“El que se siente muy seguro
no está a salvo”.

Thomas Fuller

Strategy, Resources and Capabilities in a Global World

On March 28th 2015 I attended this very interesting conference at The Fletcher School of Law and Diplomacy at Tufts University in the context of the The Global Issues Seminar Series 2014-15. Really interesting stuff regarding any measure but, especially, from an strategic perspective.

Some issues were raised about the US participation in the international arena with particular focus on three points: geopolitical factors, domestic politics and military planning efforts. All the three points very interesting from an strategic perspective.

It is always interesting to see, hear and “touch” how the “discipline of strategy” is always present and always crucial. In this case we had a really refreshing approach about what we can call, in business strategy terms, the resources and capabilities theory.

We could analyze how any strategy needs to have goals (as we always say in business). Without them we are always lost. Well, these are, according to the conference, the three main objectives in which the US focuses its foreign policy in order of importance: 1)Trans-Atlantic relationships and the crisis in Ukraine, 2)Rebalance to Asia and balancing relationships with China and 3)Brokering a deal with Iran.

It is crucial to see how reliant these objectives are on domestic policies that, of course have to do with the following factors: Campaign Promises, Public Opinion and Federal Budget. In strategic terms: the objectives mark the “capabilities” the US needs to develop to achieve them. Previously, the country needs to “gather resources” to try to be able to develop those capabilities needed to achieve those goals.

A main and fundamental resource is, of course, the Federal Budget. And here is where I want to make some reflections. Roughly speaking, two thirds of the budget is “Mandatory” spending, this is, it is already established where and how it must be invested. That has mainly to do with Social Security, Medicaid, Medicare, Interest of the Debt and the like. The remaining third of the budget constitutes what we can call “Discretionary” expending. Here is where it is easier to take decision on where to invest resources since this is negotiated each year. Less than half of this discretionary expending is military expending. It is precisely military expending a key part of “being able” to intervene in the international arena from a position or power, a position from which you can be respected beyond just having “fair” ideas. It is said in international politics that you don’t have permanent friends, you have permanent interests and, even these, can change.

If we take into account that this discretionary part of the budget will be shrinking in the future since, the mandatory part will increase, (20,000 Americans a day will retire for the next 20 years, yes, read it twice, 20,000 every single day for the next 20 years) how can the country develop the resources to have a prominent role in the international arena? The answer can be “soft power”, this is: diplomacy and influence.

In addition to the US situation and from a different perspective, there is an article in The Economist (April 4th to 10th 2015) which title is: “Little Britain. Defense and Diplomacy”. It addresses the issue that “Britain is cutting back on defense…something that diminishes its ability to influence events”. We can see here, again a matter of resources.

All this is happening when other countries, like, for instance, China, have growing economies and are expending more and more in defense. Without any doubt this type of “resource related” issues will have a deep impact in the geopolitical balance of power in the international arena in the coming decades. This can be good or bad, it depends on how the world manages the situation. I’m always optimistic and a real believer that globalization is and will be good for human kind. In any case, “things are going to change”.

This is a fantastic illustration of how important the issues related to resources and capabilities are crucial. Also in business we need to take into consideration this approach. Here I just wanted to “illustrate” the issue. Of course, as I always say, there are companies that, with very little (resources) are able to do many things (capabilities). The opposite, unfortunately, happens very often.

Why is it that people normally complain about resources (“we need more resources”) and don’t want to talk about the outcome they need to produce (capabilities)? This is a fascinating debate, right?

Here is an approach I always love to stress: resources always have limits. Human imagination, ideas, endurance, commitment and effort know almost no boundaries.

By Enrique Cortés PhD. Strategic Thinker-Advisor.



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