Unified Theory of Business Strategy

Published in Australia in 2020 by Sentinel 9 Pty Ltd

Website: www.sentinel9.com

Email: [email protected]

© Rod Samimi 2020

The moral right of the author has been asserted.

All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission from the author.

ISBN 9780648973416 (ebook)

Disclaimer

The author has made every effort to ensure the accuracy of the information within this book was correct at the time of publication. The author does not assume and hereby disclaims any liability to any party for any loss, damage or disruption caused by errors or omissions, whether such errors or omissions result from accident, negligence, or any other cause.

Contents

Acknowledgements

Introduction and background

Key concepts in Chapter 1

Key concepts in Chapter 2

Key concepts in Chapter 3

Sentinel 9

Chapter 1: What is strategy?

Introduction

Strategy – general perspectives

Strategic variables

Strategic games

Modes of thinking

Unified Theory of Business Strategy (UTBS) – axioms

Chapter 2: Strategy in business: An applied framework

Introduction

Commercial strategic outcome: Wealth

The building blocks of strategic business planning

Summary of Chapters 1 and 2

Summary of Chapter 1

Summary of Chapter 2

Chapter 3: Applied business strategy

Introduction

1. Background information

2. Formulation

3. Implementation

4. Evaluation – Financial plan and analysis

Physical examples and case studies

Physical examples

Business strategy meets vehicle suspension

Competitive advantage meets power transfer

Case Studies

Toyota Motor Corporation

Inditex – Zara

Amazon.com Inc.

Appendix: Concepts and theories

Part 1: Theoretical concepts in economics and business

Part 2: Strategic tools used in developing a business plan

Part 3: Background theories of business strategy

List of QR codes and links

Bibliography

About the author

Acknowledgements

This book brings together the knowledge and experiences I have gathered from both the corporate environment and academic research.

I have been fortunate to be a student of several prominent academics, who generously shared their knowledge with me. I was privileged to study under Emeritus Professor Ian Harper, learning about finance and economics. I was also a student of Associate Professor Clive Edwards, who taught me about international business strategy. In addition, I gained great benefit by being associated with the University of Queensland’s Business School and Durham University’s Business School during my doctoral and postdoctoral time. I also worked in the industrial sector with several experienced senior executives who introduced me to various operational disciplines and taught me a quantitative way of thinking. As an executive, I gained practical knowledge and training through my work with Shell, Pacifica Group, and Clark Equipment. I am thankful for the opportunities presented to me by those companies within their international operations. I will be forever grateful to those academics and practitioners.

The production of this book would not have been possible without the support of Dr Judy Gregory and her patient assistance in the writing and editing process. I would also like to thank Wayne Liu and Peter Winkler, who did extensive work on the graphics and related YouTube videos, and Dr Victoria Gonzalez for her academic research, and Kirsty Ogden from Brisbane Self Publishing Service for her work on the design and production.

Introduction and background

Unified Theory of Business Strategy provides a conceptual framework and practical method for understanding the strategic process, particularly as it relates to business. It proposes a practical methodology for business strategy that is nested in relevant theoretical foundations.

This book is the culmination of over ten years of postdoctoral research by the author, both independently and within large organisations. It combines the author’s experience as an executive, business strategist, consultant, business owner and academic researcher. This book applies a number of well-established concepts in the field of strategy. It straddles the academic and practical business realms, with a main focus on offering useful material relevant to business practitioners. It, therefore, does not attempt to add yet another layer of descriptive ideas on discussions about business strategy. Instead, it translates those discussions into a pragmatic, causal planning tool to present a continuum from conceptual theory into its practical application.

It is not our intent here to refute (or specifically support) any well-established or widely used schools of thought in business strategy, nor to add to esoteric volumes in the field. Instead, we aim to provide a synthesised framework that draws together specific aspects of existing theories and theoretical standpoints. Our intended contribution to the field is to identify complementary threads and offer further interpretation to translate abstract concepts into a day-to-day, practical application.

The business literature includes many theoretical standpoints, but these are often prohibitively cumbersome for business planners, particularly for those working in small- to medium-sized firms. In addition, many existing theories require a significant academic background before they can be understood – a background that many business planners may not have (or not need). We attempt to address these inconsistencies. Managers focused on, and pressured by, day-to-day business operations rarely have the time (or inclination) to examine detailed, abstract theory. On the other hand, many popular ideas about business strategy are not based on theoretical foundations, may lack credibility or may simply advance personal gain.

The framework developed in Unified Theory of Business Strategy brings together input and output mechanisms and their modus operandi that are relevant to broader business. The main body of the book refers to well-known concepts and does not assume prior knowledge. The material is presented without recurring academic referencing for ease of reading. Instead, supporting academic detail is included in the appendix and bibliography.

