In this episode, Peter Compo delves into the emergent approach to strategy and discusses the limitations of traditional frameworks using aspirations, plans, and metrics alone. He further discusses the concept of 'killer problems' in innovation and emphasises the importance of a central rule that provides real-time guidance, unifies decisions, and allows for free choice. Complex examples from business and military strategy illustrate how granularization and over-specification can lead to failure, whereas centralized, low-level constraints help create coherence and foster creativity. Peter also explores nested systems and the necessity of having individual strategies for different segments within an organization.
00:00 Introduction and Overview
00:25 Limitations of Aspirations, Plans, and Metrics
01:12 The Killer Problems of Change and Innovation
03:04 Framework Components and Their Shortcomings
05:25 The Power of Central Rules
06:45 Challenges in Digital Transformation
10:27 Local vs Global Strategy
13:54 Granularization Problem in Strategy
18:31 The Fallacy of Shrinking Time
22:38 The Hidden Blockers of Transformation
26:11 Introduction to Chapter Five: How Strategy Functions
30:20 Granularization and Cascading Problems
31:13 Identifying and Overcoming Bottlenecks
33:29 Elon Musk's Engineering Approach
35:40 The Importance of Low-Level Rules
41:21 Strategy and Tactics in Warfare
48:46 Nested Systems and Organizational Strategy
54:58 The Role of Leadership in Strategy Implementation
56:23 Conclusion and Further Resources
Link to Peter’s website: https://emergentapproach.com
Link to Peter’s Music: https://www.youtube.com/channel/UCJsn2zbnx8dwvHJrisdkAtg
Link to Aidan McCullen for Keynotes, workshops and event MC.
https://theinnovationshow.io
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Peter Compo, strategy, emergent approach, aspirations, plans, metrics, innovation, complex adaptive systems, real time guidance, central rule, rule adherence, deviations from diagnosis, decision making, organizational change, digital transformation, investment in new products, granularization, cascading goals, bottleneck constraints, nested systems, military tactics
Welcome back to the emergent approach to strategy. Peter Campo, welcome back. Good to be back. Great to have you back, man. I was looking at some of the reactions to the teasers I put out about this series. And we're on a good path. I think people are looking forward to this. And today we're going to get stuck in. I'm going to pick up the pace a little bit because we'll be with you for an entire year, the amount of content that Peter has. I thought we'd start off with chapter four. And this is the limitations of aspirations, plans and metrics. And something that kills so many of our audience, Peter. And I thought I'd start off with a little quote from that chapter where you say, while three of the designed framework components, aspirations, plans, projections and metrics contribute to the solution to the killer problems of change and innovation, each has its limitations. None fully meet the free choice. Real-time guidance and unification requirements, which explains why managing only by aspirations, plans and metrics leads to limited success. I thought I'd tee you up with that. And you give us an overview of what you're talking about here. So chapter four takes off now after chapter three established what do you need to solve what I termed the killer problems of change and innovation? And those killer problems can be summed up just as a recap as. And if you have that influence diagram again in your mind, the right-hand side is the emergent side, the aspiration side, the global side. However, you want to think of it. And the left-hand side is all the things that you can do, choice, action, decisions, and the killer problems can be summed up is that. That which you can do really ultimately doesn't matter and that which really matters, you can't directly manage. And this came out of complex adaptive systems and out of that little influence diagram model. So the conclusion from that was, well, a solution to that problem. And I likened it to Rummel Teisenberg analogy from 1979, but that the solution is that whatever management technique it is, it has to number one, be a free choice, meaning you can't just choose to have your outcomes that you want. Number two, it has to unify all of those decisions and actions so that they're coherent. And the third, it has to give real-time guidance. And the real-time guidance is the issue that you can't wait how many sometimes years before you take between the time you take action and the time you find out the results. So those were the three things we're looking for. Real-time guidance, it unifies all those decisions and is a free choice. So then let's chapter four then says, well, let's look at some of the other framework, let's look at framework components and decide how they solve that. The killer problems by meeting these three criteria. So plans, metrics and tactics and aspirations themselves, none of them can fully meet those three criteria. So for example, a metric doesn't tell you in real-time what to do by definition, it only tells you after you've done something, whether it was the right thing to do. Plans don't give real-time guidance. So say that your strategy framework demands or suggests that by six months, you should get some research done or an experiment done or some activity with the government done. Okay, that doesn't give real-time guidance. All it tells you is that you have a wish to do something in six months. It doesn't tell you what to do day to day. Tactics only apply to a small scope of the organization. And so they can't fully unify, same with plans. If the plan is very small and you can do it in a few days, that's not going to be a unifying plan because you're going to have to pick a very small part of the organization. If you make a plan very big, eventually, it just looks like the overall aspiration. And again, no real-time