constant communication with the mother ship.

Command vs cooperation

Admiral "Bull" Halsey, a disrupter in his day (WW II in the Pacific), has been quoted as saying "cooperation is no substitute for command". "Command"was the culture of his day. 

 

We've moved along. Today, we might say: "Cooperation is an essential replacement for command"

If that is so, and few would argue otherwise in the mosaic we call the modern economy, then strategic stability is all the more important.

How can you reasonably cooperate if the basis for cooperation is in constant flux? To cooperate is to assume and accept that certain behaviors and commitments of the counter-party will sustain over time while you do your thing. 

Thus, the inherent value in institutional and strategic stability.

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Culture vs Strategy

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Culture vs strategy? Put that way, it sounds like a competition
Hello! It is.

And: "Culture eats strategy for breakfast every day" (Unknown author)

Meaning: Change is hard! People are gounded in culture; it's foundational; it's a matter of security and well-being. Resist!

Bring your A-game
Any strategic idea that has to overcome culture better be a strong one. Come with your A-game! Expect losses (*). The cost will be greater than you estimate; and it will take longer.

Velocity will seem like you are dragging anchors (Actually, you probably are)
Don't expect popularity. In fact, you may not be a survivor ... but it's for a good cause!

------------------
Not particulary PC, but the expression used to be: "Shoot the first one; hang the second; the rest will follow"

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Grand strategy -- an illusion?

---

Every enterprise engages in strategy.

• It's a matter of routine to some: Driven by the calendar, it's now time to do the "strategic plan".
• To others, it's another name for how to engage with risk -- a risk might be a tactical failure, but at the same time, it could be a strategic success: The other guy won today, but he killed himself doing it.

And, of course, there is always self-interest: To be accused of not thinking strategically is a definite career limiter.

An illusion?
But, is grand strategy an illusion? I think not! But, consider these pro-illusion ideas from a recent essay on just that point:*

"It makes sense to put stock in strategy if:

• The [enterprise] has consistent preferences, if 
• It can assess the costs and benefits of alternative courses of action (and make decisions more or less rationally), and if 
• It has the capacity to follow through on its strategic choices.

But [perhaps] none of this is possible, and thus strategy is an illusion .....

In the complex and highly uncertain world of [big project and big enterprise] politics, it is all but impossible to identify the ideal strategy ahead of time. The [enterprise or project] lacks full knowledge about the threats it confronts, in part because [other businesses and markets] act [in private] and in part because their interests change over time. As a result, the consequences of [strategic] policy are consistently unpredictable.

The strategizing ritual contributes to a .... sense of insecurity. Psychological blinders, moreover, make strategizing still more difficult.

• People suffer from all sorts of cognitive limitations that hinder decision-making—in particular, a tendency to rationalize. 
• Instead of acting on the basis of ... beliefs, we revise our beliefs to make sense of our improvisations. 
• We avoid identifying priorities and the tradeoffs among them.
• Moreover, businesses are not unitary actors, and bureaucratic battles impede strategic planning and consistency.

This sounds like the "noestimates" version of "nostrategy": As a result, the consequences of [strategic] policy are consistently unpredictable.

I'm not buying the thesis that not thinking about a future that has a discriminating difference with the present is somehow a good thing. Just because -- the future is unpredictable with precision and there are unknowns and unknowables that will drive us off course -- is no reason not to tackle the hard stuff

*David M. Edelstein and Ronald R. Krebsein, writing in the Nov-Dec 2015 issue of Foreign Affairs

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About that coordination thing ....

---

We're all supposed to coordinate. That's written somewhere in the PM literature and taught in bureaucracy school everywhere. And so I was impressed with this bit of wit(*):

"Successful coordinating mechanisms depend on mutuality. The greatest chance of success derives from mutual benefit tied to sufficiently high priority programs

Lesson learned: you haven't coordinated if the other person hasn't acknowledged AND hasn't offered something in return. The "sound of one hand clapping" and "coordination without acknowledgement" are about equivalent.

... "[beware of the] weak coordinating level of [just] interaction rather than [the stronger leverage] in budgeting and policy"

Be consequential: Well, no one wants the label of "weak coordinator", so let's all go for "strong"; to wit: let's spend our energy and influence being consequential.

