A formal theory of strategy
By: Eric Van den Steen
Contributors: Harvard Business School
Series: Working paper / Harvard Business School -- 14-058; Working paper (Harvard Business School) -- 14-058
Publisher: Harvard Business School
Published: 2013
Place of publication: Boston
Language: eng
Number of pages: 47
Description: What makes a decision strategic? When is strategy most important? This paper studies the structure and value of strategy (in its everyday sense), starting from a (functional) definition of strategy as 'the smallest set of (core) choices to optimally guide the other choices.' This definition captures the idea of strategy as the core of a -- potentially flexible and adaptive -- intended course of action. It coincides with the equilibrium outcome of a 'strategy formulation game' where a person can -- at a cost -- look ahead, investigate, and announce a small set of choices to the rest of the organization. Starting from that definition, the paper studies what makes a decision 'strategic' and what makes strategy important, considering commitment, irreversibility, and persistence of a choice; the presence of uncertainty (and the type of uncertainty); the number and strength of interactions and the centrality of a choice; its level and importance; the need for specific capabilities; and competition and dynamics. It shows, for example, that irreversibility does not make a decision more strategic but makes strategy more valuable, that long-range strategies will be more concise, why a choice what not to do can be very strategic, and that a strategy 'bet' can be valuable. It shows how strategy creates endogenously a hierarchy among decisions. And it also shows how understanding the structure of strategy may enable a strategist to develop the optimal strategy in a very parsimonious way.
Notes: "December 2013"--Publisher's Web site.

Includes bibliographical references (pages 45-47).