Constructing Strategic Spaces

Constructing Strategic Spaces

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Constructing Strategic Spaces

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    Strategic spaces are the fruits of free imagination and disciplined construction. What are they made from and how are they to be used?

    Every business has goods or services to offer and employs tangible resources to produce that offering. These are the “pieces” of the business game—and where they go matters. They are can be moved about strategically to transform organizations and offerings.

    Strategy occupies three spaces: physical space, social space, and representational space. Strategy is barren without physical objects and ceases to be strategic without social interaction. And they require exploration and transformation through representational lenses that look at so-called invisible spaces, like lifestyles or demographics. The secret life of strategy. 

    Too many segmentations are driven more by the availability of data than by strategic inquiry and conscious spatial construction.

    At the most basic level, there is physical space, in which the tangible components of strategy can be moved about. Every business must have something to offer, be it goods or services, and every business employs tangible resources of great value to produce that offering. These are the “pieces” of the business game. It is nearly inconceivable that the disposition of such pieces in physical space is of no strategic moment. Often it is the primary strategic consideration.

    Consider your favorite retail store. Retailers long ago learned that a store is a space in which the precise location of various items is of the utmost consequence for commercial success. Whether an item is on the top, the bottom, or some intermediary shelf; which items are on neighboring shelves; and whether the aisle at issue is close to the entrance or the exit are all questions subject to sophisticated research and heated debate.

    Where the pieces go matters. In the petroleum industry, the physical pieces are not a product but a web of economic resources. As in the board game Go, once a piece has been placed, it can no longer be moved about. And instead of shelves and aisles in three dimensions, there is a swath of world geography to consider in two dimensions.

    From Physical to Social Space

    In real estate, the pieces are buildings, apparently positioned in the same physical space as an oil refinery, albeit on a different scale. In reality, however, we have crossed an elusive boundary into the realm of social space. A site proposed for a residential development or a concert hall is just as fully determined by two coordinates on a map as the site of a refinery. But the attractiveness of the location is no longer exclusively dependent on positions and distances. It also depends on the surrounding social life.

    One is tempted to propose that whereas physical space is created and shaped by the relationship of objects to one another, social space is woven from the relationships among individuals and groups. As appealing as such a clean distinction may be semantically, it is worse than of no use in the context of strategy, where the ultimate objective is to change human behavior. In interacting with other human beings, we invariably rely on the shared symbolic or economic significance of objects, and our interactions with objects are without much meaning unless those objects signify something to others. The spaces of strategy are barren without physical objects and cease to be strategic without social interaction.

    We see the same ambiguity at the boundary between the physical and the social when we return for a closer look at the retail store. The store is really a social space because, for instance, the desire to have one’s products stocked on shelves at eye level can be explained only with reference to the particularities of human culture and meaning. The higher, the more prestigious—but too high is bad for sales. More pertinent still, in a social sense, is the width of the aisles. Extravagantly wide aisles are a modern version of what Thorstein Veblen described as the sort of conspicuous waste that is absolutely necessary to reassure the fortunate few that they have indeed made it. Confront them with sensibly spaced aisles and they are gone. (If you don’t frequent retail outlets, think of seat spacing in first, business, and economy class in airplanes.)

    Most of us are far more comfortable puzzling about physical spaces than about their social counterparts. The natural sciences and mathematics, with certainties that facilitate both teaching and testing, offer practical methods to tackle at least some elementary problems. The social sciences—because it is beyond their power—lack easily applied theoretical insights. As a result, in most situations  the strategist who is in doubt as to whether a more physical or a more social perspective should be adopted would be well advised to err in favor of the social. The best starting point is always amid the full ambiguity of the borderland between the two.

    Representational Space

    The pieces of strategy need not be in actual motion in order to be of spatial relevance. They may be at rest in physical or social space and still be somehow on the move. This occurs when they undergo change. A budding and then flowering willow tree will remain rooted in the same location but nevertheless will be clearly on a trajectory of transformation. A trajectory presupposes some notion of space. A company engaged in internal reorganization is motionless physically. Its position in the markets it serves remains the same, yet it will be moving in a space of features as it sheds some of its characteristics and acquires new ones.

    If physical motion is a change in location while other features remain unchanged, transformation is a change in features while location remains unchanged. With that, we have crossed another boundary and entered the territory of representational space. Unlike physical or social spaces, there is nothing everyday and familiar about representational spaces for the simple reason that we do not inhabit them. We must make them up.

