Business Strategy Assignment
Hustle as Strategy
According to Chaharbaghi and Willis (1998) the term "strategy" has a growing amount of literature, which in different ways tries to capture the components necessary for the formulation of a complete strategy. For the purpose of this essay business strategy will be defined by the following components: strategy must apply to the entire enterprise, strategy is a consistent process not just a one-off occurrence, and lastly strategy must analyze the relationship between the organization and its environment. This paper will provide evidence that Hustle as strategy, written by Amar Bhide, fails to address several of these strategic issues and can hence be defined at best as an incomplete strategy or just a tactic. It will discuss Hustle as strategy in relation to a properly conducted strategic planning process, its theoretical underpinnings, the strengths and weaknesses of the article, and finally conclude by answering the question: Is Hustle as strategy a complete strategy?
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It should be noted that Bhide's article was written in 1986, at the peak of financial and investment banking creativity and profit making (Bertero, E. 1994). At the time new financial instruments were launched incessantly by different companies and readily copied by others. It might very well have seemed at the time of writing as if no basic strategic planning process was necessary, since any product launched with the slightest degree of innovation was successful. In the boom years of the early eighties it was possible for companies in the financial services business to be extremely successful without providing an overall direction for the corporation. The paradigm that seemed to work was based on individual creativity, the creation of customer relationships, customer satisfaction and profit maximization engineered at lowest possible group level without any prescriptive or deliberate planning process as guidance.
Bhide describes an emergent strategy based on survival of the fittest (Henderson, B.D 1989). Hence in the Whittington model (Whittington, R. 2001), see figure 1, the 'X' represents the position Hustle strategy would take. It lies in the first quadrant to the far right with focus on profit maximization. Bhide takes an extremely pragmatic view to strategic planning. Chaos and uncertainty thrives rather than rationality and logic. Emergent strategy is explained in similar terms by
Downs et al., where it is postulated that "uncertainty is here to stay" (Downs et al, 2003. pp. 5) and that there is a need to have a series of experimentations and trials. Bhide seems
to support this idea. In the case of Hustle as strategy top management are willing to delegate
responsibilities far down in the organization to gain responsiveness while risking control. To have a successful emergent strategy an organization must learn from all levels of employment (Downs et al, 2003).
To justify positioning Hustle as strategy to the extreme right in the Whittington model it is worthwhile to consider the components of a strategy to the left of the same model. "For a strategy to be perfectly deliberate" (Mintzberg, H. & Water, JA. 1985, pp. 258) three stipulations must be met. First, there must be clear and precise objectives within the organization. Second, the objectives must have been created as a consensus or dictated from the top management. Lastly, these objectives must be followed through without failure, meaning no external factors would interfere with the process. In other words the environment would have to be perfectly predictable or else controlled by the organization itself (Mintzberg, H. & Water, JA. 1985). Since none of these conditions are fulfilled by the Hustle strategy the positioning of it at the other end of the Whittington model makes sense.
A significant component of any strategy process is the analysis of competitive advantages. Examples of resources providing a competitive advantage are technologies and knowledge, patents, reputation and brands (Chaharbaghi, K. & Lynch, R. 1999). Bhide correctly argues that the financial and investment banking industry issues few patents, has no technological advantages, a good brand name and reputation provides a slight advantage, but the significant competitive advantage is embodied in the human resource as knowledge (Zack, M.H. 2000). However, since this resource in the financial services business in particular is extremely flexible and moveable, it does not represent a sustainable competitive advantage according to Bhide. The quote from the investment guru Warren Buffett "major sustainable competitive advantages are almost non-exsistent in the field of financial services" supports the author's position (Bhide, 1986 pp.60).
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The article discusses primarily one aspect of strategic planning - the analysis of competitive advantage, which it determines does not exist in the banking industry. Bhide rapidly concludes that neither branding nor innovation would provide substantial competitive advantages for the long term for any single corporation, hence the value of a strategic planning process is dismissed. Bhide's claim that Hustle represents a strategy is challenged below.
