The one attribute that makes a decision strategic
The one attribute that makes a decision strategic
The power of self reinforcing constraints within organizations and cities.
Greetings from Vancouver! 👋
I am back from a short vacation in Miami, one of my favorite cities. As I soaked in the sun (and eye watering humidity), I pondered on how strategic decisions differ from regular decisions. I realized that strategic decisions create something I am calling “self reinforcing constraints.”
Once you make a strategic decision, you establish a box of boundaries. However, any future decisions within the same realm, will create smaller boxes, limiting what you can do. Let me explain what this means through three different examples.
Let’s jump right in!
Miami’s Sidewalks
I love exploring cities by walking but Miami is not set up for walking—outside of some zones like Miami Beach. Out of nowhere, sidewalks will disappear, putting you awkwardly close to traffic or you may be forced to wait a ridiculously long time to cross a street while cars roar by you. In my walks, I rarely came across other people walking, confirming my suspicion that most people drive to get around the city.
Miami’s sidewalks give us a preview on how strategic decisions create the constraints of future decisions. By adopting a car-centric design, the city was limited in future city planning decisions. Houses need larger garages, businesses need plenty of parking, public transportation has to be stretched across long distances and so forth. The original decision created self-reinforcing limits in the future.
If Miami wanted to adopt the 15-minute city model—where everything is within 15 minutes on foot or bicycle—it would require a serious, almost heroic effort in city planning. I’m not even sure if a city of Miami’s size could realistically make the jump, outside of a minority of neighbourhoods such as Miami Beach.
Leaders need to be aware of how self-reinforcing constraints are playing out inside their organizations. For example, your strategic decisions on work-from-home policies will affect the type of people who join your organization, how work is measured and the type of culture that is created. Just like Miami’s sidewalks, the initial decisions—how often should employees be in the office—create the constraints for everyone else.
Think about the decisions you made in the last few weeks. How many will be creating their own self-reinforcing constraints? These are the strategic decisions you really need to think about as they will span a host of effects and consequences.
Question: Do you know which decisions are creating self-reinforcing constraints and which ones aren’t?
Car Industry
It’s no secret that the car industry is in the midst of a significant identity shift, away from petrol cars to electric battery (EVs). Many car manufacturers are being gently (or forcefully depending on your perspective) nudged to drop petrol cars in favor of the more environmentally friendly alternatives.
Car manufactures are investing billions of dollars to build new factories while demand is shaky. Ford is projected to lose $4.5 billion dollars this year alone, while it tries to launch an EV version of the Ford 150, the best selling car in America. Potential buyers are hesitant due to range anxiety, initial high costs and limited charging stations. Some factors may be unique to vast countries such as the United States but not all.
Car manufactures are all-in on EVs, which are creating their own self-reinforcing constraints. However, was that the best strategic decision? There was at least one other alternative, which would have provided a wider range of constraints. They could have promoted hybrid cars as an in-between step, before full EV adoption.
The promotion of hybrid cars would have created an easier ramp up on all fronts. Many manufactures already had their own hybrid versions, consumers could find relief knowing they can fall back on gas and there wouldn’t be so much pressure on the electric grid.
Organizations need to reevaluate their strategic decisions to confirm if they are promoting the appropriate self-reinforcing constraints. The car industry may be unable to change their position—due to public and political pressure—but most organizations can. A recent example here is how some organizations are now focused on profits instead of growth-at-all-costs. The shift may be small but the downstream constraints can be massive.
Question: Are you promoting the appropriate self-reinforcing constraints?
Twitter’s Free Speech
From the moment Elon Musk started talking about potentially acquiring Twitter, he was talking about the need to “save free speech.” Inadvertently, he made a strategic decision, which is still creating self-reinforcing constraints.
The latest chapter in the Musk-Twitter (or Musk-X?) saga is the Israel-Palestine war. European regulators are criticizing Twitter for spreading false information but Musk is taking a stance on free speech while the CEO (Linda Yaccarino) claims Twitter is actually taking down posts.
I don’t know what the right answer is here but I’m fascinated by how current decisions are still being shaped by the original decision around free speech. Musk has reshaped the platform to fulfill his version of free speech and dealing with the eventual backlash that comes from owning one of the most influential platforms.
Organizations are bound to face unexpected self-reinforcing constraints. For example, 3M can take credit for many everyday innovations such as scotch tape, masking tape, post-it notes and even artificial turf. In recent years, 3M has faced a drought of new ideas, especially after rolling back a policy where 30% of revenue must come from new products. 3M’s leadership prefers to focus on “quality over quantity” but the unexpected constraints from a drop of innovation are bound to be felt in the years to come.
Unforeseen self-reinforcing constraints are difficult because they can often take years to fully be seen. Organizations need to diagnose the root cause and then make the proper corrections. Restoring performance levels is sometimes a matter of rolling back recent policies. It’s one thing to be unaware of unexpected self reinforcing constraints but it’s another to ignore them altogether, hoping they will go away.
Question: Are you dealing with unexpected self reinforcing constraints and do you have a plan for dealing with them?
Cheers,
Ruben
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