information and inability to know whether you're following it. So chapter four essentially went through all of these reasons why plans, metrics, aspirations themselves and tactics simply cannot meet those three criteria properly. That was the first part of chapter four. Then you get into there are two metrics that can provide real-time guidance, one being adherence to a rule, and the other is measurement of deviations from your diagnosis. What this is pointing to is that only a central rule can give you those three things, real-time guidance, unification, that's why it's central, it applies to everything. And a rule that you can choose to put into place, a rule that is a free choice to make, rules can be turned into free choice. So what is it about? What is it about a rule that gives you those properties? We will not work on this. In real-time, you can know whether you're following that rule. We will only focus on customers with these properties. Can you know whether a customer has those properties? If you can, then your rule is real-time. You can decide whether you're adhering to it or not. You can judge whether you're adhering to it or not. And that's what makes a rule so powerful and a central rule, in particular, that much more powerful because it also unifies all of the actions and decisions. Peter, I thought we'd bring that to life a little bit. This idea of the central rule creates a boundary and that boundary is helpful. One of the challenges I experienced, so I'll put it into a context and please feel free to share another one that you may have studied or experienced yourself in your career, is that an organization might be leaning into digital. So I worked in a media company and what happened over time was I created new digital products and you had the challenge of digital dimes versus analog dollars for the same advertising that was analog was worth much more because it was less measurable and also digitization drove the price down. So you had this kind of challenge between the company and, as you say, in your book, each action might look great on its own yet failed together. So the traditional business was still charging higher yields or earning higher yields for a product, but often bundled in the lesser cousin rights that the poor could go online to sell the higher and your gun. Well, we're actually fueling our present with our future. So you had this kind of problem the whole time. And this is something that many, many organizations see where they either dismiss the disruptive technology or they tried to bundle it in or are we were just talking about Firestone, for example, the tire company that they're trying to plug the dam, like the little Dutch boy, as long as possible, before it all come plowing through and absolutely destroys the organization. I'd love you to expand on that kind of challenge, that battle within the company. I think what you're generally talking about is products in a life cycle and that you have mature products, you have new products and many people in the organization would rather sell products that have higher return or less cost of development and so forth. And I think this is an example I use a lot and a great example of what strategy can do and how just if you don't have the full scope, if it's not a central rule, you can run into these problems. So in general, what are we saying is that different people in an organization or different functions might have greater value for making their particular area look better in the absence of a central rule from leadership. Why shouldn't they do that, right? Why shouldn't they make their situation better locally? Because that's what they're held against. So sales wants to sell certain products that production doesn't want to make because it goes against their individual metrics. So that's where a central strategy rule comes in, where if the diagnosis has been, we've got to take the hit on developing these new products and they're going to cost more and they're going to mean retooling, then production has to accept it. But from their local area, they might not see that whole picture, right? And maybe even a whole business unit, as you described with Firestone or maybe even a whole company that's not recognizing the need to make the change and to see what's coming, it all has to do with this idea of local versus global, right? In your local view of the world, it may make sense to keep doing what you're doing. But this is what strategy's for, isn't it? It's to give guidance, it's to give a rule that takes you away from just doing what's right for what you observe yourself for your local situation and not be seduced by your local situation, right? Was Firestone seduced by the idea that slowing down the change to radial tires was better for them because in their local world and local in time, it meant for better economics. So what is the strategy all about? It's got to be for the whole organization, it's got to create these trade offs. It's got to show people to do things that are against what they would do locally in the absence of other information. And this is the power that tactics, plans and metrics don't have. And only essential rule does. There's a great paragraph here. You say granularization can lead to over constraint. If a business aspires to grow in North Africa, for example, creating sub goals for each of 10 countries makes perfect sense. Or even more granular creates 10 different customer segments based on their buying patterns, then break them into smaller customer groups managed by individual sales people and so on and so on. The list, you say, can contain supporting plans, set up a sales office in Tunisia by April 2025, design the sales brochures in Algeria, hire two more sales people in Mali, et cetera, et cetera. However, the more specific the description of each little goal and plan, the greater the constraint on the organization. And here's the thing, asking the North African sales organization to sell a million units overall is less constraining