Moreover, strategies are especially hard to implement in international context when the headquarter and local subsidiaries are differing culturally and share no common mindset or strategic language. Indeed, in many cases strategic plans do not influence critical decisions on a day-to-day basis and frequently, they just sit on a shelf, gathering dust. Hence, strategies most often fail because they are not executed well.
Things that are supposed to happen don’t happen. This begs the question of what it takes to make sure that the right things happen. How can we make sure that managers understand the strategy and make consistent decisions across markets and strategic contexts?
In 1958, March and Simon argued that the limits of human intellectual capacities do not fit the complexities of problems managers face, and suggested that rational behavior calls for simplified models that capture the main features of a problem without capturing all its complexities.
This concept alludes to Peter Drucker’s argument that the strategic assumptions that shape an organization’s behavior dictate its decisions about what to do and what not to do and define what the firm considers meaningful results.
Think about the Ten Commandments. Most of us don’t remember the whole Bible by heart, but we are familiar with most of the “to do” and “not to do” principles that consist the Ten Commandments. Why? because they are easy to understand and they are presented in a clear way. As Leonardo da Vinci once said, “simplicity is the ultimate sophistication.”
But why to implement business strategy by using simple principles? Because, for a strategy to influence action it must be remembered. To be remembered, it must be understood and to be understood, it must be simple. Following this philosophy, I conducted a research with Dr. Itzhak Gnizy and Prof. Aviv Shoham that was published recently in the International Marketing Review.
We investigated the use of simple principles by 350 Israeli firms, using questionnaires and in-depth interviews. According to our logic, managers can easily encode a few unique principles (based on their success and failure stories) into long-term memory and use them to guide their decision making. Hence, as the ‘ten commandments’, a core set of guiding, unique simple principles (we call it marketing doctrine) represent how the firm wants to implement its global strategy and guides managers toward its desired choices.
Interestingly, we found that known multinationals are using simple principles to guide their activities. For example: “New products goal is to meet or surpass 13.5% return on sales (LEGO); “We will never produce private labels” (Unilever Ice Creams); “We are not working with advertising agencies” (SodaStream) and “We only enter markets where we can be the best” (Apple). These principles act like an “international glue” that connect managers across the globe.
Importantly, we found a strong and statistically significant positive relationship between the use of simple principles and international performance. The meaning is that the use pf principles indeed pull everyone in the same strategic direction by providing clear behavioral guidance and enhanced communication. A critical insight that emerged from our findings was that managers need to make sure firms translate learning from success and failure stories into simple and clear guiding principles.
Moreover, they need to make sure that all firm members are knowledgeable of the principles and integrate them into the organizational culture. In sum, the use of simple principles creates a shared global language that drives superior international performance. This is especially crucial for Israeli firms that heavily rely on international business.
I encourage managers to use simple principles to implement their strategy in their decision making. Just keep it simple, please!
The writer is a senior lecturer and head of marketing and global strategy at the Ruppin Academic Center.