While some firms hope to yield above expected normal returns from implementing business strategies, they must however be consistently conversant with the future value of those strategies than other firms playing in the same market. Other firms gain advantage in strategy implementation which is either a manifestation of these special insights into the future value of strategies, or a manifestation of a firm’s good fortune and luck, as sometimes, the price of the strategic resource acquired may be based on expectations on the return potential of that strategy
However, unexpected greater organisational profits can simply be unexpected, a surprise, and a manifestation of a firm’s good luck and possibly not its ability to accurately anticipate the future value of a strategy. Even well-informed firms can be lucky in this manner. Some organizations’ actual returns on strategies could be greater than the expected returns; this resulting difference is often regarded to be manifestation of a firm’s unexpected good fortune.
Although most of the success of the company has been deliberate and designed, luck has also been part of it. Luck can also play a role in the formation of business strategy as was the case of the battle of the ball-point pen, when Chicago businessman Milton Reynolds, stumbled upon a new product on a business trip to Argentina, he then bought a few samples knowing that another company Eversharp had bought the patents for a million dollars and widely publicised it, devised a strategy to be first to market in order to take opportunity of the publicity already gained in the US. Reynolds then sold the Pens for hefty prices to anxiously waiting customers thereby making millions of profit.
Strategic luck can be demonstrated in the success of the “POST-IT Notes” originally developed the firm 3M. The idea of Post-it notes came from Dr Spencer in 1968 but didn’t emerge until 6 years later when it appears to be a solution for a problem of Art Fry (a colleague of Dr Spencer at 3M) in finding songs quickly in his Hymnal book. Even though Dr Spencer was talking to colleagues and anyone ready to listen about his discovery, no one really knew how to use it until Art Fry came up with the idea of using the post it note to retrieve quickly what he needed from his hymnal book. As a result post it notes became really popular and was used in almost every office. Had it not been the problem Art Fry that require a solution post it notes may not have known the success they had and still have.
The more accurate an organisation’s expectations about a potential strategy’s return are, the less luck plays in generating above normal returns but when the organisation has less than perfect expectations, luck can play a role in determining an organisation’s returns to implementing its strategies.
Consequently, strategies yielding above normal returns may be as a result of a firm’s ability to uniquely implement a strategy which either reflects the competence of the firm to make accurate expectations, underestimating the true value of the strategy or it had no special expectations but the strategy still yielded above normal returns, these are real reflections of a firm’s good fortune and luck.
Thus, Barney (1985) explained, “because luck is, by definition, out of a firm’s control, an important question for managers becomes, ‘How can firms become consistently better informed about the value of strategies they are implementing than any other firms?’ Firms that are successful at doing this can, over time, expect to obtain higher returns from implementing strategies than less well-informed firms, although, as always, firms can be lucky”.
Another perspective of luck is that it only affects performance of strategy in a few instances but which when averaged out over a lengthy period of time appears to be insignificant. These two views are consistent with scientific inquiry’s assumption of causality. This perspective is most evident in sports, whereby a team like Manchester united may perform poorly in a few games due to some “bad luck” but will generally do better than the other teams over the course of the season due to their superior football strategy.