than forcing them to sell 230 K units in Tunisia for 20 K in Mali and 350 K in Algeria. And aggregate goal creates the freedom to sell wherever people want to buy. If there's good reason for forcing specific sales numbers in each country, fine, but the more granular the goals, the greater the potential to paralyze the organization with over specification. And I love this line. There's also the potential for unwanted self competition within the region. And when I read that, I was like, oh, that's exactly what happened, say, in my context, where traditional business were given a directive to sell more digital products. So they started to just apportion some revenue towards it to say it was digital. And you're like, oh, that's against the entire point, but it's because of the metrics and the metrics were wagging the dog and dictating a certain type of behavior that was no good for the organization. That is a classic example of when the measurement becomes the goal. And what you were describing comes from a little bit of a larger thought process in that chapter. And I think it's one of the most important conclusions from the model of strategy that I present is that cascading back from a goal, from a corporate goal, cascading back till you get granular with every individual person and every little task that has to go on, it seems like it would be a solution to the killer problems of innovation, that it would give free choice and free choice. And real time guidance, because you made it so granular, you, you can say, okay, we know we have to sell this product in this country at this time. The problem is there's no unification at all when you do that. And you just described an example of that where you start fighting in house because there's no guiding principle that makes an action right or wrong. By granularizing a big goal, like grow in Africa, or be in the forefront of the, of the tire industry or whatever digital industry, breaking that into a million little pieces is actually the opposite of strategy. Because it allows every little piece to be its own world. And now you put metrics on it and it becomes the goal, right? For, to solve each one of those little pieces of their own world. So this is what I classify as the granularization problem, working backwards from a goal until everything looks manageable, doable and actionable is actually the worst case of creating a strategy. I was thinking of it like either from you talk about a lot about war and all the various war tacticians throughout the book, but also sports that it's like having a sports team and each player having a certain type of metric from the coach, you need to do this, this, this. And they achieve those separately, but they lose every match. And they're like, well, I did my piece, like, what's the problem here? Because that actually can happen inside a team. A player might be going, well, I'm playing well, like you guys are letting us down. And that happens in organizations, the silos, the metrics, dictating behavior and influencing behavior. Individual metrics, right, are not for the good of the team. Huge thing. So I was thinking then, if you think about each element of your bike shop, example, for example, that you talk about then the characteristic time of change. So you open up this and you say a more damning fallacy. We're shrinking the task to shrink the needed time is that change requires a minimum time to emerge. And a brilliant example you give is word of mouth. So how do you put a metric on by October? I'll have good word of mouth of my new business coming into town. You don't know about that. And this is one of the things that I love about your book, but also that needs to be sung from the rafters about strategy is that nearly all of it needs to emerge. You can't dictate. You can't put a constraint on it because for it to happen properly, it has to happen naturally. And that emerging nature, it's very, very hard to see it through the windscreen only through the rear of your mirror. Can you see that? Aren't you perfectly describing the free choice requirement of a management solution to the killer problems? If it were a free choice to have people believing in the value of your product or the quality of your product instantaneously, well, you would just do it. If it were the free choice to have a new manufacturing system for selling radial tires or pick any goal that any business ever had of any meaning of any debt, if it were just a free choice to demand that it be true, why would we need strategy at all? We wouldn't. And so what you're, you're connecting to is a second work around that people think they can do to solve these killer problems of innovation. They think, well, okay, if I need real-time guidance, what I'll do is I'll shrink the goals to such a small time that I can approximate real-time guidance. I can approximate whether we're doing the right things because I'm getting feedback right away. And I liken it to, okay, if you have to run a marathon, think of it in terms of shoot, not kilometers. I don't know what the kilometers are of a marathon, but what the miles of marathon is 26.2, I believe, right? Break it into 26.1 or whatever it is segments. Okay. That may help mentally. Maybe that's a fun kind of tool, but it doesn't change the fact you got to run 26 miles, 0.2, right? So this is another fallacy. One is the granularization. Okay, we'll make things so granular and give everybody such a very minute explanation of what they have to do, so it's obvious they'll know what to do. And the other is the fallacy that you can shrink the time dramatically. And neither are solutions. This is absolute torture for so many. I'm sure it happened to you in your roles where you have somebody who believes they're doing their job, usually in a finance role or a PM role. And some of the examples you give in the book, so I'm going to, I'm going to poke into some wounds and some cases, open wounds of some of our listeners. How long should be expected for changes to