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The European Business Review

Strategy as Learning
This article will lay out a practical leadership process for creating an adaptive enterprise by mo-
bilizing a dynamic cycle of four steps: learn, focus, align, and execute. These steps build on one
another and are repeated to create a dynamic cycle of renewal that I call Strategic Learning

By Willie Pietersen
speed, choice, and innovation. These new
challenges demand a new type of leader-
ship.
Rather than A-to-B change, the central
challenge facing business leaders today is to
create and lead an adaptive enterprise. This
means creating an organization with the
built-in ability to sense and rapidly adapt to
changes in the environment on a continu-
ous basis.
As a practicing CEO for 20 years and now
as a professor of the practice of manage-
ment, I recognize that one of the biggest
hurdles facing executives is their inability to
mobilize their companies behind new ideas.
Change is disruptive to organizations and is
notoriously difficult to lead. And ongoing,
continuous change is even harder to achieve
than one-time change. Yet building an adap-
tive enterprise is the only path to long-term
survival.
This article will lay out a practical leader-
ship process for creating an adaptive enter-
prise by mobilizing a dynamic cycle of four
The leadership challenge as an answer is that it strongly suggests that steps: learn, focus, align, and execute. These
What is the central challenge facing business change should be a one-time event that a steps build on one another and are repeated
leaders today? company needs only to go from point A to to create a dynamic cycle of renewal that I
The answer most management experts point B in order to succeed. This A-to-B ap- call Strategic Learning. It is a process that of-
will give you is the need for change. This proach is at the core of traditional strategy, fers a new way to lead companies in a world
has been repeated so many times, that it has but in todays fast-changing world, that ap- of unpredictable change.
become accepted as a truism. But on closer proach is badly outdated.
inspection, this answer is only half true. And Todays competitive environment pres- Learning from nature
a half-truth, like a little knowledge, can be a ents unique challenges for organizations: What are the principles of successful adapta-
dangerous thing. high levels of uncertainty and complexity, tion? Nature is our best teacher.
The problem with the need for change disruptive technologies, and a premium on In nature, the creation of favorable varia-

24 July - August 2010


tions is the key to successful adaptation. A Fortune 1000 Companies: % New in Top 20
wonderful example is a plant, the common
red clover, which has developed a flower
with a unique feature a long, thin funnel
leading to the nectar at its base. Only bees, 1993 2003
which have very long tongues, can reach the
sweet nectar. Other insects are shut out.
60%
The beauty of this strategy is that bees
can fly farther than other insects. In effect, 1983 1993
the red clover has formed an exclusive alli-
ance with bees that ensures that its pollen 45%
is distributed more widely than that of other
plants. This gives it a crucial competitive ad- 1973 1983
vantage which promotes its long-term sur-
vival. 35%
This strategy is not without risk, of
course. What if another plant produces a
sweeter-tasting nectar and the bees switch Exhibit 1 Source: Lawler & Worley, Built to Change
brands? Or what if the bees themselves are
outmaneuvered and become extinct? The What lessons does nature hold for orga- of Fortune 1000 companies found that be-
risk/reward trade-off is hard at work here! nizations? As in nature, the rules of survival tween 1973 and 1983, 35% of the Top Twenty
Nonetheless, at least for the time being, the in the marketplace are essentially Darwinian. names were new. The number rose to 45%
alliance strategy has captured a significant Never sit still. Continuously generate favor- in the following decade, and between 1993
advantage that no other plant has been able able variations those that create competitive and 2003, shot up to 60%. (See Exhibit 1)
to challenge. advantage or run the risk of extinction. If organizations want to improve their
How does the natural world produce But here is the twist. People have one ability to adapt and survive, they will have to
such brilliant strategies? Nature generates crucial advantage over other organisms: the change their ways.
variations through a massive and ceaseless power to think and learn. Natures low odds The trouble is that most companies are
set of experiments mutations that test a are due to two gigantic learning disabilities. relying on the conventional A-to-B strategic
wide range of survival strategies. Most of When nature fails, it doesnt know why; when planning process. That model simply doesnt
these variations are failures. But a few suc- it succeeds, it doesnt know why. cut it in todays turbulent environment.
ceed, enabling individual organisms to live Organizations possess the capacity to In many companies, there is widespread
longer, reproduce in greater numbers, and overcome these learning disabilities. It is our frustration over the fact that their strategic
out-compete other species. These are the power to harness learning that increases our plans are not doing their main job creating
favorable variations that will come to domi- chances of survival, and the quality of that competitive breakthroughs. People groan
nate future generations. learning determines our odds of success. when they hear that the strategic planning
The key is that nature never sits still. What Therefore, in the world of organizations, ef- season is at hand. Frankly, they have good
is stunning is that, in nature, the develop- fective learning is at the heart of successful reason. Strategic planning in most cases is
ment of favorable variations is a completely adaptation. 10 percent strategy and 90 percent planning
random, unconscious process. The variations number crunching, forecasting, and bud-
that arise are generated without apparent Strategy is broken geting. All this does is generate thick bind-
design, and the ones that will survive are not What is the track record for organizations in ers full of data that end up collecting dust on
predictable. As a result, evolution is a low- responding to this challenge? The evidence the shelf. The sad truth is that strategy all too
odds game: 99 percent of the species that is not encouraging. Longevity in corpora- often fails to engender the kind of ongoing
ever existed are now extinct. tions is the exception, not the rule. A survey renewal that is the hallmark of an adaptive
organization. Why is this so?
Remember that successful strategy is es-
As in nature, the rules of survival in the marketplace sentially a response to the Darwinian logic
are essentially Darwinian. Never sit still. Continu- we explored earlier. Survival, in the final
analysis, depends on our best use of limited
ously generate favorable variations those that create resources. No matter what business we man-
age IBM or the local pizzeria we all have
competitive advantage or run the risk of extinction. finite resources; if we squander them, we are
out of the game. Thus, the main job of strat-

