The Death of ‘Good Strategy’

Why well-run companies lose, and what that means for how you think about strategy

In 2004, Hewlett-Packard was by any serious measure an excellent company. It had revenues that dwarfed most of its competitors. It dominated personal computing and enterprise printing. It had experienced leadership, a credible strategy, and the kind of global reach that takes decades to build. Business schools used it as a model. Analysts rated it well. Nobody watching HP in 2004 would have marked it as a company in danger.

By 2019, HP held 6% of its industry’s profits. Apple held 78%.

What interests me about this is not the outcome. Technology companies rise and fall; disruption stories are everywhere. What interests me is that nothing HP did was wrong. Carly Fiorina drove cost synergies and competitive scale. Mark Hurd cut 14,500 jobs in his first year to sharpen operational efficiency. Meg Whitman restructured the business and eliminated 55,000 positions to restore what she called “a balance of growth and efficiency.” Three consecutive CEOs, over fifteen years, each running the same competent playbook. And the company still lost its leading position.

Good strategy, executed competently, against the wrong things.

What ‘good strategy’ actually means

The conventional definition of strategy seems reasonable enough. Good strategy means clear goals, targeted resource allocation, and consistent execution. Know your market, watch your competitors, measure what matters, improve what works. Most of the strategy frameworks in circulation, from Porter’s Five Forces to the Balanced Scorecard to OKRs, are built around this logic. They are tools for understanding your current position and improving it.

HP had all of it. So did Nokia, which was the world’s largest mobile phone manufacturer when it began its decline. So did Amgen, which in the early 2000s held 195% of its industry’s biotechnology profits. (That figure is not a misprint: the hundreds of other biotech firms were collectively losing money.)

These companies were models of execution. The problem was somewhere else.

What the data shows

I spent two years reading annual reports. Twenty years of filings from six companies, 9.1 million words in total. The premise was simple: what a management team writes about year after year, in legal documents reviewed by lawyers and auditors, is a reliable window into what they actually believe matters. You can’t fabricate strategic intent in an SEC filing. The consequences are too serious.

What I found was starker than I expected.

Apple’s annual reports were full of language about technology, consumers, and global markets. HP’s were full of language about business structures, competitive positioning, and workforce management. The difference wasn’t subtle and it wasn’t recent. Apple was writing about the external forces reshaping its industry from the early 2000s, when it still held 1% of its industry’s profits and HP held 23%. Before the iPhone. Before iTunes had scale. Apple was oriented toward the world. HP was oriented toward itself.

Cisco versus Nokia is even starker. Nokia’s annual reports were dominated by financial language: shares, equity, debt, shareholder obligations. Its management was writing about its balance sheet at the precise moment the forces reshaping communications technology were accelerating around it. Cisco was writing about those forces. Nokia was writing about its capital structure.

Stephen Elop’s “burning platform” memo, written when he arrived as Nokia’s CEO in 2010, diagnosed the crisis entirely in internal terms: accountability failures, leadership gaps, poor internal collaboration. Every sentence pointed inward. The external forces that had destroyed Nokia’s position appeared only as things already lost to, not as things that could have been seen and built around.

The losing firms were not ignoring the world. Technology appeared in HP’s reports. Consumer devices appeared in Nokia’s. Amgen wrote about globalisation. The forces were present in their documents, but they didn’t organise anything. They didn’t shape capital allocation, acquisition decisions, or where the CEOs spent their attention. They were context. The winning firms treated the same forces as architecture.

How to tell which kind of firm you’re in

The test is uncomfortable because most people know the answer before they finish asking it. And it applies whether you run a $200M distribution business or a global technology firm.

Think about your last three major strategic decisions and where they originated.

Were they triggered by an external force your firm had identified and committed to building around? Or by something internal: a competitor move to respond to, a margin target to hit, a capability gap to close, a cost structure to improve?

Neither answer is automatically right or wrong. Internal decisions are real and necessary. The question is about the ratio and the direction of travel. A firm that consistently justifies its biggest decisions by reference to internal logic is anchored to its present position, not to where the market is going. That’s fine in a stable world. The world is not stable.

The second question is harder.

When your leadership team describes what your firm is building toward, is the answer primarily about the company: our capabilities, our culture, our market position? Or primarily about the world? What forces are reshaping your industry? Which ones are you organised around?

The firms that get this right don't necessarily have better answers. They have a different habit. Once a quarter, their leadership teams ask a version of the same question: which external forces are we actually organised around, and is that still the right bet? Not as a planning exercise. As a standing item. The question itself changes what gets noticed, what gets funded, and what gets quietly dropped.

If those answers come easily, with specifics, the firm has a compass. If the answer is vague, or defaults quickly to competitive positioning, the firm is navigating by what it can already see rather than by where things are going.

The Death of ‘Good Strategy’

The problem with good strategy is that it feels like strategy. Goals get set, roadmaps get built, reviews get run, alignment gets achieved. The organisation is coherent and busy. And then, years later, the market reflects something different from what all that activity was supposed to produce.

HP was not poorly run. Nokia was not poorly led. Amgen was, by most measures, excellent at what it did. The conventional tools of strategy gave them no warning and no diagnosis, because those tools are built to improve a current position, not to identify whether that position sits on shifting ground.

What separated the 11 firms that achieved genuine profit dominance from the 8,419 that didn’t was not the quality of their execution. It was the object of their attention. The winning firms found structural forces in the world, changes already in motion, measurable and accelerating, and organised their major decisions around them over years, sometimes decades. The losing firms organised around their current position and improved it.

That distinction is not captured in any standard strategy framework. It is not a gap in execution. It is a gap in what we call strategy.

That is what needs updating. Not the firms. The definition of strategy.