occur to upgrade the capability of your workforce, change the culture of your company, change people's mind about something of emotional importance to them, see the success of investing in a new stock, improve your golf handicap by two strokes, reduce the failure rate of government agency, all those things. But these are what we're asked to do all the time in innovation. One of the most damning lines ever with innovation is when will this be profitable, which has killed so many ideas on the vine? So I gave those examples hoping that they resonate with people, at least one of them resonates with the reality of what it takes to change something meaningfully, change something systemically, which is, tell me a CEO who doesn't want to do that, right, who doesn't want to really change things so that the performance is truly, truly different. They all take time, they all take some minimum time for reality. And worse is the investment curve, right? The idea that when you start to change things, usually you get worse at first. When you change the way the system is, and I think you as a sportsman, it's probably as obvious in sports as in any other thing. I remember once I gave a presentation where I showed Tiger Woods performance before, and like the year after, he decided to change his swing. And it got worse and people are like, what are you talking about? It got worse. How could it get worse? It was a, it was a change for the better that he ended up going with for the long term, but he had to change everything is his brain, his muscle memory, his whole approach, probably to certain, maybe the, I don't know, anything about golf, but I'm making shit up swinging different clubs. I don't know. Who knows a different approach to various holes and courses. It's a, it's a connected system that needed to change in many different connected ways. And that's why this fallacy of shrinking in time is, is just not true. Peter, that's is something that is one of the hidden blockers of transformation in organizations where say, for example, and we're seeing it now with AI, you have to learn a new way of doing things, which means unlearning an old way. And so, so firstly, people have a challenge with that. That's a difficulty thing. That means doing L and D courses. It means building new capabilities, et cetera. But it's, it's if management are looking at you and people are afraid to look incompetent for a while, that that creates this whole psychological issue about change. And we see that manifest as resistance and fear and, oh, they're just being stubborn. But when you resume out and you go, but what is, what is the organization doing to create an environment where it's okay to look like you're incompetent for a while as you're learning this new skill? I think this is a, a heavy issue you're, you're bringing out. It, it really is that, that things get worse before they get better when you're trying to make a real systemic change. And yet it's so frightening for everybody involved, right? It's so, it's so troublesome. How about in sports? If a team decides on a different approach or a different playbook, is it going to be instantly better? Uh, can a coach do that and get away with it? Maybe that's why it's brilliant to be new or to come in. I was involved with this situation recently. And I know that I'm talking about things that everybody knows about here, but I'll just say it really quickly, a new person on a board, a new, a new CEO. And someone on the board said, well, boy, things are really messy right now. That makes it really hard for this new, this new CEO. And I said, I don't think so. Entering a mess is the easiest way to come into a new organization, not if it's a mess that's so disastrous and everybody thinks you can fix it instantly. But that's not usually the case. Usually new people are brought in to fix something. And that's a nice opportunity, but what if you're already there and you realize you got to do something and you realize it's going to destabilize everything before it gets better? One of the worst ones that you see is I liken this to sport again, where the previous CEO or the previous coach has had a very successful tenure. But they've done so at the expense of the future because they've always picked the same team. They haven't bluddered any new types of players. They haven't invested in the academy. And then a new coach has come in and they have these kind of old, older players at the end of their careers, not much talent coming through. And their blame is the CEO of the organization. People don't zoom out and go, well, it was the other woman or man who ran the company before who ran into the ground. And it's another universal situation in politics that you describe, right? Someone comes in new, whether it's a president, a prime minister or a local organ place and the previous people messed everything up, but it's not revealed until the time that you come in. As if isn't it hilarious in politics where someone will say after two months that they've changed the economy, right? And it's in any field. Okay. We're going to be being paid or went off on a tangent there. We're back on the track. Chapter five, highly strategy functions. In part one of the book, we discussed a strategy rule as a self-imposed constraint and then we start moving towards bottleneck constraints and the importance of bottleneck constraints and that you actually need to self-impose these constraints. A strategy is not a strategy without constraints. And this is something that's so missed when it comes to innovation because one of the worst things you can do is give somebody a huge budget and go, go innovate and they don't know where the hunting ground is, where are the constraints, where can they play, etc. This is one of the key elements of the book. I see stuff that you've been sharing. I've been following your resources for months before we got to interview and then I read the book and it all came together. But this idea, getting your head around constraints connected