This book offers a solid theoretical foundation drawn from multiple disciplines, but also offers practical versions and planning tools. Readers with less theoretical interest can access the planning tool by itself (Chapter 3), knowing that the underlying theory is also available (Chapters 1 and 2).¹ Chapter 1 provides a conceptual framework of strategy. Chapter 2 interprets that conceptual framework into an applied commercial and economic version. Chapter 3 applies the framework to practical business planning. In this way, the chapters are designed to be read either individually or sequentially. Readers seeking only practical application may find everything they need in Chapter 3. Readers seeking the underlying theory will benefit from reading Chapters 1 and 2. Case studies and supporting material are provided at the end of the book.

Chapter 1, What is strategy?, presents the underlying theory of strategy and offers a definition of strategic process with relevant variables at play. Drawing on specific variables and simple elements of game theory, Chapter 1 also introduces different modes of thinking. It concludes by proposing that the strategic process can be understood through two theoretical axioms and the interpretation link between them. The concepts developed in Chapter 1 apply to all types of strategy, not only to business strategy. Chapter 1 is most useful for readers seeking a theoretical foundation from which to understand how correlated strategic intent can translate into a causal process.

Chapter 2, Strategy in business: An applied framework, applies the theory developed in Chapter 1 to a commercial business context. It introduces the concepts needed to develop and understand strategic business planning process. Chapter 2 defines wealth as the desired economic outcome of business, addresses the issue of risk, and introduces three building blocks of strategic planning (formulation, implementation and evaluation). These building blocks correspond with the material identified in Chapter 1. Chapter 2 is most useful for readers seeking to focus on the basis on which business strategy is developed.

Chapter 3, Applied business strategy, describes specific steps involved in developing a practical, workable strategic business plan. It includes links to an external software tool, which can be used to develop a comprehensive business plan. Chapter 3 is most useful for readers who are ready to develop their own strategic business plans.

Following Chapter 3, we offer two examples from the physical sciences to illustrate the links between practical science and business strategy, and three case studies (Toyota, Zara and Amazon) that relate the content of the three chapters to actual external examples.

The appendix summarises key concepts, tools and theories referred to in the main body of the book. It includes three parts: theoretical concepts, business strategy tools, and theories of business strategy. It acts as a brief overview with reference material to support the concepts presented in the book.

The bibliography provides detail of further reading to support the ideas presented in this book.

Throughout the book, QR codes are used to link readers to additional material, including:²

Short YouTube clips covering key content

Online access to diagrams that may be difficult to decipher on the page

Access to read-only versions of strategic planning software.

Key concepts in Chapter 1

Strategy process

Strategic variables

Strategic games

Modes of thinking

Strategic axioms

Key concepts in Chapter 2

Desired outcomes in business

Attributes of risk

Building blocks of strategy (formulation, implementation, evaluation)

Correspondence with key elements of Chapter 1

Key concepts in Chapter 3

Formulation (external analysis, internal analysis, gap analysis)

Implementation (general operations; processes, procedures and communication; capacity-building programs)

Evaluation (financial plan and review)

The diagram below summarises the content of Chapters 1 to 3 and shows the links between the chapters.

Sentinel 9

Sentinel 9 is a conceptual framework that overarches the models developed in this book. It links nine interconnected bodies of knowledge to offer a synthesis that can be applied in many different contexts. The Sentinel 9 framework provides a holistic approach to understanding reality. Whilst this is not a book about the attributes of Sentinel 9, its framework has been used to configure the Unified Theory of Business Strategy (UTBS). Here, we apply Sentinel 9 to a microeconomic context by focusing on business strategy and competitive advantage. In a forthcoming book, we will also apply Sentinel 9 to a macroeconomic context.

Sentinel 9 draws on literature from the physical sciences, life sciences, social sciences and philosophy. Each discipline offers a slightly different perspective and provides a useful lens for examining reality. Sentinel 9 adapts key elements from these partially connected fields to develop a more complete theoretical standpoint. It attempts to create a more accurate set of paradigms to holistically interpret the reality (and its sub-components) around us.³

Some observers have suggested that universities should formally establish a cross-disciplinary faculty, tasked with examining similarities between disciplines and looking for relevant synergies in a way that is similar to the rationale of Sentinel 9. It is possible that artificial intelligence systems will assist with this process in the future.

Figure 2 illustrates the nine fields that contribute to the Sentinel 9 theoretical framework.

This book forms one of the linked elements between Sentinel 9’s education material (particularly Unit 14) and the relevant YouTube channel and planning software, as described in Figure 4 below.