www.europeanbusinessreview.com 25
The European Business Review

ligent strategic choices about where you will


compete, how you will win and how you will
prioritize your scarce resources in support of
your Winning Proposition.
3. Alignment: Every element of your entire
organization measurement and reward
systems, organizational structures and pro-
cesses, your corporate culture, and the skills
and motivation of your people must be
aligned and energized behind your strategic
focus. This is a crucial leadership challenge
and without success here, no strategy can
succeed.
4. Execution: A rigorous discipline for ex-
ecuting better and faster than competitors is
essential. Speed in carrying out your strategy
expands the gap between you and your near-
est competitors and improves your ability to
take advantage of the next shift in the envi-
ronment which is likely to happen sooner
than anyone expects. But youll be able to do
Exhibit 2 Copyright W.G. Pietersen 2002 this only when the first three competencies
are in place.
egy is to make the most intelligent choices 5. Renewal: Finally, youll need the ability to
about how to use our limited resources. And The ability to constantly do these things repeatedly, thus creating a
as the environment becomes more discon-
tinuous, intelligent choice-making depends
renew your organization cycle of continuous learning and adaptation.
Note that the fifth competency is different
increasingly on an organizations ability to separates truly dynamic from the first four. The first four competen-
make sense of the changing landscape cies are aimed at producing specific outputs.
through learning and discovery, to translate
organizations from those The fifth creates an ongoing cycle of renewal.
superior insights into strategic action and that are doomed to be- The ability to constantly renew your organi-
to do so continuously. zation separates truly dynamic organizations
come tomorrows dino- from those that are doomed to become to-
Strategys new mission saurs. It is the ultimate morrows dinosaurs. It is the ultimate killer
The key, then, is to shift from the original competency.
notion of strategy as planning to strategy killer competency.
as learning and thus to the new mission of The strategic learning cycle
strategy: to create an adaptive enterprise. We Strategic Learning is a practical process for
need a method of doing strategy that en- following critical skills to become an adap- mobilizing the five competencies to create
ables us to adapt and renew in response to a tive enterprise: an adaptive enterprise. Unlike traditional
shifting environment. 1. Insight: As the engine that drives every- strategy, which aims at producing one-time
Every effective business process be- thing else, your organization must have the change, Strategic Learning is a process for
gins by defining its outputs. Work happens ability to make sense of the changing envi- sensing and responding to change on a con-
through processes that make it happen. Win- ronment through powerful tools that gener- tinuous basis. (See Exhibit 2)
ning strategies will only emerge through a ate superior insights into market trends, the The Strategic Learning process mobilizes
deliberate and practical process for generat- evolving needs of customers, and the organi- the key principles of evolutionary theory. The
ing insight, making choices, acting on them, zations own realities. This is where the com- process has four linked action steps learn,
and then adapting successfully as the envi- petition begins. In fact, the competition for focus, align and execute which build on
ronment changes. The outputs of a robust insight is the most decisive battle today. one another. The first two steps form the ba-
strategy method are what I call the five killer 2. Focus: Throughout the ages, no lasting sis of an organizations strategy creation. The
competencies. success has been built without a robust third and fourth steps are the foundations of
process that translates superior insights into strategy implementation. Strategy creation
The five killer competencies an intense focus on the right things. This and implementation are integrated in a mu-
I believe every organization must master the involves the ability to make the most intel- tually reinforcing process. The cycle is then