to the overall vision, the North Star is essential for any successful strategy. You're right that this is the heart and soul of understanding strategy as it comes from a model of innovation. And it's the interplay of several types of constraints. But as an overview statement, it is a remarkable thing that the essence of a creative process, the essence of an innovation process is constrained. It almost seems backwards. How could it possibly be? But we covered that in chapter two and three in the theory of emergence, right? That low local level activities lead to the emergence at the global scale of the innovations. So now we're at the spot. And what chapter four was trying to do was, well, how do you do that? Well, these things can only do it a little tactics, plans, metrics. So what does do it? A central rule, a strategy is a central rule. And what is it? It's a, it's a self-imposed constraint. But let's put it in the context of the other constraints. The aspiration that the strategy is aimed at is itself a constraint. It defines the scope of the endeavor, right? And this immediately brings out that this idea that strategy is always long term, for example, and big and important is not true. It's your aspiration that determines the term and the horizon and the size and importance of a strategy because the strategy is for achieving the aspiration. So the aspiration itself is a constraint that you choose to create the scope of your program. If you want to take on a lot, you have a big aspiration. And the constraint is you must do that whole thing. If you want to take it in small bites, then the constraint is much smaller and you aim at small things. The strategy has to follow it. But there's a third constraint that is really the magic to finding strategy. And that is what I call the bottleneck constraint. In theory of constraints from gold rat, it's called the system constraint. Same idea. Romalt talks about it as what's in the way. And this is, and the reason why this constraint is the magic to finding strategy is that strategy has to reduce what's in the way. I use the term bust has to bust the bottleneck to achieving the aspiration. And this is the magic because instead of everything mattering, which is what you get. And I remembered the word I wanted to call granularization. It's the idea of cascading, cascading down where everything matters. And you take it down to this very great detail, right? That would have been easier for me to say. I should have called the cascading problem. But anyway, cascading down when everything matters, nothing matters. And how many strategies are simply lists of all the things you think might be important for achieving that aspiration. But there's no unification to that. And what's the chances that all those things are of equal importance to achieving the aspiration you want to achieve? The chances are almost zero. You have to discover what's really in the way, what's limiting. And I use the word bottleneck instead of obstruction or barrier. Because in most situations and business and in life where you would use a strategy. You're thinking about process of change and time. And you're thinking about a flow of success, right? And a flow of products and a flow of inventions and things like that. And I think a bottleneck being something that is constricting. And you're going to open that so you get more movement, more forward motion. So those are the three key things. And I summarize them as the triad, right? The aspiration defines the scope and importance and horizon of the project. The bottleneck is the constraint that defines what's in the way of achieving the aspiration. And then the strategy is a rule that in fact, all rules are constraints. Is a self-imposed constraint to reduce the bottleneck to the aspiration. You say then that each time you do that, each time you break or you bust a bottleneck, the system, and this is your organization. The system's capability or its fitness increases. And another bottleneck becomes rate limiting. So that becomes your next thing to deal with is the next bottleneck. And I was thinking about that, that say it's a startup or even a new product within an organization, we get so overwhelmed by what we talked about earlier on. And it's not even overwhelmed. It's we focus on what will be measured on or rewarded on because we're given these metrics. And oftentimes they're useless. Like they're the least difficult things to surpass because it looks like we're making progress, this bias for action that we have. Well, if we focus on like AstroTeller would call it the monkey. So what's the, what's the difficult thing that I need to deal with? Because if I don't get through that. It does not actually have a break. It doesn't matter what you do. I think this is the essence of it. Elon Musk, he was asked why did he succeed with electric cars when other electric car companies had gone bankrupt and failed. And there were some explanations for those others. But I think his explanation really showed his overall strategy thought process. And his answer was not, well, we do everything right. His answer wasn't, we've designed beautiful cars. His answer was we're an engineering company. And what does he do? He talks about spending time on the shop floor. He talks about fighting through all the barriers to making electric cars efficient. And costs at a level that people can afford, right? And with long range and the right driving experience. He viewed it as an engineering problem, not we're going to be great in marketing. We're going to be great in, in, in, in this aspect of working capital. We're going to be great in terms of the design of the inside of the car and options and features. And it sounds a hell of a like what we talked about in the first session and referred. Who said no options or a few options, very few stylistic cues. You want, you want a Model T, you can have it in any color you want. So long as it's black. And he spent his time on the engineering floor, developing the