3 Lessons to Learn from the Worst Strategy of All Time

Published on LinkedIn by Jonathan Stout on November 15, 2017

For a strategy guy like me, planning season is the most wonderful time of the year! It’s a time of hope, excitement, and wonder about the future, but also a time to reflect on the past. I find that the best way to prepare a strategy is to analyze successful and failed strategies of other organizations.

And what better strategy to learn from, than the worst strategy of all time?

The “Death Benefit”

“The Public Finance Balance of Smoking in the Czech Republic”was a report conducted by Philip Morris’ Arthur Little back in 2001. It actually contained a cost-benefit analysis that concluded that the Czech government could lower Pension Expense among its retired employees by encouraging smoking since the retired citizens would die-off more quickly! The reaction to this controversial strategy was exactly what you would expect and the release of this report was a major setback for Philip Morris.

Lucky for us, we can learn from this disastrous strategy:

They didn’t evolve with the reality of the market

Philip Morris is in the cigarette game. They’re good at it, but that industry certainly isn’t what it used to be. For the first sixty or so years after Philip Morris was founded, it would have been understandable for them to deny diversifying. They didn’t have to. But by the time they commissioned this infamous report, their heavy reliance on such a villainized industry forced them to put their eggs in this unreliable basket. If your competition has started diversifying, you need to catch up.

They were thinking in terms of short-term gains and not long-term consequences

Philip Morris’ goal from this report wasn’t global support, just favorability from the Czech government who was relentlessly trying to save money. Before the report got attention from the public, it even looked like they might achieve that goal. But the cost was so much greater than any benefit they may have initially gained. Had Philip Morris thought in terms of long-term strategies supplemented by short-term tactics, they would have avoided this strategy altogether.

They failed to understand how their strategy would be accepted by the market

It doesn’t at all surprise me that nearly everyone who read this report was appalled by its cynicism. It probably doesn’t surprise you either. So why didn’t Philip Morris see that coming? My guess is that whatever strategist suggested this study was thinking only as the strategist of a major company in a slowly dying industry, focused on preserving margin and revenue at all costs.

I’ve written previously about the importance of understanding “market acceptance” in a successful strategy. As ridiculous as the strategy here is, there’s actually a logic behind it (and as someone who spent 12 years working in health insurance, I’ve seen other crazy ideas like this). Even the best strategies will fall flat if there isn’t a good understanding of how the strategies will be accepted by the market, customers, governments, regulators, etc.

Do you know other cautionary tales? I would love to keep the conversation going in the comments below.