Variety and the firm's performance: An empirical investigation

Abstract Traditional strategic planning attempts to answer “What should a firm plan to do?”. We propose an alternative approach and question “What should a firm plan to be able to do?”. It is not a play on words, but rather a control approach to strategic planning rather than a problem solving approach. Its origins lie in Ashby's law of requisite variety and its implications. Variety is the list of things that a firm can do. It is measured using, separately, factor analysis and experts. The two approaches are correlated. Variety is then used as the independent variable in a financial performance — variety model. Statistically significant results obtain. Finally, normative implications of variety creation for the firm are explored.