"Budgeting and policy" are C-suite speak.
You, on the other hand, may be working execution rather than forming policy.
Nonetheless, even at the execution level, there may be more areas of leverage than 'money and resources' and a hammer on direction (strategy), but those are two pretty good ones.

Thus, if you're not "coordinating" in those areas, what is it you're coordinating about that is consequential?

-----------------
(*)Dr. L. Parker Temple, III
Policy advisor to President Reagan

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More about game theory -- and the PMO

---

Probably the greatest benefit of working with game theory arises from evaluating the consequences of each game step.

• You do this ... your consequence
• Your competitor or opposite number does something .... their consequence

The challenging game situation for the PMO is when your game opposite can't or won't collaborate with you, making the consequences for both potentially less optimum than if you collaborated

• Adversaries across the table in a negotiation
• Business partners that are really your nemesis
• Win-lose situations ... often politically motivated (shocking!), but sometimes it's all about money (another shock) ... if the other guy gets it, you don't

Sort of win
Some people are stubborn; they insist on win-lose when sort of win - sort of win is available. In some circles, this is called compromising to get more than nothing.

Nash Equilibrium
Did you see the movie "A Beautiful Mind" or read the book about the Princeton mathematician, John Nash?
Nash was a game theorist. He devised something called the "Nash Equilibrium".

In practical terms, you and your non-collaborator have arrived at a Nash Equilibrium when simultaneously neither you nor your opposite has an alterative game move of greater benefit. Consequently, neither you or your non-collaborator is motivated or incentivized to change positions. To wit: you've arrived!

Ooops! There's a cost for being at equilibrium. In fact, you may have arrived at a sub-optimum point when looking through the lens of win-lose; but when taking the broader and more strategic view point ..... win-win .... you are at a good spot.

Strategic thinking
Why is win-win more strategic? Because today's competitor may be tomorrow's partner .... certainly that's the case in the technology contracting business. To win, you often have to fill a hole in your corporate resume. And that filler partner may have been your game competitor in the last competition.

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The value of strategy

---

"I will not take by sacrifice that which I can achieve by strategy"

General Douglas MacArthur

And, so what we have in that philosophy, when put in project context, is the oft-criticized 'brute force approach' vs a more subtle tactical alternative. Where this shows up more often than not is using the right tool for the right job, and preparing the context for using the tools.

We see it all the time: rather than taking the time to obtain -- and perhaps train on -- the right tool, practitioners barge ahead with brute force because they think they are saving time. No strategy required. I have a hammer, so every problem is a nail!

Ooops! It takes more time to clean up the mess than do it right the first time --- and, how many times have you heard that one?

More brute; more force

Remember this from a prior post? "Measure with a micrometer; mark it with chalk; cut it with an axe"? Just brute piling on top of brute

And, of course, the other brute force idea is more force -- more people. More is better -- until you get to Brooks Law: "Adding people to a late project makes it later" *

* Fred Brooks: "The Mythical Manmonth"
More subtle tactics

• First we have the Tom Sawyer approach: get someone else to paint the fence; and, better still, make them think it's a privilege.
• Ignore the inconvenient: Also known as: answer the question you wished they had asked and not the question asked. And, jump over, around, or dodge adversity -- the MacArthur approach
• Don't confuse cost and unit cost: experts may cost more per hour, but throughput is what counts. They may finish a lot faster and better. This is the case for "made in America"

---

Historians are in general accord that during the Pacific war MacArthur was able use strategy both as a force multiplier and a means to avoid casualties more effectively than any other strategic leader. *
At the single battle of Anzio in Italy, 72K casualties; in 2 years in the campaigns from Australia to the Philippine invasion, MacArthur suffered 27K casualties. There are many other examples.
* From: "American Caesar" by William Manchester

---

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Strategic weakness

---

And when your strategy depends on someone else doing something that's pretty weak strategy

Jeff Roe
Politcal strategist

Well, yes, but no ....
Certainly, self-sufficiency is the better game plan, but who gets to play in that green field? Certainly not PMs which are at the behest of sponsors, customers, and other business interests. If they don't behave and get on the same page with the project, then there's inevitably a gap between interests ... a gap between the strategic interests of the project project and the business.