things that we associated finally with mass production. And like we said, this strategy was not, we're going to do assembly lines. He didn't even have the assembly line at first. It came in five years later, as did the rule that you can only get the car in black. These have emerged based on the engineering view of producing the cars. There was a reminder I have in here that low-level rules drive freedom and creativity. High-level rules are just noise or lead to paralysis. And bringing it back to the bike shop, you said the rule, make a profitable bike shop, being my rule, is an unenforceable and useless constraint. While the rule only sell high-end and novel bicycles has meaning and forces discussion about what high-end and novel means, and you say here, only low-level rules are a free choice. That's a really important line that maybe just missed when somebody's reading the book, but I thought I'd pull it out and pull it that thread because I thought it was so important. Well, you're pulling us back to the fundamental point around the solutions to the problems of change in innovation. It must be a free choice. It's not a free choice to have a successful bike shop. It's not a free choice to have a successful electric car line. It wasn't a free choice for Ford to be able to change automobiles from toys for the rich to practical transportation for the average person and for the average business. His rule, no options, no style, nothing can get in the way of reducing the cost to customers and to throughput, which was an important one. That's why black paint was so important. It was the greatest for throughput. That's a very low-level rule and it looks nothing like the result you want. And that's one of the amazing things about emergent systems. What you can do doesn't look anything like the outcome you're trying to get. So the aspiration doesn't look anything like or the strategy rule that you put in to bust the bottleneck. Doesn't have to look anything like the aspiration you're trying to get. Sports, you want to be a great rugby player, right? What do you do? Just be a great rugby player? It sounds crazy, but when we get into corporations and things get difficult, do we start resorting to that? Do we start resorting to, okay, you'll make this business profitable? Boom, that's you. We're going to turn this around. We're going to grow. We're going to grow profitably. That's our strategy. There was a captain I had once in rugby, and I was like, I was like, I thought it was a candid canvas. I was like, we'd be losing a game or something like that. And he'd just bring everybody in for his words of wisdom and go, come on, guys, come on. And you're just looking as you're going, that's really helpful. I think this is one of our challenges with this team. But yeah, I hear you, man. You know, again, back to my workplace experience was the lack of a strategy to be the, almost the comparison, the imaginary comparison of what you want to be, and where are you now? So it creates this kind of gap. So your decisions are made against that imaginary version of yourself in the future. And the lack of that just causes such problems for everything down the line. Absolutely. And what you're describing is how do you get that creative tension that's useful when the gap is so big between the aspiration to be a great rugby team or grow profitably after years and years of middling performance or declining performance? Or whatever you're asked, be a great piano player, whatever your aspiration is. How do you take that great aspiration and turn it into guidance for day to day life? Is what strategy framework is trying to do and the strategy is trying to do. But you can't go directly from that aspiration to strategy. It's too much of a gap. You can't go from vision to what you do next Tuesday. It needs to filter through this bottleneck question so that you can decide what is really important. And then from that, your actions don't necessarily look very much like the result you want. I wanted to give another example. The best practice on a musical instrument, if you just happen to be in the other room listening to somebody practice to learn a piece, a Chopin A2, Chopin Belad. The best practice is you couldn't even tell what piece they were practicing. Whereas bad practices just play the piece over and over again, hoping by some magic it will get better. And it does get better, but it plateaus very, very quickly. And this is why granularization and cascading down and going individual and having lots of plans and lots of little choices and lots of decisions is better than nothing at all. But it leads to very, very mediocre performance. It plateaus very quickly because you're not attacking the constraint that really matters. The system constraint, the bottleneck. We're moving now on to chapter six. And this is where you talk about the fact that both strategy and tactics are for winning wars. And you discuss the challenge to understanding scope based tactics. And I love how you incorporate also the thinking of General Mao Zedong. There's a lot in there, but I love the way Peter constantly brings in the master tacticians of military, et cetera, because obviously that's where so much strategy was devised in the first place as well. There's great quotes throughout the book as well. I'm going to let you buy the book or read the book. I hope, I really hope you're reading along with us because this would be just a great way to actually get your head around it. Go to the emergent approach website. Go to the website. I'll share it all the time as we progress through the book. But I'd love you to be reading ahead of us and then having this discussion or listening to the discussion and then read the chapter because it is the best way to learn. Over to you Peter to discuss what we're getting at now. And I think we'll leave it out of there. We'll leave it after chapter six and then we'll move into the next session, which is looking at the killer problems again. Yeah, Mao Zedong was a, and