This is an MIT Sloan Management Review article. Composing valuable strategies requires seeing the world in new and unique ways. It requires asking novel questions that prompt fresh insight. Even the most sophisticated, deep learning-enhanced computers or algorithms simply cannot generate such an outlook. Innovative strategies depend more on novel, well-reasoned theories than on well-crunched numbers.

CEOs often complain that the financial markets simply don't understand their companies' strategy. The author's recent findings show that they may well have a point. Many good strategies are complex and thus hard to understand. A proper analysis of Monsanto, for example, requires expertise in pharmaceuticals, agricultural chemicals, and agricultural biotechnology--but on Wall Street those three industries are analyzed separately. Back in 1999 one analyst wrote, "Monsanto will probably have to change its structure to be more properly analyzed and valued." Zenger was intrigued by the possibility that complex or unique strategies are systematically ignored by analysts or undervalued by capital markets. He and two colleagues undertook to investigate the question, by examining all 7,630 companies that were publicly traded in U.S. capital markets from 1985 through 2007. They devised a way to measure uniqueness and complexity and counted the number of analysts covering each company. Their analysis determined that although many factors--such as company size and trade volume--influence analysts' decisions about what companies to cover, the greater effort required for a complex or unusual strategy discourages coverage. And although their uniqueness measure is actually associated with higher market value, this premium is, on average, lower than it would be if the company got more coverage. CEOs who face the uniqueness challenge have two options: They can make strategic information more accessible--by issuing tracking stocks, marketing directly to investment banks, or paying for independent equity research--or they can find sympathetic investors who believe in the company, which may mean taking it private.

Asked to define strategy, most executives would probably come up with something like this: Strategy involves discovering and targeting attractive markets and then crafting positions that deliver sustained competitive advantage there. This view of strategy as position remains central in business school curricula around the globe. Unfortunately, writes the author, investors don't reward senior managers for simply occupying and defending market positions. Equity markets are full of companies with powerful positions and sluggish stock prices. Merely sustaining prior financial returns, even if they are outstanding, does not significantly increase a share price; tomorrow's positive surprises must be worth more than yesterday's. Zenger argues that managers' most vexing strategic challenge is not how to win or sustain competitive advantage but, rather, how to keep creating value. He offers what he calls the corporate theory, which reveals how a given company can do just that. Drawing on the history of Disney and Apple, he describes what makes a corporate theory strong, shows how it informs strategic choices, and warns what can happen when a company loses sight of its theory.