The Power of Strategic Centering

The strategy frameworks that most executives rely on were forged in what we might call the “stuff” economy. Michael Porter’s seminal five forces model the resource-based view and Blue Ocean strategies were the frameworks made sense in a world where most corporate value resided in tangible things: factories, distribution networks, inventory, and equipment. In 1975 roughly 83% of the assets on the books of Fortune 500 companies were tangible. Strategy was, in essence, about identifying opportunities or defending positions in physical space.

The shift has been accelerated by what the economic historian Carlota Perez calls a technological revolution—the kind of once-in-a-half-century transformation that reshapes not just technology but the entire logic of how economies work. She identifies five such revolutions in the history of capitalism, each driven by a cheap input with economy-wide applications: the original industrial revolution; steam and railways; steel and electricity; oil, automobiles, and mass production; and now information and telecommunications.

Each revolution follows a pattern. In the disrruption and installation phases, financial capital rushes in, bubbles form, and inequality surges. Then comes a turning point—a period of crisis and institutional adjustment. Finally, in the deployment phase, the new paradigm takes hold, institutions adapt, and a new age of broad-based prosperity becomes possible.

We are at a turning point right now. The symptoms are unmistakable: massive income inequality, political instability, widespread dissatisfaction, and an old strategic paradigm whose productivity has been exhausted but has not yet been replaced. The defining characteristic of this transition is what the author calss dematerialization: Value creation is shifting decisively from physical stuff to digital services, coordinated ecosystems, intangible assets, and experiences.

Strategic centering is deliberately choosing one organizing principle to guide resource allocation, opportunity selection, and organizational identity in a dematerializing world. It involves answering a simple but profound question: What are we really about?

The author’s research has identified five types of strategic centering

1. Mission.  What problem keeps us up at night?  Ideal for the large and enduring problem; the technologies for addressing it are in flux.  Risk could be mission drift.
2. Customer.  Whose needs do we understand better than anyone?  Suitable when customers have complex, evolving needs that cut across industries.  But the risk is it could conflict with other corporate goals.
3. Technology.  What capabilities do we have that are transferable across domains?  Good for companies having capabilities those are deep, on a long and exciting technological trajectory, and applicable in multiple markets.  Technological narcissism (failing to connect technological discoveries to real customer jobs to be done) could be the risk.
4. National Ecosystem.  What system are we essential to?  Good for the venture requires scale and patience beyond private capital; geopolitics create strategic value.  Major risks are: geopolitical strategic constraints; uncompetitiveness globally.
5. Friction Erasure.  What’s still absurdly hard in our space?  The domain has legacy complexity, regulatory fragmentation, and poor customer experience.  Scope creep (friction is everywhere).

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