I'm not talking about his political theories or actions. I'm talking about when he was a great general and strategist in the 20s and 30s. And he's the only person I've found so far. I'm sure there's others who have really, I believe, a meaningful definition of the difference between strategy and tactics. And what I'm fighting is the idea that strategy is for the long term and tactics or for the short term. We've already covered that. No, your aspiration determines your time horizon. Strategy doesn't determine that. If your aspiration is short, your strategy is short. And you're tactic. Another one is strategy for are for winning wars and tactics or for winning battles. Well, tell me this. Why would you ever fight a battle? Why would you ever lose a battle if it's not for winning wars? And this is what Mao was trying to get at. There's other definitions that tactics are implementation and strategy is the what to do. But that's all blown away by the idea of strategy as a rule versus a long list of plans or a goal. So what Mao said was a strategy is a law. A law was a different language for rule. And I don't even know what the proper Chinese translation was, what exactly it was translated from. You can get these. I have references. You can get these in the English translation directly writings from the 30s. He said a strategy is for a rule, a law that applies to the entire system. And a tactic is a rule or a law that applies to a smaller scope. And this is the value of tactics that you can take on goals of smaller scope with their own smaller bottlenecks and put in a rule for that. So if you have a company that overall is having to make a change to digital of some type, let's say, that doesn't mean that you have one rule that's going to describe everything you have to do. Maybe there's people that are responsible for there are obviously people responsible for individual parts of the enterprise system of the company. And they need tactics for how they might deal with the individual parts. So long as they don't violate the overall rule, the central rule. So the example he gave was so brilliant. It was about the difference. It was about staying true to guerrilla warfare tactics. And he said, you can summarize guerrilla warfare tactics in some ways as never fight a pitch battle, right? He gave some wonderful examples about when they retreat, we harass, when they attack, we retreat, and so forth and so on. He had many several characteristics of what guerrilla warfare meant to him, what that as a strategy meant to him, the rules by which he would play. And he was out of power for a period. He lost power for a period. And the people who replaced him fought some pitch battles. And he said, this is a failure to execute. This is tacticization where you turn the tactic from the small scope into the total rule. It's like what you were saying before about turning the metric into the goal, right? And they failed eventually in this, even though they won some battles. But as he said, if the battle is won, but it hurts the war, then the battle wasn't won. So chapter six goes through the details of this and eliminates these other definitions of the difference between strategy and tactics and puts tactics as a rule, not of lesser time or lesser importance, but of smaller scope. And every organization has tactics, CEOs have tactics. And we can get into that in chapter seven, the idea that the CEO creates this strategy and everybody else is just tactics of that strategy. No, that's not how to design nested systems. Let's do that, man. I think that's so important that this whole bottom up versus top down versus bottom up approach. And I just wanted to emphasize something. And we talked about this before, is that each silo or subunit or department within inside an organization has its own kind of a North Star as well. And therefore, from that North Star has a subset of strategy and the tactics that all complement the bigger overall North Star as well. And that's so often missed because one thing I find, I don't know if you found this, Peter, is I worked in organizational development as well. And one of the reasons I did was because I couldn't understand how you could have this amazing strategy when I worked in innovation that would just go into somebody's desk and never be implemented. I was like, what the heck's broken there? And it was this connection between the innovation and the organizational strategy and the leadership skills. And it was just because each subunit or department inside an organization didn't have a connection to the bigger strategy, or it was badly articulated, or there was none in their own department. They just relied on this message from all the time. And there's a lot of floors between where they are and where the messages come from, where they're often very, very fluent in this, in the top layer of the organization. But it doesn't trickle down to the rest. This is why chapter six and seven go nicely together, seven being the chapter on nested strategies. So instead of just cascading goals down to everybody, or the CEO and the C-suite determines the strategy, and now everybody implements it, and you just described a lot of problems with those, there's the concept of nested systems, where every group of some meaningful size, and you pick these for convenience in a way that makes the most sense, has their own strategy. But it doesn't just repeat the CEO strategy. It takes the CEO strategy as an external constraint. This is the fourth kind of constraint that exists in the system. If the CEO strategy said something about we're going to go digital in these areas, the IT department strategy cannot be, we're going digital in some of these areas, because you're not adding any new information. The IT department now has to decide what strategy they're going to use to make that happen. And they're going to have their own bottlenecks that are different. Maybe the CEO's bottleneck for going digital is that they can't get all the functions in the