Balancing Calculation and Serendipity

The book, “How Will You Measure Your Life” by Clayton Christensen is filled with valuable life and business lessons.  The one I’ll focus on today is the difference between deliberate and emergent strategies, and how they can ideally come into play in a firm.

Christensen illustrates this point by summarizing Honda’s entry into the North American biking marketplace in the early 60’s.   They started by going head to head with Harley on big bikes.  But aside from Honda being seen as the poor man’s version of the biking powerhouse of Harley, various technical and logistical issues with Honda bikes made it even more difficult to compete.

Simultaneous to their big bike strategy, Honda had also shipped a few smaller bikes (called Super Club) to their sales centre in Los Angeles.  Sale of these bikes was moderate; however employees began to find the smaller bikes very handy for running errands around town.  They also found them to be a blast on the local hills, riding through the dirt.  In time, demand for these new “dirt bikes” forced Honda to ship more of these  Super Club bikes to California.   Soon, a buyer from Sears noticed the bike and its growing popularity and asked if the bikes could be sold through the Sears catalogue.  Eventually Honda begrudging admitted to themselves that their big bike strategy in North America was not working, and that they should perhaps change their focus to these smaller bikes, creating and capturing the “off road” bike category.   They went so far as to change the sales venue, selling these bikes in power equipment and sporting goods stores instead of bike shops.

That shift in strategy led to Honda’s impressive foothold in the North American “dirt bike” category, and their ability to – finally – successfully enter and stay in the North American bike market.

Honda’s goal was to expand into the North American bike market.  Their deliberate strategy was to do so by competing within the big bike category.   It’s difficult to take over market share from existing providers in any market, let alone one where there is limited to no brand recognition for the newcomer in that product category.  If Honda’s product had been qualitatively superior to those brands already established ( in fact, it was worse); or if their pricing structure was considerably lower (it wasn’t) they might have stood a chance.  The only other factor they could compete on was differentiation.   But Honda lost a lot of time and money because they were blind to their alternatives.

Encouraging a company to move off of a deliberate strategy can be like trying to get a bull to stop charging.  The problem is not that a strategy was in place.  All businesses should have a strategy in place.  The problem was that when the strategy wasn’t working, it was extremely difficult to convince the company to recognize the need for a different strategy, and then to support an emergent strategy as one evolved.

Emergent strategies are opportunities that one couldn’t have planned for, but are knocking on the door none the less.   Companies in a marketplace are constantly testing product and sales strategies whether they realize it or not.  From time to time, one of those strategies may become particularly successful.  Their success does not mean that the company was wrong in pursuing a deliberate strategy.  Emergent strategies are like the lottery tickets we buy all the time and place in our pockets.  If you’re going to be buying them anyway, why wouldn’t you check to see if they contained any winning numbers?  Further, pursuing an emerging strategy does not mean that having a deliberate strategy was wrong.  If one of those tickets ended up winning you several million dollars, would you then beat yourself for having had a job all of these years?  No, you’d simply be thankful for the surprising bounty of the win.

But what if, when you checked the ticket, you found that it had been shortlisted to win the top prize. So there was no guarantee, but there was a good chance you’d win.   Firms can start to pursue emergent strategies while still pursuing their deliberate strategies until they know which will be the more successful.  Christensen calls this openness the balance between calculation and serendipity.

In other words, business strategy is not something etched in stone.  It is constantly evolving with the marketplace.   Firms should have clear targets, and should pursue them with vigour.  However if the marketplace is suggesting strong opportunities for a firm in a slightly different direction, firms will be well-served by recognizing and even starting to pursue those areas to see if the emergent area might be even more powerful than the deliberate plan for the firm.

By |2019-01-28T09:58:50+00:00November 28th, 2014|Leadership, Strategic Planning|0 Comments