How leaders find a way ahead in chaotic times
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Russia’s invasion of Ukraine has provided bloody vindication for the best-known sayings of Prussian field marshal Helmuth von Moltke and American boxer Mike Tyson. Respectively: “No plan survives first contact with the enemy” and “Everybody has a plan until they get punched in the mouth”. Ukraine’s fierce resistance, particularly around Kyiv, immediately set back whatever military strategy Russian president Vladimir Putin intended to pursue when he first ordered the attack in February.
The war has also revealed broader long-term strategic flaws in Putin’s leadership. Barbara Kellerman, lecturer in public leadership at Harvard Kennedy School and longtime student of Russian politics, says his failure to diversify the Russian economy sufficiently beyond oil and gas left the country vulnerable. “Unlike Xi [Jinping, China’s president], nobody will ever say [Putin] has been particularly effective as a leader,” she told me.
On a wider economic front, the conflict called into question the strategic direction of many companies, too. So should companies that have taken a blow to the head stick to their strategic path or change course?
Asked in March whether post-invasion market volatility had changed his company’s commitment to investing in renewable energy, Torbjorn Tornqvist, co-founder and chair of Gunvor, an energy trader, told the Financial Times Commodities Global Summit: “We’re not changing our strategy because of this. We see the Ukraine situation as something that needs to be dealt with. That doesn’t affect the way we look at [how we deal with] the future energy landscape in our portfolio.”
On the other hand, look at BP which, within three days of the invasion, abandoned a decades-old strategic engagement with Russia, announcing the divestment of its 19.75 per cent stake in Rosneft, the Kremlin-backed oil producer.
In search of strategy principles to help companies through the fog of war and uncertainty, I turned to two new books by experienced strategy advisers: The Crux by Richard Rumelt, and Roger Martin’s A New Way to Think, a concise guide to management effectiveness.
Rumelt, whose last book, Good Strategy/Bad Strategy, cut through flabby thinking on the topic, is bracingly direct. The “crux” is the term boulder-climbers use to refer to the hardest part of a climb. Solve “the puzzle of the crux” and it is possible to move forward and conquer the whole boulder.
In corporate strategy, Rumelt says, it is important to identify “the most critical part of the challenge you can actually expect to solve. Don’t pick a challenge you cannot yet deal with — attack the crux of the situation, build momentum, and then re-examine your position and its possibilities.”
Or, in the words of a strategy executive at one big financial institution, concentrate strategy on “what you can execute”. He told me, for example, that his bank shunned China as an investment opportunity in the 2000s, despite its obvious attractions. His group’s strengths lay elsewhere and it would have found it hard to implement a China strategy.
The logical consequence of this attitude is that as business challenges alter, so strategists must correct their course. Strategy, Rumelt writes, is “a journey through, over, and around a sequence of challenges”. As for the objection that a short-term focus turns strategy into tactics, he points out that, in military planning, the distinction between strategy and tactics merely “denotes the difference between the general’s action plan and the top sergeant’s action plan”.
There are, however, perils in fixating on the idea Henry Mintzberg, the management thinker, calls “emergent strategy”, which responds to unexpected events. Bad managers, Martin points out in A New Way to Think, use “the idea that a strategy emerges as events unfold as a justification for declaring the future to be so unpredictable and volatile that it doesn’t make sense to make strategy choices until the future becomes sufficiently clear”. Which, of course, it never will. This “comfort trap” condemns companies to follow competitors, rather than lead.
The bank strategy executive I spoke to pointed out the importance of trying to stick instead to an “anchor vision” — so-called “deliberate strategy”. As Tornqvist suggests, a company should divert from that vision only in extreme crisis. BP’s decision falls into that category: the flight from Russia was the right response to what one company executive called “a complete geopolitical reset”.
Finding a balance between deliberate and emergent strategy requires deft “navigation” — the process, Rumelt writes, of “making assumptions explicit and then checking them as events unfold”. Fail to do this, and you risk falling into a dangerous paralysis, of the sort to which Putin has perhaps always been prone.
As early as 2004, in her book Bad Leadership, Kellerman described how Putin’s mishandling of the Kursk nuclear submarine sinking four years before put the Russian president in a cohort of rigid leaders: “Although they may be competent, [they] are unable or unwilling to adapt to new ideas, new information, or changing times.”
Andrew Hill is the FT’s senior business writer