26 July - August 2010


repeated continuously the fifth step to Strategy demands difficult choices. You increasingly skilled at using it, and therefore
embody the five competencies for sustain- will never know in advance whether your continually sharpen the companys adaptive
able competitive advantage. strategy will work. And you will never have capability.
The underlying ideas and tools of Stra- enough information to make a risk-free deci- An effective strategy process doesnt re-
tegic Learning have been applied in orga- sion. move the need for leadership courage. But
nizations as wide-ranging as ExxonMobil, Strategy almost always involves dealing it provides the insights, decision framework
Ericsson, DePuy, Novartis, the Federal Home with change, and change is inherently stress- and organizational support to help make and
Loan Bank of Atlanta, the Girl Scouts of the ful. Overcoming resistance to change and implement the toughand courageous
USA, and Henry Schein, Inc. amongst others. converting it into active support is the ulti- decisions that strategy demands.
The leaders I have worked with feel that the mate test of leadership. Applying such a system is in itself an act
process and the concepts that have inspired For all these reasons, strategy requires not of leadership.
it are intrinsically compelling and have made only business acumen and superior insight
a real difference to their organizations. The but also a combination of intestinal fortitude,
Strategic Learning methodology has also personal integrity, and (in Ernest Heming- About the author
become the main basis for how strategy is ways phrase) the kind of grace under pres- Willie Pietersen is a Professor of the Practice
taught in Columbia Business Schools Execu- sure that constitutes courage. Its a quality of Management at Columbia Business School
tive Education programs. that isnt taughtand probably cannot be in New York. He specializes in strategy and
taughtin business schools. the leadership of change, and his methods
Strategy and the leadership Fortunately, the courage to lead can be and ideas, especially Strategic Learning, are
significantly enhancedor undermined widely applied within Columbias executive
challenge by the processes within which individual education programs, and also in numerous
An interactive, dynamic process like Strategic executives operate. A strong leader is much corporations.
Learning is an essential tool in the quest for stronger when equipped with a good set of Prior to joining Columbia Business School
strategic innovation. But such a process can- tools. he served as the CEO of multibillion-dollar
not operate at its full potential in the absence When strategy is developed through an businesses such as Lever Foods, Seagram
of strong leadership. While strategy has little organization-wide process, the leaders are USA, Tropicana and Sterling Winthrops Con-
to do with planning, it has everything to do not merely directing the company through sumer Health Group.
with leadership. In fact, every failure of strat- the current years business plan. They are also Pietersens latest book is Strategic Learn-
egy is a failure of leadership: either to set the building a crucial organizational capability: ing: How to be Smarter than Your Competi-
right direction for an organization, or to mo- the ability to think and act strategically. Over tion and Turn Key Insights into Competitive
bilize the energies of the people behind that time, the members of the organization in- Advantage.
direction. ternalize the strategy-making process, grow His web site is www.williepietersen.com.

Every failure of strategy


is a failure of leadership:
either to set the right
direction for an organiza-
tion, or to mobilize the
energies of the people
behind that direction.

One of the central reasons for the link be-


tween strategy and leadership is this simple
truth: Strategy takes courage. Heres why:
Strategy is about asking tough questions,
challenging existing assumptions, and deal-
ing fearlessly with the consequences. It is
about seeing the world as it is, not just as you
wish it to be.

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