Carl Von Clausewitz in “On War” states: "The conduct of war, then, consists in the planning and conduct of fighting. If fighting consisted of a single act, no further subdivision would be needed. However, it consists of a greater or lesser number of single acts, each complete in itself, which, as we pointed out in chapter 1 of book 1, are called 'engagements' and which form new entities. This gives rise to the completely different activity of planning and executing these engagements themselves, and of coordinating each of them with the others in order to further the object of the war. One has been called tactics, and the other strategy." Substituting “business” for “war” business consists of a series of engagements which taken together represent the execution of a firm’s strategy.
Executives continually evaluate if the firm’s strategy is working, or if it is time to adopt an alternate strategy. But how can you determine if the firm’s current strategy is succeeding?
I’m not sure you can, but it seems plausible that you could approach the decision the way you approach any other hypothesis test. Each “engagement” a firm undertakes has some probability of success, and some probability of failure. If the null hypothesis is to continue executing the current strategy, and the alternate hypothesis is to adopt an alternate strategy, the decision would be to adopt a new strategy when the evidence from past engagements appears more likely to indicate the need for strategic change.
Similarly, it is difficult to quantify when it’s time to change strategy but some properties of when can be defined in relative terms. The speed required to adopt change in a tactical engagement is faster then the speed required to adopt strategic change, and the speed required to adopt strategic change is slower than the speed to adopt tactical change. If a firm's strategy changes after each engagement it implies either relatively high probability of success in the engagement, leading to adopting the alternate hypothesis quickly after failure, or failing to allow adequate time for a strategy to emerge. It is more difficult to quantify how quickly to ditch a strategy that shows the glimmer of success, especially if the probability of engagement success is small. An early success may lead to adopting a deficient strategy longer than prudent.
