Luck and the chemistry of strategy

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In Jim Collins’ fourth book in his “Good to Great” series, he introduces the concept of ROL, or Return On Luck. In Great by Choice: Uncertainty, Chaos, and Luck -- Why Some Thrive Despite Them All, Collins and his team analyzed pairs of successful companies that experienced exactly the same market dynamics but in which one company ended up being ten times more valuable than the other.

One theory he puts to bed quickly is that one member of the pair was “more lucky” than the other. In fact, each company had the same amount of good and bad luck. The difference was how their strategies enabled them to handle that luck. With the right “chemistry of strategy,” they were able to minimize the damage from bad luck and maximize the benefits from good luck.

I think of luck more in terms of the unpredictability of the specific timing of events. For example, over a five-year period, you can be confident that there will be changes in the economy, technology, and your industry that will trigger a need for new approaches and solutions. For example, digital chip technology will have a ten-fold improvement in price performance. The newest generations of buyers will increasingly shape the consumer and labor markets they participate in. The economy will heat up or stall. The business models that sustained industries for years will cease working. Disasters will impact everything.

The role of strategy and luck is straightforward. You start with a clear visualization of where you want to be in five years. You then identify threats and current weaknesses that can prevent you from achieving that visualization. You identify your strengths and the opportunities that can accelerate the achievement of that visualized future. You then invest in changing the status quo so your organization can quickly recognize such opportunities or events – good or bad – when they occur. And you have the capability to quickly respond to those events and generate a superior ROL.

It’s easy to overlook the importance of prior strategic planning when your organization “gets lucky.” When you look deeper, you can usually see the value of the old adage:

 
“The harder and smarter I work, the luckier I seem to get.”

Create a strategic plan with your team

"I am tomorrow, or some future day, what I establish today.
I am today what I established yesterday or some previous day.”
James Joyce

A well facilitated strategic planning process is a proven way to increase an organization's Return On Luck.

How long have you been saying that you will develop your strategic plan, but you haven't yet done so? Why? Perhaps it remains on your to-do list because it feels like a huge, laborious process and you haven't the time to spare to do it. Peak-performing companies have a clearly defined strategic plan…and it doesn't have to take long to create an effective one.

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