Strategy is the art of creating power. Witness Sun Tzu, Buffett, Drucker, Sir Alex and other strategic geniuses

In case you haven't noticed, I love books. And reading. So not surprisingly, my favourite people tend to be those who read a lot. Conversation is so much more interesting when driven by those with views shaped by more than the superficial. Patrick Lawlor is one of those. After doing his time in the financial journalism, he moved on to edit the Investec stockbroking arm's financial publications. He does a fine job of it. Occasionally Patrick even finds time to write something himself. Like this article which addresses a new book on the fascinating subject of strategy. It's on his holiday reading list. After reading his piece, mine too. – AH

By Patrick Lawlor*

Strategy, like solutions, is probably one of the most widely used and abused terms in business (and life) today. From corporate strategy, to investment strategy, to marketing strategy, even right down to strategies for getting fit and improving one's self image – everyone seems to have one, or is expected to have one.

A couple of reviews of a recently published book "Strategy: A History", by Lawrence Freedman, one of the UK's leading military historians, set me thinking about the use and abuse of this term (the book is over 700 pages long – so will need to be tackled by me over the holidays).

The word strategy came to the business world via the military, so it seems apt that the ideas of Sun Tzu and Carl von Clausewitz, two of the leading authorities on the subject, should feature in so much modern thinking about business. However other areas of human endeavour have also developed their own bodies of thinking on the subject. Think of politics (where Niccolo Machiavelli's thinking stands out) and of course business (Peter Drucker's works come to mind). In the investment space, the likes of Benjamin Graham and Warren Buffett spring to mind. Sports books, from biographies of Alex Ferguson to golfing books, reveal a huge interest in the topic on the playing fields as well. Any student of strategy (in any field) can learn a great deal from the writing of the above.

Freedman succinctly defines strategy as the art of creating power – of getting more out of a situation than the starting balance of power would suggest. This definition simultaneously appeals to human optimism (that even the underdog can get ahead with a wise strategy) but also reminds us of the great difficulties of creating a wise strategy and making it work.

A strategy may look clever on paper, with extensive research into the underlying environment and the strengths and weaknesses of one's competitors. But even the best strategies are subject to the vagaries of chance or external factors outside of one's control. All require expert implementation to work (imagine if David's slingshot had been slightly off target; Goliath would surely have finished him off quickly).

In this light, the best strategies are not necessarily those that look great on a Powerpoint presentation or in a glossy report. The best must surely be those that recognise the risks involved and are adaptable to changing circumstances. Slavish adherence to a rigid plan can often be the worst strategy of all. Or, as Mike Tyson so pithily said: "Everyone's got a plan until you get hit in the face."

Strategies that rely on quick, early successes or that have total dominance as their goal can fail spectacularly in the longer run. The "blitzkrieg" approach can yield stunning initial successes, but eventually fail if the success ends up stretching the resources of the conqueror in administering the newly won territories. There are many good military examples of this, but some of the best examples are from business: think here of a bank growing its assets aggressively or a mobile telco company undercutting its competitors to grow market share. Poor risk management or the lack of a decent infrastructure to service a growing customer base can prove fatal.

Equally, a wiser goal may be one of a strong but not totally dominant position. Almost total dominance in a market often leads to resentment from customers, who then quickly turn to nimble competitors once there is a major social or technological change that creates new opportunities for those competitors.

In summary, while it is clear that in any form of human endeavour that one should have clear goals and a plan for achieving them (something that "gets you out of bed in the morning"), the best strategies are those that recognize the need for both patience and constant adaptation.

* Patrick Lawlor edits the DailyView and other publications of Investec Wealth & Investment. Prior to joining Investec he was a financial journalist, having worked at many of SA's leading business titles.