And what fills that gap ('cause it isn't a vacuum!) None other than: RISK!
And who gets tagged as risk manager? Right! The PM is always in the hot seat as risk manager, balancing the interests of the project strategy with the larger business strategy.

You say: Not fair! And, you'd be right most of the time. Not fair, but certainly realistic. The PM is the risk manager for any gap between interests. And, as manager, there is both a payoff or a penalty depending on how the risks play out... to wit: hero or goat!

---

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Grand strategy

---

Every enterprise engages in strategy.

• It's a matter of routine to some: Driven by the calendar, it's now time to do the "strategic plan".
• To others, it's another name for how to engage with risk -- a risk might be a tactical failure, but at the same time, it could be a strategic success: The other guy won today, but he killed himself doing it.

And, of course, there is always self-interest: To be accused of not thinking strategically is a definite career limiter.

But, is grand strategy an illusion? I think not! But, consider these pro-illusion ideas from a recent essay on just that point:*

"It makes sense to put stock in strategy if:

• The [enterprise] has consistent preferences, if 
• It can assess the costs and benefits of alternative courses of action (and make decisions more or less rationally), and if 
• It has the capacity to follow through on its strategic choices.

But [perhaps] none of this is possible, and thus strategy is an illusion .....

In the complex and highly uncertain world of [big project and big enterprise] politics, it is all but impossible to identify the ideal strategy ahead of time. The [enterprise or project] lacks full knowledge about the threats it confronts, in part because [other businesses and markets] act [in private] and in part because their interests change over time. As a result, the consequences of [strategic] policy are consistently unpredictable.

The strategizing ritual contributes to a .... sense of insecurity. Psychological blinders, moreover, make strategizing still more difficult.

• People suffer from all sorts of cognitive limitations that hinder decision-making—in particular, a tendency to rationalize. 
• Instead of acting on the basis of ... beliefs, we revise our beliefs to make sense of our improvisations. 
• We avoid identifying priorities and the tradeoffs among them.
• Moreover, businesses are not unitary actors, and bureaucratic battles impede strategic planning and consistency.

This sounds like the "noestimates" version of "nostrategy": As a result, the consequences of [strategic] policy are consistently unpredictable.

I'm not buying the thesis that not thinking about a future that has a discriminating difference with the present is somehow a good thing. Just because -- the future is unpredictable with precision and there are unknowns and unknowables that will drive us off course -- is no reason not to tackle the hard stuff

*David M. Edelstein and Ronald R. Krebsein, writing in the Nov-Dec 2015 issue of Foreign Affairs

---

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The first question to ask about strategy

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Are you a strategy competition guy?
Do you know the first question to ask about competitive strategy?

Roger Martin says this:

I look at the core strategy choices and ask myself if I could make the opposite choice without looking stupid .... The point is this: If the opposite of your core strategy choices looks stupid, then every competitor is going to have more or less the exact same strategy as you. That means that you are likely to be indistinguishable from your competitors

Well, that's certainly something to check yourself about: is a counter strategy or corollary stategy "stupid"? If so, no one is going to adopt it, and so everyone -- yourself included -- will line up with your strategy. What then is your competitive discriminator? After all, "me too" is not all that compelling.

Thus, the search is on:

• A strategy with a compelling discriminator
• A strategy that has a plausible alternative, less compelling, but nonetheless one that your competition could align with

I can't tell you how many business development sessions I've been in where the only thing the sales people (or marketing) can come up with is "me too". How does that win you any business?
Somehow, in the manner of Kano, you need to come up with the "Ah hah!"

And, is there a formula approach to "Ah hah!"? Not that I've ever found. The epiphany just happens, but mostly it happens with a lot of people interacting with high entropy: lots of disorder from which something gells.  It just happens!

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What is strategy?

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Marc Sniukas has put some time and effort into assembling and summarizing the ideas of several thought leaders in the strategy business. He's put this all in a slideshare that's a pretty good read: "What is Strategy?" -- see the embedded reader below (however, if you want to download it, bring money... sharing only goes so far.)

