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Effective strategies must match both the external market and the internal company culture.

Effective strategies must match both the external market and the internal company culture.

Whats your goal when you read blogs about business strategy?

Simple and unequivocal answers to the immediate challenges you face every day?

If so, youre either going to be misled or disappointed. Thats a bold thing to say, so let me justify it.

Although its easy to find simplistic prescriptions for what pharmaceutical executives should be doing right now (the latest are mostly about social networking and market access), a careful look at their provenance reveals that, mostly, they have little evidence behind them.

Just as you wouldnt accept a drug prescription from a quack doctor, executives are ill advised to accept strategy prescriptions that are no more than opinion.

Adam Smith said it first

The reasons for this were first documented in 1776, although they became part of accepted strategic thinking in the 1960s.

In that momentous year, Adam Smiths The Wealth of Nations described how factories were successful because of a combination of specialization (workers perfecting some skills) and integration (managers connecting up the specialities).

Look around your 21st century pharma company and you see his observation still stands.

In the 1960s, Burns and Stalker and then Lawrence and Lorsch developed this thinking into contingency theory.

In essence, contingency theory says that what works best is what fits the specific context of the situation.

In other words, there is no single best solution; only a best solution for that business situation at that time.

One-size-fits-all prescriptions, therefore, should be treated with great scepticism.

Take an example from my own research into why some pharmaceutical companies make strong strategy and others dont. 

At first, there seems to be no pattern. Some firms full of MBAs, swimming in data and with huge planning resources, make great strategy, while other create a mountain of waffle.

Some firms make up strategy as they go along, while others follow the vision of a great leader.

Planners, visionaries, and those who bumble along all seem equally capable of making great strategy or steering their firms to disaster.

So whats the prescription for good strategy making?

It turns out that the answer is, just as contingency theory suggests, it depends.

What makes a good strategy?

Dig deeper and you find that while formal planning is essential in some contexts (complex markets, for example), it is a poor method in others (very turbulent markets, for example).

Similarly, visionary companies cope with market turbulence better than planners, but fall down when the market grows complex.

Bumbling along, or incrementalism, works well only when the market is simple and stable but fails as the market develops. 

There is no perfect strategy process, only one that is perfect for your particular situation.

And the complexity doesnt end there. 

Some firms with just the right strategy process for their market (macrocongruent, if you like the jargon) still fail to deliver strong strategies.

When this happens, deeper research reveals that the companys internal culture sabotaged the process.

To create a strong strategy, you need a process that both fits the market (i.e., is macrocongruent) and fits the culture (i.e., is microcongruent).

Only when both conditions are met (bicongruence, in the jargon) does a strong strategy emerge.

In short, any prescription, be it from a book or from a consultant, about how to make strategy is going to be wrong for many of the people reading it.

New ways to think about problems

So back to the point about your goal in reading this blog.

If youre in the give me the answer now category, then you will be disappointed.

Instead, what you might find here are new ways to think about your problems.

In particular, this blog is based on the research Im currently carrying out for my new book The Future of Pharma and the ideas that are emerging about how our industry will evolve and what that implies for your strategy.

In The future of pharma, I introduced ideas about how the industry will fragment or speciate; in Managing complex markets, I suggested how that might happen in a sudden and hard-to-manage burst of industry change.

As the above discussion about how best to make strategy shows, such sudden fragmentation will mean that how we plan may have to change, too.

For now, let me leave you with a management paradox.

Contingency theory means, in practice, that you have to answer your own questions.

The paradox is that the best way to do that is to stop asking for quick-fix prescriptions and, to steal a phrase from the great Stephen Covey, Seek first to understand.

Coming up next month: How co-evolutiona complex three-way dance among pharmaceutical company business models, the social environment (like healthcare systems), and the technological environment (like personalized medicine)is driving the pharma industry.

Dr. Brian D Smith is an author, academic, and advisor in competitive strategy in medical markets. He is editor of the Journal of Medical Marketing, a research fellow in the marketing and strategy unit at the Open University Business School, and runs specialist strategy consultancy Pragmedic.