As I mentioned in the first chapter, people often use the adjective strategic rhetorically to signify importance. An example is that many people use the adjective strategic to contrast with tactical. The best explanation is that the strategic level is analogous to the brain and the tactical level is analogous to the hands. This results in a meaningless distinction between “choosers” and “doers,” because people in low levels of an organization’s hierarchy can and do make decisions.[i]
Sometimes those lower-level decisions are catastrophic, as in the case of James Liang, a Volkswagen engineer who found a way to fake reports on vehicle emissions testing – Volkswagen paid over $20 billion in fines.[ii] Clearly, it’s not only the CEO of an organization who makes consequential decisions.
I generally advise avoiding the use of the word strategic as a substitute for the word important. However, I make an exception for the phrase strategic decision if it’s used deliberately and coupled with the distinct phrase tactical decisions.
The application is in this rule: a strategic decision constrains a tactical decision.
An example of a strategic decision was Gerstner’s decision to keep IBM together. He revealed it to be “the most important decision I ever made – not just at IBM, but in my entire business career.”[iii]
The first essential characteristic of a strategic decision is stand-aloneness, which means that the decision is independent of other decisions. [iv] Gerstner’s decision to keep IBM together was stand-alone because Gerstner decided it on its own merits.
Gerstner’s decision arose out of his specific nuanced understanding of the situation and was influenced by his unique perspective. A standalone decision could also be called a subjective decision, in that is guided by a person’s perspective, personal values, and experiences. Throughout his book, Gerstner recollected his first-hand frustrations as an IBM customer.
The decision to reduce the price of mainframe computing systems was a tactical decision. It was not a standalone decision, because the pricing decision involved a considerable sacrifice of profits at a time when IBM was under extreme financial pressures. The pricing decision’s logic depended IBM’s commitment to large, global customers. IBM had no good reason to reduced prices if it was going to abandon those customers.
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[i] This is a meaningless distinction: See Roger L Martin, “The Execution Trap,” Harvard Business Review, July-August 2010.
[ii] Volkswagen engineer: See Bill Vlasic, “Volkswagen Engineer Gets Prison in Diesel Cheating Case,” New York Times, August 25, 2017. https://www.nytimes.com/2017/08/25/business/volkswagen-engineer-prison-diesel-cheating.html.
[iii] “the most important decision:” Louis V. Gerstner, Jr. Yes, Elephants Can Learn to Dance. page 61.
[iv] The first essential characteristic of a strategic decision: This section draws from the reasoning by Eric Van den Steen of Harvard. He defines strategy as the smallest set of choices sufficient to guide all other choices. Van den Steen says: “A strategy is not (1) a detailed plan of action or (2) a comprehensive set of choices and decisions; it is a plan of action boiled down to its most essential choices and decisions.” See Eric Van den Steen, A Theory of Explicitly Formulated Strategy, Harvard Business School Strategy Unit Working Paper No. 12-102 (May 3, 2012).