1. This is not a get-rich-quick book, nor is it a do-it-our-way book. Instead, it offers the business community a practical, usable method that helps with ‘how not to lose money’ before advising ‘how to make money’.

2. All QR codes and URLs are current at the time of publication but their accuracy and availability cannot be guaranteed going forward.

3. A full discussion of the Sentinel 9 framework is beyond the intended scope of this book.

Chapter 1

What is strategy?

Introduction

This chapter looks at the fundamental concepts that underpin strategy and provides a new perspective to propose that strategic processes can be configured within two interacting axioms in the Unified Theory of Business Strategy (UTBS).

Whilst the focus of this book is ultimately on business strategy, the strategic concepts discussed in this chapter apply to many fields, with relevance to politics, military and career development. The strategic concepts here also apply to everyday interactions and personal relationships.

In this chapter, we first make some general observations about strategy, including correlation, causality, outcomes, information sets and time-based decisions. We then look at specific components of strategy and introduce different types of variables, games within which these variables are engaged, and the ways players think when undertaking these games. We bring the components of strategy together in a theoretical framework with two interacting axioms.⁴

We provide the building blocks for a strategic process by:

Defining strategy and the strategic process

Introducing key variables present within the strategic process

Using elements of games theory to explain how key variables are engaged

Explaining different modes of thinking used by players in dealing with the games and variables

Combining the concepts into two interacting axioms that explain how to develop a causal strategic process

Connecting a link of interpretation between the axioms to close the loop for the framework.

In setting up a theoretical framework, we acknowledge that expounded theories may not be an absolute or unchallengeable reflection of reality. They offer a useful perspective and an improved way of interpreting that reality. Theories provide interrelated concepts, definitions and propositions that explain or predict events or situations. Most theories specify relationships between variables, offer a systematic way of understanding events or behaviours, and provide a simplified representation of how variables interact. Theories take a complex, real-world issue and simplify it down to its essentials in order to explain and make predictions. If done well, this enables decision-makers to understand the issue, problem or opportunity.

Strategy – general perspectives

Strategy is a word that gets used in a multitude of different contexts. In business, people talk about their ‘business strategy’, ‘product development strategy’, ‘marketing strategy’ and ‘human resources strategy’. In their personal lives, people may talk about their ‘fitness strategy’, ‘personal development strategy’ or ‘financial strategy’. People also talk about strategy as a type of intended action. People ‘think strategically’, ‘invest strategically’ and ‘study strategically’. In government, the term ‘strategy’ is applied to concepts like ‘economic strategy’, ‘employment strategy’ or ‘election strategy’. Here, the term ‘strategy’ is often vague, with some reference to broad thinking or boundary intentions. In this sense, strategy seems to convey an approach for a premeditated scheme.

One idea seems to link the various uses of the word ‘strategy’: it is often about forward planning – about putting in place a plan of action designed to attain a position in the future, with plans that are reasonably long-term and encompassing. This general use of the word ‘strategy’ makes it possible to identify some complexities with the term.

Strategy involves making plans and taking action in the present, and implementing those plans over the medium- and long-term in order to achieve some future goal; it involves allocating resources now for some future higher-value outcome.

Strategy involves an element of uncertainty and risk; whilst a well-developed and well-implemented strategy will internally (or endogenously) increase the likelihood of achieving the desired outcome, the outcome is not guaranteed due to potential external (or exogenous) influences.

Strategy involves achieving an appropriate balance of breadth (scope), depth (scale), deterministic planning and indeterminate flexibility: if a strategy is too broad and vague, it is unlikely to be achievable; equally if a strategy is too closely defined and too narrowly fixed, it may become prohibitive to enhance opportunities as they arise. It will become increasingly susceptible to external influences.

There are three parts to developing strategy, which we will look at in more detail in the coming chapters:

Defining the desired outcome

Devising plans about the best way to achieve that outcome

Implementing decisions in respect of those plans.

In the UTBS, we propose a definition of strategy as:

Strategy is a series of correlated decisions, made at sequential points in time, based on an available information set and players’ ability to interpret that information, in order to attain a desired outcome at a future point in time.

Within this definition:

Series of correlated decisions (or tactics) – implies the interdependence between decisions and the accumulated residual impacts of previous decisions up to each point in the process

Sequential points in time – implies the sequentiality of decisions (tactics) and the critical role of the time dimension

Available information set – implies a state of play at each point of time with different accumulated values as the residual position up to that point of time

Players’ ability to interpret – brings in the human, cerebral element with their ability to analyse and/or synthesise a certain volume of information based on underlying complexity and players’ level of knowledge

Attain a desired outcome at a future point in time – implies that strategy is designed to maximise the likelihood of that desired outcome and reduce (or eliminate) the likelihood of other potential outcomes.

We will describe the above elements in more