THE JOURNAL OF LEADERSHIP APPLICATIONS
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Vol. 2, No. 4
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How to Apply the Principles of Strategy

© 2003 By William A. Cohen, PhD, The Institute of Leader Arts, www.stuffofheroes.com

Adapted from a forthcoming book The Art of the Strategist: 10 Essential Principles for Leading Your Company to Victory to be published by AMACOM in May 2004

Numbers are important in the development of strategy, for they may act as important inputs to that greatest of computers and computer programming, the human brain. Yet, it is your judgment that enables the development of a strategy that works, not any assignment of numbers and percentages. These can never replace the incredible ability of the human brain to integrate vast amounts of data, both qualitative as well as quantitative, and to reason to a solution that works and is optimal.

This means that the application of the principles of strategy can be scientific, quantifiable or no. In fact, we can induce major error into the development of strategy when we attempt to assign numbers to elements that, in fact, cannot and should not, be quantified. This is because assigning numbers to qualitative aspects gives the appearance of accuracy, when in reality we are simply cloaking judgment in a way to make it appear absolute. If you heard of the term, the tyranny of numbers, this is it.

However, this does not mean that the application of principles to strategy development is cannot be scientific. The scientific method is a process which is a reliable, consistent and non-arbitrary representation of the real world. It minimizes the influence of bias and prejudice. Because numbers are most easily controlled, we frequently assume that to be scientific requires quantifiable entering arguments. This is not necessarily true. What is true is that we must approach the solution we seek in a manner in such a way that the output yields consistent results. In this way, we can avoid a repetition of past errors, capitalize on the greatest chances for success, and reach predictable results.

This is crucially important when employing judgment and in utilizing the principles and to coordinate the many factors which must be considered in developing operational strategy. This is painfully true when various principles conflict (which they often do) or when under different conditions, one principle is more important than another, which is also true.

Principles, Resources, and Situational Variables

There are three aspects of any situation we face when we apply principles of strategy. These are:

• the principles themselves
• the resources we have available, and
• the relevant variables found in the situation faced

There have been innumerable concepts put forth as the true basic principles of strategy. My own studies have resulted in ten principles that I consider universal. They are shown below in the figure.

The resources we have to work with may include manpower, capital, equipment, know-how, and quality of leadership. They are assets that we control. We can manipulate these resources to best implement our strategy.

The relevant variables in the situation faced include economic conditions, business conditions, the state of technology, politics, legal and regulatory requirements, social and cultural norms, the competition, etc. They are distinguished from resources in that, while sometimes we may exercise some control in the situation, this is far more difficult. For example, a strategist faces the weather in a particular situation. With modern technology it is possible to modify the weather to some small degree, say cause it to rain, but this is difficult, expensive, and uncertain. For all practical purposes, the weather is uncertain.

An astute strategist first looks at all aspects of the situation and selects the relevant variables in it. Each variable must be avoided, overcome, ignored, or turned to an advantage. The strategist’s purpose is to integrate the variables with the principles, and using the available resources, develop a plan to accomplish the mission.[1]

In the figure below, I have prepared the three lists of the aspects necessary, side by side.

Example: Attacking the Market Leader’s Top Product

To illustrate the method, let’s look at one of the most successful new product introductions ever undertaken against a market leader. In 1936, Lever Bros., number two in the soap business behind Proctor & Gamble, introduced Spry vegetable shortening to compete against P&G’s well-entrenched Crisco brand.[2] The smart money said “no way.” Not only was Crisco, firmly established, it had been on the market for twenty years. Despite the Great Depression, it appeared to be depression-proof, and sales were up. It had no serious challengers. This was despite that fact that lard and butter were far less expensive. The Crisco name had become synonymous with vegetable shortening and almost generic. When women asked for “Crisco,” they meant vegetable shortening. Yet within one year of introduction, Spry had captured 50% of Crisco’s market share. Moreover there were no new ingredients used, and Spry was made from exactly the same raw materials as Crisco.

How Lever Bros. Did It

Lever Bros. was a subsidiary of Unilever of London, a giant worldwide corporation. Having been successful with a number of products in the U.S., in the late 1920s, it sought another new product to launch. The company first looked at all aspects of the situation. A vegetable shortening product seemed a good potential candidate. P&G had already proven there was a market. Although its potential competitor’s product was well-established, its dominance also meant there were no other major competitors or competitive products to contend with. At the time of the initial decision, both business and economic conditions were good.

