Sun Tzu's Warrior's Rules -- for Winning without Conflict

Sun Tzu had strategy right while most management gurus get it wrong. In the corporate world, they have done extensive studies regarding the execution of strategy. While most people confuse strategy with planning, executing strategy increasingly means adapting to market changes. In a study of 125,000 people representing more than 1,000 companies, government agencies, and not-for-profits in over 50 countries, researchers found that three out of five companies rated their organizations as weak at strategic execution.

In the article in Harvard Business Review exploring this research, the researches came to the conclusion that:
"Execution is the result of thousands of decisions made every day by employees acting according to the information they have and their own self-interest."

The problem starts with the fact that, in a interconnected organization, most of us do not know what our rights and responsibilities for making decisions are. This wasn't a problem in hierarchical organizations where all decisions flowed from the top down. Part of the problem is that our work role as decision makers has been generally ignored by our education system.

In the research, the difference between companies that were able to execute versus those who couldn't execute is dramatic. The same is true in our personal lives. In companies strong on execution, 71% of individuals understood that they needed to make decisions, in other words, they had the type of situation awareness taught by Sun Tzu. Only 32% of those in organizations weak on execution had the same understanding.

This Importance of Making Decisions

Growing up with a linear worldview, we are trained to think that others are looking out for our interests and that we are protected from making poor decisions. We think we are protected by our employers, by the government, and the system. Nothing could be further from the truth. The world has changes.

The same mistake is made in companies where people still look to headquarters for guidance. In most companies, the basic thinking used to be that information had to get to headquarters for certain strategic decision to be made. Though there is a difference between how quickly information gets to headquarters in good and bad companies (77% to 45%) the research found that the role of headquarters was in identifying patterns and spreading best practices. This was the coordinating role of a networked organization, not one of decision-making of a linear one.

The well-know equipment maker, Caterpillar, for example found that the hierarchy no longer made sense in terms of making business decisions. As one field executive expressed it:

“It just took a long time to get decisions going up and down the functional silos, and they really weren’t good business decisions; they were more functional decisions.”

Caterpillar's CEO, Jim Owens, noted that by the time information got to the top, it had been “whitewashed and varnished several times over along the way.”

The research found that the higher decision were made in the hierarchy, the poorer the quality of the decision was. Pricing issues were a great example. Only the people on the front lines can make pricing decisions based upon local market condition, which different from moment to moment in every market. When pricing decision were made further up in the hierarchy, it had to be made on the basis of cost rather than market.

In a high change world, the system is always behind the information curve. Laws cannot be passed quickly enough to protect people from all the dangers. The federal government cannot save you from the hurricane.
Researchers found that the more decision-making was moved down in the organization, the better the information passed to headquarters became. They came to the conclusion that:
"Ironically, the way to ensure that the right information flowed to headquarters was to make sure the right decisions were made much further down the organization. By delegating operational responsibility to the people closer to the action, top executives were free to focus on more global strategic issues."

The Flow of Information

Who is best positioned to make the best decisions about your life? You are. The only question is, do you have the skills to make those decisions? Do you have the information that you need?
In the business world, there is no question about where the best information for making decision resides: at the front-lines of the competitive battle. The research found that 61% of individuals in strong-execution organizations agreed that field and line employees have the information they need to understand the bottom-line impact of their decisions. This figure plummets to 28% in weak-execution organizations.
As more and more of us are plugged into a wider and wider variety of information sources, are we getting better information to deal with the decisions that we need to make in our own lives? The chances are against it. Unless you know how to develop a personal information network, actively seeking the information you need, the information you get will more likely divert you from what is important than point you to it.

This problem of information flow is also seen in the corporate world. As the pace of information increases, one key to the success of the enterprise is to move information across internal boundaries. Organization cannot afford to second-guess their front-line decision makers or the flow of information will stop. In companies the poorly executed strategy, 71% of people asked were worried abut their decision being second guessed. The predictable result is that information about decision was kept secret and almost 80% of those in the survey verified that information did not flow in these companies.
However, even in the best companies, there is a problem with information flow. Almost half (45%) of those in companies that were good at execution felt that information flowed freely between the various parts of the organization. At the Institute, we see this as symptomatic of the fact that most organization lack a vocabulary for discussing competitive situations on the front line. One of the benefits of our training is that it gives the entire organization a standard vocabulary and framework for communicating competitive and strategic issues.

If the key to success is moving more and more responsibility for competitive decisions to the front-lines, organization must rethink training. They must give their front-line people the perspective and tools they require to make those decision. This is why another separate research project came to the fascinating conclusion that the best strategy is really being created from the bottom up not from the corporate headquarters down.