    Gas stations come in different sizes. They also differ in terms of their share of revenue derived from the sale of general merchandise. These are two independent features that can easily be imagined as a two-dimensional space. Now imagine that a summer intern at a large petrochemical company, with nearlyunseemly eagerness to demonstrate his smarts, plots the gas stations of his employer and those of its major competitor on a graph. (See Exhibit 1.)

    The company will have some general policy about what type of gas stations to operate and some equally general beliefs about its competitor’s policy. The intern’s graph mercilessly disaggregates the effects of that policy and probes the adequacy of those beliefs. Strategy must start with probing, probing requires disaggregation, and disaggregation must take place in space. A disaggregation in space yields a pattern or a shape that is often, as it is here, so far from random or obvious as to call for some vigorous scratching of strategic heads.

    Now let the strategic plot thicken a bit. Our young intern discovers that these curious patterns seem to have something to do with whether the gas stations are in urban or rural locations. (See Exhibit 2.)

    Now we have several very precise questions to ask about what exactly is going on here strategically. Those questions may lead to a thorough review of strategy or to the conclusion that these patterns are a meaningless artifact of past decision making. Or they may lead to a discussion of the relevance of the chosen dimension—in this case, urban versus rural locations—and hence to modified or entirely new spaces. No matter: strategic thought is propelled forward by spatial constructs. But there’s a catch. Peering into an aquarium, one can easily distinguish between big and small, colorful and drab, aggressive and timid specimens of fish. But unless there is some sustained thought as to which of these features matter and why, this is nothing but idle sorting.

    Too many segmentations are of this kind—driven more by the availability of data than by strategic inquiry and conscious spatial construction. If data on the age and residence of customers are readily available, chances are that the strategic plan will include a PowerPoint slide on profitability according to segments defined by those characteristics. Demand some thinking on whether and why those characteristics are strategically significant, or ask whether other spatial constructs have been considered, and you will get blank stares. A segmentation arrived at in such a manner may look like an ingredient of strategy, but it is merely a deceptive simulacrum if the thought process that could influence other minds and give rise to more thought has been absent. In strategy, the proof of the soufflé is in the making.

    The spatialization of gas stations could easily be mistaken for a purely representational construction uncontaminated by either physical or social considerations. On closer inspection, however, the space is pregnant with both and is of greater strategic interest for precisely that reason. The availability of general merchandise is not an abstract economic quantity but a social feature that will attract different types of customers whose differing demands must be satisfied by the overall design of the gas station.

    The station’s location in an urban or a rural environment could be taken as a proxy for physical location, but it promises more pertinent inquiry if interpreted socially. Convenience shopping at gas stations is tied to certain lifestyles. Lifestyles tend to cluster in geographic space, so a finer resolution (for example, between suburban and exurban locations) may be needed to gain a full strategic understanding. Here again we encounter the boundary of ambiguity. Purely representational spaces, while theoretically possible, are likely to lack strategic relevance. Significant spaces will be hybrids of the three idealized forms of strategic space. 

    A Rich Mixture

    Gas stations and everything else sufficiently rich in features to be of possible strategic interest can be embedded in many different spaces. Indeed they must be, for no single space can capture the full strategic richness, or it will lose all explanatory power. We must select combinations of a few features at a time for spatial consideration and remain keenly aware of a much larger space of spaces that surrounds us. Of those selected, many will be found wanting in one or two critical ways, but their very rejection is potentially the seed of new spaces. In this manner, the process of strategic thought can be considered the conquest of the space of possible spatializations.

    This conquest does not culminate in the taking of some rich capital city deep in the center of strategic metaspace. There can be no canonical spatialization for any strategic situation, let alone for classes of strategic situations. The conquest must be a spreading out in the territory and the establishment of powerful garrison settlements from which further excursions can be made. Ultimately, it must result in a suite of ever-changing spatializations—some complementary, some contradictory—that sustain strategic inquiry, articulate thought, and fuel debate.

    Strategy is a particular form of social coordination across scales of space and time that can be bridged only by articulated and shared thought. Strategic spaces are superb catalysts and vehicles for the thinking itself and for the articulation and the sharing. They are also—unlike narratives in the form of vision and mission statements—open-ended and highly plastic. They provide a shared yet always debatable sense of where we are and where we could go, but they never obscure distant horizons or dim the awareness of alternative paths and directions.

    Thought must precede strategy. The first manifestation of thought that is communicable, and hence capable of influencing the thinking and behavior of others, must be spatial. The spatial mode of thought alone is not likely to result in the finished product of strategy or even to resemble it much. But it is a promising place to start.

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