Lever initiated a deeper look into its competitor’s product and found some weaknesses. Although women liked the product, there were some things that they didn’t like. If refrigerated, the product turned hard and was difficult to use. If left unrefrigerated, it tended to turn rancid. The color was not consistent, and while housewives would have preferred the product in a pure white colorization, it tended to be described more as a sort of dirty white color. Moreover, the packaging was not uniform in the cans in which it was supplied, and the housewives didn’t like that, either.

Integrating the Principles

Looking at the principles of strategy, we can see how some were integrated with the situational variables to this point. Lever Bros. seized the initiative and committed to a definite objective. It planned to concentrate resources at the strategic position of shortening. P&G thought its product Crisco was invulnerable, thus it paid little attention and did no research with the consumer. In fact, it had even allowed quality control in manufacture and packaging to get sloppy. As a consequence, the thought that a competitor, even a major one like Lever Bros. would introduce a product to compete with Crisco was totally unexpected, even unthinkable. Lever Bros. capitalized on this belief. Coupled with good security, the Spry product achieved complete surprise.

Looking at Resources

Lever Bros. decided which of the situational variables could be avoided, overcome, or taken advantage of. Moreover, it had the resources to do this and to support the general principles of strategy it was planning. Unilever had made major technological advances in Europe in the manufacture of soap, and the technology was directly transferable to the production of vegetable shortening due to hydrogenation, the major process common to both types of products. Thus, a vegetable shortening product was compatible with the Lever Bros.’ experience, know-how, and technical advantage. The problems with Crisco noted by consumers were easy to overcome. Some had simply to do with a stricter quality control. Financial resources and know-how were on Lever Bros side, but it even had one additional major advantage.

Lever Bros.’ Secret Weapon

Francis Conway had become president of Lever Bros. in 1913 when sales were but $1 million. By the late 1920s, sales were over $40 million largely due to his personal leadership. Conway had met every challenge thrown at him, and he had the confidence of parent company leadership back in England. Unilever invested the money to built the manufacturing plants to make the product. By the early 1930s, Lever Bros. was ready to go.

Enter the Great Depression

The depression began in October of 1929 and pre-empted product launch. By mid-1930 it was clear this was not an economic condition that would change soon. Lever Bros. had planned on introducing the product by then. There was tremendous pressure from within the company and the parent corporation to do so. The company had sunk a lot of money in Spry up to this point. They wanted to get on with it. However, Conway knew his strategy and the importance of timing. He made the decision to wait. Meanwhile he did note that the sales of Crisco did not slow, and while Spry was shelved, fine-tuning went on and research into the best promotional approach was initiated.

The Launch

In late 1935, lard and butter prices rose. This created a situation whereby the higher-price shortening would be more price competitive. Lever Bros. did not intend to compete with P&G on price, a direct approach strategy. Instead, although it was competing with essentially an identical product, the approach was indirect in the sense that problems with Crisco, recognized by consumers, but not by the manufacturer, were all corrected in the new product, Spry.

Again, Conway economized elsewhere to concentrate and initiate a massive promotional campaign. Until this time, conventional wisdom was to introduce advertising for a new product and let it be assimilated gradually by the consumer. Conway eschewed this approach and gave it everything he had day one. This included door-to-door salesmen distributing one-pound sample cans and free Spry cookbooks, to discount coupons and advertising even in small town newspapers. Conway even launched a mobile cooking school which went around the country doing two-hour demonstrations. P & G was stunned, and though it improved its product and manufacturing, it never recaptured the shares it had lost. Conway and Lever Bros. integrated the relevant variables with the principles, and using the resources available, develop and initiated a plan which made Spry a success despite the advantages enjoyed by P&G with Crisco.

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[1] This concept originated with J.F.C. Fuller as developed in Anthony John Trythall, ‘Boney’ Fuller, (New Brunswick, New Jersey: Rutgers University Press, 1977) p.108.

[2] The information from this example is from Robert F. Harley, Marketing Successes, 2nd ed. (New York: John Wiley & Sons, Inc., 1990) pp.68-78.
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THE LESSON: Strategy is an art, but the principles are not applied haphazardly, but scientifically. The strategist analyzes his situation and identifies the relevant variables. He uses numbers, but he does not allow them to overrule his good judgment. Rather, he integrates the relevant variables with the principles. Using the resources he has available, he develops and then implements the plan which will help him lead his organization to victory.