Strategy Means Finding the Patterns That Drive the Business

The current business climate may seem uncertain, but it makes for an excellent time to study strategy, according to James Schrager, clinical professor of entrepreneurship and strategic management. “The world of strategy is changing right beneath our feet,” said Schrager, who shared the latest models for both corporate and new venture strategy at the 56th annual Management Conference at Gleacher Center on May 16.

Schrager addressed a number of topics students had often asked about: How the strategy models used in his new venture strategy course were developed, how they vary from strategy used in his corporate strategy course, and books students could refer to for further information.

Starting with the new venture models, the defining difference between new venture and corporate strategy is that the new venture uses a static model system is made to answer a single question at a single point in time: Should we invest?

Schrager explained some of the observations, inspirations, limitations, and discoveries that led to the new venture strategy model. Inspirations included Chicago professor Ed Wrapp, who observed that great strategists ask perceptive questions, and Alfred North Whitehead, who proposed that teachers should attempt to help students develop an “unconscious common sense” that guides them through the subject matter.  New Venture Strategy takes Wrapp’s observation and develops sets of questions for entrepreneurs
to review. 

While static models work great for such time-limited decisions as the period between “pre-start-up” to the first potential liquidity event, they don’t apply to corporate strategy, where time is unlimited and situations change frequently. “What people need is something that is prescriptive,” Schrager explained, “something that says, ‘Here’s the way to create strategy.’ When top executives know they are in trouble, they don’t want analysis, they want a solution.”

Corporate strategy requires the development of “expert knowledge” so that you can know enough to develop a picture of the business issues at hand, Schrager said. When identifying corporate strategy, there is often something that isn’t obvious until discovered, but then it seems completely obvious — for instance, McDonald’s decision to expand internationally, Schrager said.

Many students ask for books to help them think about strategy after taking a course with Schrager, who brought a table full of them for participants to consider. Since strategy is all about making decisions, Schrager said, his favorites included books about the latest — and some older — concepts of how we formulate decisions. Among his selections were Models of Thought Volumes I and II, by Chicago PhD and Nobel laureate Herbert Simon; Blink, a popular book by Malcolm Gladwell; and Dynamic Memory Revisited by artificial intelligence and learning expert Roger Schank.

He also explained that strategy is something that must be experienced in order to be understood. “Chances are you won't learn strategy from reading a book. It just takes practice. There's no other way I've seen it done in spite of reading all of the books.”

When it comes to improving your sense of strategy, Schrager offered several tactics:

• Look for and build strategy patterns in your organization.
• Listen to others in your firm talk about why the company is great.
• Take note of the order, see what patterns develop, and compare their ideas with your own.
• Pick a big issue that intrigues you and learn to discern the difference between a trend (just the recent data) and a pattern (the reasons why the data change).
• Always start with something you know well; domain knowledge matters.
• Look for patterns when you read business media.
• Be clear in how you present the problem. Look for powerful patterns to guide you.

“The point of strategy is nothing less than saying, I have to bet on tomorrow,” Schrager said. “I’m going to think about it very seriously and come up with a way to draw that target, aim, and hit it dead center.”

— Emily Hiser Lobdell