My suggestion is pay attention to the attribution in the small print on each page. You'll find that there are a hand full of references -- some free, some reasonable, some pretty expensive -- that are the intellectual underpinning of this presentation. It's not clear if Sniukas has added any original thought, but nonetheless, this is a good presentation.

And, before I leave you to the slideshare, let me add my own value: here's my personal definition of strategy, as given in my new book: "Maximizing project value"

Strategy is a plan that integrates continuous improvement of oper-
ational effectiveness with a vision and narrative for differentiated
innovation.

What is strategy? from Marc Sniukas

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Game theory revisited

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John Baez, mathematician and blogger, has started a free course online about basic game theory. He's decided to post some of his class notes on his blog, Azimuth.

Here's Part I. And here's Part II.

By way of disclosure, I have a fetish with game theory for project management; it's Chapter 12 of my new book, Maximizing Project Value: A project manager’s guide, to be published this month.

Game theory
Game theory is all about strategic reasoning; it pits your ideas against those of your competition, your nemesis, or other project strategies. What it helps you do is forecast a likely outcome -- not necessarily a certain outcome. That is, if you do a series of moves and your counterparty does their own moves -- which may be similar or the same or none-of-the-above -- then where are you and your counterparty likely to come to?

Now naturally there are "games" -- scenarios really -- that are win-lose; but in project management situations we're more often interested in win-win, especially those that make the pie bigger as even the share of the pie changes a bit.

Especially we are interested in win-win when negotiating a competitive procurement. We want to win -- to be sure -- but we should also want the customer to win by selecting us over the competion. Indeed, in our proposal we have touted such an advantage: our win theme, the customer's view of our win strategy... select us because...

Strategy and counterstrategy
Haven't we all done something like this.... We want to minimize errors and maximize quality in the final project deliverables. Strategy: place incentives on the discovery and fix of errors. Counterstrategy (by the counter party, not necessarily ethical, but it happens): deliberately -- or sloppily -- cause an error and then 'discover' it, thereby earning an incentive.

Unfortunately, this happens all too often in the software business. With this incentive plan the original code can be done so quickly that there's no incentive to get it right the first time, even if not deliberate, since the developer will be paid an incentive to clean it up... something that should have been part of the development ethic in the first place. Thus, we have abetted the moral hazard of paying for risk that should not really be ours to pay for. (yes, I know I keep ending sentences in a preposition!)

The counter-counter strategy is to push the incentive downstream so that the incentive is on the quality of the final deliverable and not upstream on some piece or part. Then you are incentivizing the end and not the means. (Of course, there may be a counter-counter-counter strategy... this has a tendency to go on)

Game examples
Dr Baez develops some of the basic ideas in Part II with a description of several game ideas we're familiar with. Two of interest to project managers are "Chicken" and "Rock-scissors-paper"

Chicken:

In the game of Chicken two managers (or strategies, plans, events) are on a collision course. Each are driven on this course with the idea of overcoming the on-coming alternative. (Some view this as mindlessly stupid)  If there is a collision then it's possible that there is a loss for both and no one wins: lose - lose. And, the loss may be calamitous.. you could lose the company or the project.

It's anticipated, of course, that one party or the other will step aside or change course before the collision (or, in the popular vernacular: before going over the cliff).

Baez develops the game theory forecast for Chicken, a game that comes too often in politics and projects.

Rock-scissors-paper

Most parents are experts at this game, which is handy for enteraining children while waiting for the pizza to be delivered to the table.

Project managers may also be expert. The game is one of competing outcomes, each independently random as viewed by the counterparty. The outcome possibilites -- there are nine in a 3x3 matrix -- are individually scored as win-lose, lose-win, or a no-harm-no-foul tie among parties, respectively.

For example: in the outcome set of one party selecting paper and the other simultaneously and independently selecting rock, "paper covers rock", so paper wins and rock looses for that particular outcome.

This has some of the elements of Chicken without the calamitous collision possibility. The no-harm-no-foul tie outcome -- like paper - paper -- could be a win - win in some situations, but more often it's a suboptimum equilibrium wherein neither party is motivated to change, each party can live with the outcome, and the project can move on.

