A Blog by Jonathan Low


Mar 27, 2014

Strategy Is No Longer a Game of Chess

Organizations under attack - whether in business or government - tend to follow the same basic play book: blame their woes on outsiders and conspiracies, attempt to discredit or even eliminate the channels or media that are delivering unwanted messages - and sometimes even dispatch with the messengers.

The problem is that the way in which decisions are reached in this world is no longer linear. There are too many sources, too many linkages, too many influences, connections, points of leverage and impact to count, let alone manage.

Whether it is the President of Turkey outlawing Twitter because people are recirculating evidence of his corruption or the President of Russia invading a week neighbor in a pathetic attempt to establish his nation's resurgence - or the CEO of JPMorgan accusing the government of undermining his business in the face of industry-wide governance failures, the belief appears to be that the best defense is an offensive offense.. Brazen it out and hope the next global crisis will shift attention elsewhere.

The fact is that the number of players has expanded exponentially and the tools at their disposal have increased in range and power - all while the cost of wielding influence has decreased dramatically. The result is that the carefully considered point-counterpoint of global strategy has devolved into a far more chaotic frame. The days in which an elder statesman declaimed that gentlemen did not read each other's mail, is now one in which they are not ashamed to publish each other's mail.

Important decisions must be made in inadequate time with insufficient information.To survive in this environment, let alone succeed takes new skills and expertise whose meaning we are only beginning to understand. It is a world of 'frenemies' in which your best customer may also be your worst competitor. The days of sustainable competitive advantage have given way to ephemeral points of influence. Most people know what you do - or soon will. And they will have their own opinions about why you are doing what you are doing - and whether it will work. In this context, understanding the context in which your actions will be judged and acting accordingly may be the most effective strategy. JL

Greg Satell comments in Digital Tonto:

Anyone with an idea and a broadband connection can gain access to technology, marketing, finance and talent that rival the world’s biggest firms and, indeed, even large nations.
As the crisis in Ukraine continues to play out in Crimea—and possibly spread to Eastern Ukraine as well—it is not only conventional measures of power we should be paying attention to, but linkages.
It is, of course, Russia’s connections to a large segment of the Crimean population that Putin used as a pretext for his invasion.  It was also fear of connections (ethnic Ukrainians to the mainland, Crimean Tatars to Turkey), which led him to shut down television stations and other channels of communication.
And it is through deepening and severing connections that the West intends to combat Putin’s aggression—by uniting with Western and Eastern European allies to apply sanctions that will deny Russia the economic and cultural ties it now relies on.  Strategy is no longer a game of chess, because power no longer depends on nodes, but on networks.

Tyrants Aren’t What They Used To Be

Until very recently, Viktor Yanukovych held nearly absolute power in Ukraine.  When confronted, he remained defiant, exercising every lever of authority he possessed, including his control over the media, political structures and finally, the use of force.
His rivals were almost comically ill-equipped.  They donned makeshift shields and helmets, burnt tires to obstruct the snipers and posted information on social media.  Yet still, they prevailed through a network of unseen linkages that proved to be decisive.
While Yanukovych was a man of uncommon ineptitude, we’ve seen similar scenes play out in countries like Egypt and Tunisia—not to mention at corporations like Blockbuster and Kodak—which had leaders reknown for their political savvy.  Yet they fared no better than Ukraine’s feckless despot.
It’s time to come to terms with the fact that the world has changed, past notions of power have become obsolete and leaders need to adapt

The Impotence Of Power

As soon as Viktor Yanukovych entered office, he moved quickly to take firm hold on all organs of power.  He pushed a new constitution through Parliament that considerably strengthened his office, threw his chief political opponent, Yulia Tymoshenko, in prison and took control of important media outlets (including, I’m sorry to say, my former company).
Yet, as it turned out, none of that did him much good.  As political scientist Moisés Naím explains in, The End of Power, overthrows are becoming the rule, rather than the exception. He writes, “Power is easier to get, but harder to use or keep,” and I think that encapsulates the challenge that leaders today are facing.
Everybody, from governments, to religions, to even militaries on the battlefield are having to learn to live with greatly diminished advantages to scale.  Superior capital, technology and market share no longer confer the benefits they once did.  In fact, they might even blind us to dangers that loom under the surface.

How Disruption Happens

As George Friedman of Stratfor pointed out, Yanukovych was in an excellent strategic position.  His powerful neighbor, Vladimir Putin, was offering financial and political backing to join his Eurasian Union, while the West was offering little more than a trade agreement. For anyone versed in the power centers of the region, the choice seemed clear.
Yet the masters of realpolitik had it wrong.  A small group of activists went to the main square in the city—the Maidan—to protest.  They created a web page, became active on social media and their numbers grew.  When the riot police attacked the camp, still more came.  New laws were enacted outlawing the protests and the entire country exploded.
While these scenes seem incredible—and are indeed even more impressive to witness first hand—they are exactly what network scientists predict.  A small group of passionate people can influence others that are slightly more reticent, still others take notice and also join in. That’s how disruption happens.

The Anatomy Of Disruption

One of the most salient aspects of the Euromaidan protests is the extent to which events defied the strategic narrative.  Putin, many said, was far too determined while the US and the EU were reticent and the opposition leaders incompetent.  By any conventional analysis of interests and capabilities, the protesters were on a fool’s errand.
Yet conventional analysis failed and spectacularly so.  The reason is that we need to look beyond the nodes and start thinking in terms of networks, in both business and political life. Here’s what to look for:
Small Passionate Groups:  With all of his access to power, it was easy for Yanukovych to dismiss the trouble when it started.  The opposition politicians had small constituencies and little public standing.  Those camping on the streets were mostly students and activists with few resources.
Yet those groups were connected to larger ones.  They had family, friends and colleagues at work, not to mention weaker links to some in the government and the military who would later be called to shoot on them.  It was these unseen links that proved Yanukovych’s downfall.
Ideas That Don’t Make Conventional Sense:  As I noted above, there was a rational strategic logic to Mr. Yanukovych’s decision to back out of the EU trade deal.  We can only imagine he was taken aback by the strong reaction to it and that made it harder for him to deal with the crises effectively.
Disruption never makes sense to us, because it always starts with them. The film nut who will rent a cult movie through the mail rather than go to Blockbuster; the Silicon Valley mogul who wants to salve his environmental angst by driving an electric car; the forlorn Tunisian street vendor setting himself on fire in a public square. Yet that’s where it starts.
Unlikely Suspects Join In:  The truth is that it’s not the influentials we have to worry about, but when ordinary folks start joining in.  One of the things that surprised me during the Orange Revolution in 2004 was how many of my business colleagues I saw at the Maidan.  I noticed the same trend during the last year’s protests in Turkey, where I have also lived.
Make no mistake, the face of revolution today looks a lot more like The Good Wife than it does Homeland.  Even the most radical seeming idea is one viral Facebook post away from becoming mainstream.

From The Scale Economy To The Semantic Economy

The 20th century was driven by the scale economy.  The path to success was paved by minimizing costs and maximizing control over the value chain.  The bigger you were, the more you were able to able to negotiate with customers and suppliers, acquire technology and talent and leverage capital and marketing might.
Yet today, we are competing in a semantic economy in which everything is connected.  Anyone with an idea and a broadband connection can gain access to technology, marketing, finance and talent that rival the world’s biggest firms and, indeed, even large nations.
And the failure to recognize that reality proved to be Yanukovych’s downfall and soon, most probably, Putin’s as well.  By relying on traditional notions of power and influence, today’s authoritarians are fighting a 20th century battle in a 21st century world.


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