Perspectives

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Constructing
Strategic Spaces

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Constructing
Strategic Spaces
Strategic spaces are the fruits of free imagination and disciplined construction. What are
they made from and how are they to be used?
At the most basic level, there is physical space, in
which the tangible components of strategy can
be moved about. Every business must have
something to offer, be it goods or services, and
every business employs tangible resources of
great value to produce that offering. These are
the pieces of the business game. It is nearly
inconceivable that the disposition of such pieces
in physical space is of no strategic moment.
Often it is the primary strategic consideration.
Consider your favorite retail store. Retailers
long ago learned that a store is a space in which
the precise location of various items is of the
utmost consequence for commercial success.
Whether an item is on the top, the bottom, or
some intermediary shelf; which items are on
neighboring shelves; and whether the aisle at
issue is close to the entrance or the exit are all
questions subject to sophisticated research and
heated debate. Where the pieces go matters.
In the petroleum industry, the physical pieces
are not a product but a web of economic
resources. As in the board game Go, once a
piece has been placed, it can no longer be

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moved about. And instead of shelves and aisles

in three dimensions, there is a swath of world
geography to consider in two dimensions.
From Physical to Social Space
In real estate, the pieces are buildings, apparently positioned in the same physical space as
an oil refinery, albeit on a different scale. In
reality, however, we have crossed an elusive
boundary into the realm of social space. A site
proposed for a residential development or a
concert hall is just as fully determined by two
coordinates on a map as the site of a refinery.
But the attractiveness of the location is no
longer exclusively dependent on positions and
distances. It also depends on the surrounding
social life.
One is tempted to propose that whereas physical space is created and shaped by the relationship of objects to one another, social space is
woven from the relationships among individuals and groups. As appealing as such a clean
distinction may be semantically, it is worse than
of no use in the context of strategy, where the
ultimate objective is to change human behavior. In interacting with other human beings, we
invariably rely on the shared symbolic or economic significance of objects, and our interactions with objects are without much meaning
unless those objects signify something to others. The spaces of strategy are barren without
physical objects and cease to be strategic without social interaction.

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We see the same ambiguity at the boundary

between the physical and the social when we
return for a closer look at the retail store. The
store is really a social space because, for
instance, the desire to have ones products
stocked on shelves at eye level can be explained
only with reference to the particularities of
human culture and meaning. The higher, the
more prestigiousbut too high is bad for sales.
More pertinent still, in a social sense, is the
width of the aisles. Extravagantly wide aisles are
a modern version of what Thorstein Veblen
described as the sort of conspicuous waste that
is absolutely necessary to reassure the fortunate few that they have indeed made it.
Confront them with sensibly spaced aisles and
they are gone. (If you dont frequent retail outlets, think of seat spacing in first, business, and
economy class in airplanes.)
Most of us are far more comfortable puzzling
about physical spaces than about their social
counterparts. The natural sciences and mathematics, with certainties that facilitate both teaching and testing, offer practical methods to tackle at least some elementary problems. The social
sciencesbecause it is beyond their power
lack easily applied theoretical insights. As a
result, in most situations the strategist who is in
doubt as to whether a more physical or a more
social perspective should be adopted would be
well advised to err in favor of the social. The best
starting point is always amid the full ambiguity
of the borderland between the two.

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Representational Space
The pieces of strategy need not be in actual
motion in order to be of spatial relevance.
They may be at rest in physical or social space
and still be somehow on the move. This occurs
when they undergo change. A budding and
then flowering willow tree will remain rooted
in the same location but nevertheless will be
clearly on a trajectory of transformation. A trajectory presupposes some notion of space. A
company engaged in internal reorganization is
motionless physically. Its position in the markets it serves remains the same, yet it will be
moving in a space of features as it sheds some
of its characteristics and acquires new ones.
If physical motion is a change in location while
other features remain unchanged, transformation is a change in features while location
remains unchanged. With that, we have crossed
another boundary and entered the territory of
representational space. Unlike physical or social
spaces, there is nothing everyday and familiar
about representational spaces for the simple
reason that we do not inhabit them. We must
make them up.
Gas stations come in different sizes. They also
differ in terms of their share of revenue
derived from the sale of general merchandise.
These are two independent features that
can easily be imagined as a two-dimensional
space. Now imagine that a summer intern at a
large petrochemical company, with nearly

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unseemly eagerness to demonstrate his smarts,

plots the gas stations of his employer and those
of its major competitor on a graph. (See
Exhibit 1.)
The company will have some general policy
about what type of gas stations to operate and
some equally general beliefs about its competitors policy. The interns graph mercilessly disaggregates the effects of that policy and probes
the adequacy of those beliefs. Strategy must
start with probing, probing requires disaggregation, and disaggregation must take place in
space. A disaggregation in space yields a patEXHIBIT 1

