A spectre is haunting Europe—the spectre of communism. All the powers of old Europe have entered into a holy alliance to exorcise this spectre: Pope and Tsar, Metternich and Guizot, French Radicals and German police-spies.
—Karl Marx, The Communist Manifesto, 1848
A new specter is haunting Europe and other parts of the West—the specter of absolute decline. Faced with that threat, an alliance of governments is primarily addressing its symptoms by cutting spending, regulating banks, revising treaties, and reassuring markets. Harder to fix are the underlying causes of the crisis, whether these are understood to be stagnant productivity, rising welfare costs, superannuated infrastructure, or uncompetitive markets.
But if all we do is address the symptoms, the patient won’t recover. Governments’ first priority must be to stabilize the current situation. They then need to move decisively to address the original causes of the crisis and to shape a better future. In other words, they need a strategy. Yet many governments have lost confidence in strategy, resorting instead to what Paul Cornish calls1 Notes: 1 Paul Cornish, “Strategy in Austerity: The Security and Defence of the United Kingdom,” A Chatham House Report (London: Royal Institute of International Affairs, October 2010). “a cleverer version of muddling through.” Politicians fear that their ability to plan is no match for the complexity and uncertainty of the modern world. Meanwhile, civil servants, jaded from decades of being asked to apply the tenets of business strategy to policy, believe their skepticism has been vindicated.
Rather than abandon strategy altogether, politicians and civil servants need to learn from these failures and frustrations. Around the world, public-sector innovators are doing just that, evolving a style of strategy that combines clear goals with flexible methods. This “adaptive strategy”2 Notes: 2 Read background on BCG’s approach to adaptive strategy in the private sector. differs from both the classical strategies of twentieth-century business and the “muddling through” that has replaced them in much of government today. Although it means accepting less predictive ability and control than has been expected of traditional strategy, adaptive strategy rescues government’s ability to set a direction without reintroducing the rigidities of old-fashioned planning.