There's more
Needless to say: I'll say there's a lot more to game theory. You may also be interested in this very informative series on YouTube: Game Theory 101.

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Three strategies for strategic actions

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In a recent issue of Strategies+Business, authors Tim Laseter and Saras Sarasvathy tell us about three different approaches to strategic actions. After reading through it, I understand their three points, but I think their first one is academic filler... but you judge for yourself:

Approach 1: Planning and Positioning. Characterized by knowledge of the probabilities and impacts of risk events. Decisions to maximize strategic value are made on the basis of expected value. Typical tool is the classic decision tree

Approach 2: Organizational Learning: Probabilities (and therefore probability distributions) are unknown, so risks are now "uncertainties". Events, conditions, and perhaps impacts can be estimated, but not their frequency. This has been termed Knightsian Uncertainty, named for its conceptualizer, Frank Knight who wrote it all down in in book: "Risk, Uncertainty, and Profit".

One really important idea here is that the first step in assessing uncertainty is to estimate whether the downside is affordable. If not, then that's to be taken care of first. Then, choices can be made about the strategic upside of opportunity. Expected value usually doesn't enter the picture since there's no knowledge of probability.

Approach 2 has buried in it our natural avoidance of ambiguity. When the stakes are small, we may choose strategies that are vague but probably doable. But as stakes change, so do attitudes.. bigger stakes, more conservative, eschewing ambiguity for more clarity; in effect, a violation of utility. An understanding of this is generally credited to Daniel Ellsberg, and called the Ellsberg Paradox.

Approach 3: Constructive Transformation. In this strategic formulation, you more or less take what live gives you and then make something out of it. In other words, you don't lead with vision; rather, you lead with process (and tools, and talented people). So, this is something like what Lou Gerstner said when he took over IBM. In effect, when asked about his vision for IBM, he said he didn't need one. What he needed to do was to get the machinery of IBM working again. This, of course, he did, and he did it quite well.

Constructive Transformation is something akin to abductive reasoning: that is, you hypothesize what might be possible that could link many disparate events, objects, or conditions.

So, what do you think? For my money, approach 2 or 3 are close to the way it really works. Approach 1 is theoretically correct, but generally impractical because the information simply isn't available to drive the decision tree.

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Strategic planning v The Strategic Plan

Eisenhower once said: planning is everything; plans are nothing. He had in mind Von Moltke's famous statement: plans never survive first contact with the enemy.

And, although projects are not war, plans seem to suffer the same fate. Plans don't seem to survive the first touch with project reality, though perhaps project plans are a little more surviving than war plans.

In a recent post, "why small business should scrap strategic planning" we learn that small businesses can successfully do away with strategic plans altogether. They're too expensive, time consuming, and irrelevant to write and maintain.

Author Kaihan Krippendorff  says: "What fast-growing companies need is strategic thinking--not strategic planning". He offers three ideas for thinking:

1. Think in the hallway (casual conversations are sometimes very stimulating of new ideas; See A. Cockburn's osmotic communication)
2. Ask "why not" (this is probably the strategic adaption of the 'ask why 5 times' paradigm)
3. Try (something) and adjust (this is Franklin Roosevelt's "try something and if it doesn't work try something else, but don't just sit there" paradigm)

So, not exactly a paragon of original thinking, but perhaps there's something to Krippendorff's thesis, to wit:

• Too many strategic plans are just a three-year display of sales and market share... mostly a money plan and not a strategy per se, necessary but not sufficient
• Product road maps are closer to strategy if there's plan attached
• Three years may be too long for a small business; their horizon may be 6 months to some positive cash flow, or else
• And, if the product flops, do the Roosevelt thing. A lot of start-ups, like Group-on, start on Plan A but quickly shift to Plan B. The planning element "1" from the list above may be the best thing you've got. (Solyndra, anyone?)

But, in the end, Greg Githens told me: Where it’s weak: regardless of size, companies need a coherent strategy.  The article skips by that point.  Hustle and opportunism does not qualify as a competitive strategy.

Hmm...

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