At times of new interpretations and perspectives for classic concepts, the meaning of expression strategy is in full and strong effervescence. Very excited about the current "innovative" concepts, bringing the strategic practice to something more "fluid" and "dynamic". Let’s mention, of course, the effervescence of acronyms VUCA and BANI to explain the world context in which strategies are outlined.
Nonetheless, in essence, at least in the corporate universe, strategy still takes on a key role: optimal allocation of risk-adjusted capital. Simple as that!
No flourishes. No arabesque. No confetti.
Simply optimal allocation of risk-adjusted capital. That in itself already represents something very complex. And, let’s face it, little practiced in reality.
It is worth expanding on and giving a new meaning to the "optimal" qualification and the conditioning "risk".
Optimal allocation necessarily implies expressing the desire for maximum return on the invested capital – regardless of the capital structure funding it. At the present time, the return has taken on broader and more inclusive delineations, acknowledging the greater relevance of other stakeholders interested in capturing value beyond the shareholders’ interests.
The conditioning risk, in turn, acknowledges that only the nominal evaluation of returns would be naïve and insufficient to truly measure the effectiveness of the venture over time. Acknowledging the importance of the risk as an adjustment factor appreciates economic agents’ capability to search for all possibilities of arbitration between risk and return so that the various classes of assets are equivalent along multiple combinatory possibilities of the two faces of any organization or project. After all, idiom No Free Lunch is a true dogma in finance.
Optimizing the allocation of risk-adjusted capital is the fundamental mission of a CEO and, even more strategically, of the Executive Committee and the Shareholders themselves. Amid the countless possibilities in so many envisioned scenarios, the choices necessarily call for renunciations, inferences and compromises.
Experienced strategists use the lenses of optimized capital in the binomial risk-return to support their decision-making more analytically and systemically, thus minimizing passions and biases. Strategy is not a mere casual exercise on a blank page. But rather a disciplined and continual practice, fundamentally grounded on data.
In the current frantic context of transformations, despite cosmetic alterations in the form, the strategic essence has remained exactly the same! Even if new metrics are proposed, and new mental models are developed. Optimizing the allocation of risk-adjusted capital is, at once, an art and a science for few diligent minds.
Daniel Augusto Motta é Managing Partner e CEO da BMI Blue Management Institute. Doutor em Economia pela USP, Mestre em Economia pela FGV-EAESP e Bacharel em Economia pela USP. É Alumni OPM Harvard Business School. Atua também como Managing Partner da corporate venture capital WhiteFox sediada em San Francisco (EUA) e como Senior Tupinambá Maverick na content tech Bossa.etc. Também atua como Diretor de Planejamento Estratégico da UNIBES e Membro do Conselho Deliberativo do MASP. Foi Membro-Fundador da Sociedade Brasileira de Finanças. Foi Professor nos MBAs da Fundação Dom Cabral, Insper, FGV, ESPM e PUC-SP. É autor de diversos artigos publicados por Valor Econômico, EXAME, VocêSA e Folha de São Paulo, e também tem três artigos publicados pela Harvard Business Review Brasil. É autor dos livros best-sellers A Liderança Essencial e Anthesis.