AN INTERN PLOTS TWO COMPANIES GAS STATIONS,

FOCUSING ON SIZE AND SHARE OF REVENUE
FROM GENERAL MERCHANDISE

Large

Gas
station
size

Small
Small

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Share of revenue from

general merchandise

Large

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tern or a shape that is often, as it is here, so far

from random or obvious as to call for some vigorous scratching of strategic heads.
Now let the strategic plot thicken a bit. Our
young intern discovers that these curious patterns seem to have something to do with
whether the gas stations are in urban or rural
locations. (See Exhibit 2.)
Now we have several very precise questions to
ask about what exactly is going on here strategically. Those questions may lead to a thorough review of strategy or to the conclusion

EXHIBIT 2

THE INTERN ADDS THE DIMENSION OF THE GAS

STATIONS LOCATION IN URBAN OR RURAL AREAS

Large
Urban
Rural
Gas
station
size

Urban
Rural
Small
Small

Share of revenue from

general merchandise

Large

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that these patterns are a meaningless artifact

of past decision making. Or they may lead to a
discussion of the relevance of the chosen
dimensionin this case, urban versus rural
locationsand hence to modified or entirely
new spaces. No matter: strategic thought is
propelled forward by spatial constructs.
But theres a catch. Peering into an aquarium,
one can easily distinguish between big and
small, colorful and drab, aggressive and timid
specimens of fish. But unless there is some sustained thought as to which of these features
matter and why, this is nothing but idle sorting.
Too many segmentations are of this kinddriven more by the availability of data than by
strategic inquiry and conscious spatial construction. If data on the age and residence of
customers are readily available, chances are
that the strategic plan will include a
PowerPoint slide on profitability according to
segments defined by those characteristics.
Demand some thinking on whether and why
those characteristics are strategically significant, or ask whether other spatial constructs
have been considered, and you will get blank
stares. A segmentation arrived at in such a
manner may look like an ingredient of strategy,
but it is merely a deceptive simulacrum if the
thought process that could influence other
minds and give rise to more thought has been
absent. In strategy, the proof of the souffl is in
the making.

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The spatialization of gas stations could easily be

mistaken for a purely representational construction uncontaminated by either physical or
social considerations. On closer inspection,
however, the space is pregnant with both and is
of greater strategic interest for precisely that
reason. The availability of general merchandise
is not an abstract economic quantity but a
social feature that will attract different types of
customers whose differing demands must be
satisfied by the overall design of the gas station.
The stations location in an urban or a rural
environment could be taken as a proxy for
physical location, but it promises more pertinent inquir y if interpreted socially. Convenience shopping at gas stations is tied to
certain lifestyles. Lifestyles tend to cluster in
geographic space, so a finer resolution (for
example, between suburban and exurban locations) may be needed to gain a full strategic
understanding. Here again we encounter the
boundary of ambiguity. Purely representational
spaces, while theoretically possible, are likely to
lack strategic relevance. Significant spaces will
be hybrids of the three idealized forms of
strategic space.
A Rich Mixture
Gas stations and everything else sufficiently
rich in features to be of possible strategic interest can be embedded in many different spaces.
Indeed they must be, for no single space can

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capture the full strategic richness, or it will lose

all explanatory power. We must select combinations of a few features at a time for spatial
consideration and remain keenly aware of a
much larger space of spaces that surrounds us.
Of those selected, many will be found wanting
in one or two critical ways, but their very rejection is potentially the seed of new spaces. In
this manner, the process of strategic thought
can be considered the conquest of the space of
possible spatializations.
This conquest does not culminate in the taking
of some rich capital city deep in the center of
strategic metaspace. There can be no canonical
spatialization for any strategic situation, let
alone for classes of strategic situations. The
conquest must be a spreading out in the territory and the establishment of powerful garrison settlements from which further excursions
can be made. Ultimately, it must result in a
suite of ever-changing spatializationssome
complementary, some contradictorythat sustain strategic inquiry, articulate thought, and
fuel debate.
Strategy is a particular form of social coordination across scales of space and time that can be
bridged only by articulated and shared thought.
Strategic spaces are superb catalysts and vehicles for the thinking itself and for the articulation and the sharing. They are alsounlike
narratives in the form of vision and mission
statementsopen-ended and highly plastic.

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They provide a shared yet always debatable

sense of where we are and where we could go,
but they never obscure distant horizons or
dim the awareness of alternative paths and
directions.
Thought must precede strategy. The first manifestation of thought that is communicable, and
hence capable of influencing the thinking
and behavior of others, must be spatial. The
spatial mode of thought alone is not likely to
result in the finished product of strategy or
even to resemble it much. But it is a promising
place to start.
Tiha von Ghyczy
Tiha von Ghyczy, a former vice president at The Boston
Consulting Group, is a fellow of the firms Strategy
Institute. He teaches strategy at the Darden School of
Business at the University of Virginia. He is working
with Bolko von Oetinger, a senior vice president and
director in BCGs Munich office, on a book about spatial thinking in strategy.
You may contact the author by e-mail at:
ghyczy@virginia.edu
To receive future publications in electronic form about this
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www.bcg.com/subscribe.

The Boston Consulting Group, Inc. 2006. All rights reserved.

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Amsterdam
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Chicago
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Paris
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Rome
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