A consistent process not just a one-off occurrence does not seem to be a theme Bhide accepts. Nothing in the article indicates the support of an ongoing strategic process built on analysis of the environment and its business cycle. Rather he repeats the idea that ad-hoc decision making on any level of the organization is the correct approach in a fast moving market, where quick response to customer demands is more important than any guidance a strategic framework would provide.
The strategic planning process should be concerned with the organization as a whole (Andrews, K.R. cited in Foss, N.J. 1997), rather than each entity creating its own strategy without coordination. The Hustle strategy seems to support the idea of each small entity being allowed to maximize its own profitability without being constrained by an overarching strategic framework, hence this pillar in a strategy development is also rejected by Bhide.
The last element of a strategic planning process is to establish the relationship between the organization and its environment (Grant, R.M. 1991J. The Hustle strategy supports this concept only on a tactical level rather than on a strategic one. Fast reactions to changes in the business environment are seen as the key to profit maximization. A strategic framework to create a unique and valuable position for the corporation is an essential criterion for any strategy according to Michael Porter (Porter, M. cited in Segal-Horn, S. 2003), would only be a stifling constraint on individual creativity and is basically rejected as not essential by Bhide.
Bhide's argument, that Hustle is a strategy, lacks any theoretical underpinnings and does not include the components defining a complete strategy as shown above. Still Hustle might have been seen as a strategy during the economic boom time of the early eighties. However, a strategy must be able to support a company throughout a full business cycle.
With low barriers to entry, insignificant product differentiation, no threat of substitution, a sufficient supply of money and a large customer base little can be gained from an analysis of the Porter's five forces (Porter, M. 2001). The innovation and optimisation framework can be applied (Adcroft, A, and Willis, R. 2000). An innovative product launch in the financial market has only a brief period of advantage before being copied by competitors. Rather the industry survives on optimisation of existing products by making small and incremental improvements to the existing portfolio.
In the right business climate the Hustle strategy certainly has its place. The article provides an analysis of the performance of the financial industry during a period of booming demand for creative new financial instruments. The strength of the article resides in the insight the author provides of the competitive environment. In addition it recognises the lack of sustainable competitive advantages caused by the fast movement of human resources between companies. The hustle strategy boils down to fast customer response, quick decision making on lowest organizational levels with an acceptance of the high risk associated with it. The financial service industry in 1986, as Bhide describes it, is reminiscent of a market having reached a Nash equilibrium (Camerer, C.F. 2003), in which no company is interested in seeking an advantage over any other participant.
The weakness the article suffers is its lack of theoretical work to substantiate Hustle as a complete strategy containing the necessary elements the literature refers to. Its attempt to generalize a strategic concept that seemed to have worked during a portion of a business cycle - the boom time - without assessing its applicability in the trough of the cycle is an additional drawback. The key resource referred to in this article, the employees, are described as quick to change tactics to support a customer demand. They are well trained, highly flexible and hard working as long as the reward is substantial. These attributes might be attractive in a boom time but they certainly raises the question if this category of employees - good hustlers - are able to adapt to an economic down turn. This important issue is not discussed by Bhide. In hindsight we know that already three years after this article was published the financial services business faced its worst crisis for decades (Blanchard, O. et al. 1993).
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As defined in this essay, a strategy is made up of three major components: strategy must apply to the entire enterprise, strategy is a consistent process not just a one-off occurrence, and lastly strategy must analyze the relationship between the organization and its environment. Bhide's argues that a full strategic framework only would represent a constraint in a fast changing world, hence Hustle becomes a satisfactory strategy. In Bhide's world no competitive advantages are sustainable, chaos prevail and high risk exposure is acceptable.
In such a world Hustle as strategy might work in the short term, but it cannot support a company throughout the full business cycle. Bhide describes at best one component of a strategic framework, while ignoring the other two presented here. Hustle as strategy, it must be concluded, does not provide sufficient support to regard it as a complete strategy, but rather as a tactical framework useful in an economic boom time.