company to agree on how to do it, because one wants to go slow, another one wants to go fast, one wants to change real quickly because they can fix a problem they've got. But if they go very quickly over here in marketing and sales, now operations has to go quickly, and that's going to kill them in their metrics. So the CEO might have to create a system of deciding either I'm going to go quick or slow, and everybody has to tow that line, right? Everybody has to accept that once it's agreed. That's now an external constraint on each one of the systems, both manufacturing, marketing, and the IT group that's going to make this happen, right? Now, each one of those three organizations has to have a strategy now. The Ops group says, "Oh my God, they're going to do this to us." Production operations, I've called it two different names, call it operations. This is going to happen because it's for the greater good of the company, even though locally it's bad for me. Okay, what are we going to do to minimize that? What are we going to do to find a way to make this work in the least bad possible way? Marketing is going to have a strategy that's going to be okay, we got a gift here. How are we going to be able to really use this to maximize and to take ourselves even that much further? IT's got a strategy on how they bring the two together in a way that's coordinated. None of those strategies look like the CEO's strategy. This is the proper design of nested systems. Each one of the organizations, including the CEO, has strategy, tactics, plans, goals, the whole thing. And to your point, it makes it easier for a CEO. It makes it easier, like, I don't mean to bring it about sport, but it's my first line of context. If you had player-led teams, the team are making the decisions on the pitch, because the coach, once the game starts, particularly in a game like rugby and soccer, for example, you don't have that constant dialogue with the players. The way you would maybe in American football, where you have the coach with the clipboard, that's so far removed from a sport like rugby, for example, that you have to have a player-led team that they understand, and they have this in their blood. They understand how to play certain moves as it goes along. And I said I would resist this, but just to give our audience a flavor of the brilliant quotes throughout the book, you were talking about here about micromanagement and minimum essential. You said, "Helmut von Mülke, the 19th century German general, said, 'An order shall contain everything that a commander cannot do by himself, and it was with him back then, but nothing else.' I thought that was such a wise sense. And this is 19th century, so you can see how this wisdom is still valid today. Well, Mülke was a brilliant general and understood nested systems. He understood that over-constraining IT production and marketing would bring no value, give them the minimum rule. The minimum rule was, well, I've looked at the pros and cons of going slower fast, and we're going to go fast. Even though it's going to hurt us in some areas, that's a true strategy, has some trade-offs. Should the CEO then tell each one of those groups exactly how to do it? Probably not. It might be a dialogue, it might be a negotiation. Operations might beg for a little more time. IT might ask for a little more money to be able to make the operations thing work a little better for them. That's a negotiation, but that's different than, here's exactly the way you'll do it because I know better, I'm the CEO. And that's part of the design of nested systems only impose on the organization below you the minimum essential needed so that the organization is coherent. That was the goal, right? That the CEO would give guidance to each one of the three organizations that they could not arrive at themselves locally. So they created a global picture. People who are tortured by meetings wish that was the case from their CEO. How much the leader and we're saying CEO, but this would be head coach, right? This would be orchestra, conductor, and musical director, government, president, any prime minister, any leader at any level of an organization. How much you have to tell people what to do and this gets into deliberate and emergent strategy depends on the skill of the organization and the capability of the organization. There's many times when the organization doesn't have the skills or the motivation or the habits to do the things that have to be done. And sometimes the leader has to impose, has to give very, very granular direction, but that should not be the goal. The goal should be teach and develop the organization so that they can, so that the leader can start to back off and give the local organizations the freedom to do what in principle they can do better because they have more knowledge about what's going on in that local situation. So I don't want to leave this as CEO should never tell people what to do. It's they should tell people the appropriate level of what to do. And there's a big difference between those. I highly recommend the book. For those people who have followed us, maybe saw some of the stuff we shared on LinkedIn, there's a huge appetite for this book as well. Peter, where can people find you, find out more about the book? You can go to emergentapproach.com one word emergentapproach.com and you'll see chapter supplements and guidebooks and some additional examples. You can go to LinkedIn, Peter Campo, and I post regularly and give examples and also small tutorials on aspects. In fact, right, the last few weeks have been about the four constraints that we've discussed here today. And then, of course, you can get the book on Amazon.com and all and all online retail outlets. If you're reading along with us, we're going to go on to chapter eight next and the disqualifiers of strategy. So there's loads more to come. I'm very grateful to our guest, the author of the emergent approach, the strategy. Peter Campo, thank you for joining us.
