Your Strategy Needs a Strategy

1. Strategy Must Match the Business Environment

Your strategy needs a strategy.

Environment dictates approach. The effectiveness of a strategy depends on how well it aligns with the business environment. Leaders must assess their environment's predictability, malleability, and harshness to choose the appropriate strategic approach. This assessment should consider factors such as industry stability, competitive dynamics, technological change, and regulatory landscape.

Five strategic environments:

• Classical: Predictable and nonmalleable
• Adaptive: Unpredictable and nonmalleable
• Visionary: Predictable and malleable
• Shaping: Unpredictable and malleable
• Renewal: Harsh and requiring turnaround

Mismatching strategy to environment can lead to poor performance and wasted resources. Companies operating in multiple environments may need to employ different strategic approaches across their business units or geographies.

2. Classical Strategy: Analyze, Plan, Execute in Stable Markets

Be big.

Scale and positioning. Classical strategy works best in stable, predictable environments where competitive advantage is sustainable. Companies aim to achieve superior scale, differentiation, or capabilities. This approach involves rigorous analysis of market attractiveness and competitive dynamics, followed by detailed planning and disciplined execution.

Key elements of classical strategy:

• Comprehensive market and competitor analysis
• Long-term planning and goal-setting
• Focus on operational efficiency and cost leadership
• Building sustainable competitive advantages
• Hierarchical organization structures

Examples of classical strategists include Mars in confectionery and PepsiCo in beverages, where they leverage scale and brand strength in relatively stable markets.

3. Adaptive Strategy: Continuously Experiment in Unpredictable Markets

Be fast.

Rapid experimentation. In unpredictable environments where advantage is fleeting, companies must continuously adapt through rapid experimentation and learning. The adaptive approach focuses on generating a variety of strategic options, selecting the most promising ones, and scaling them quickly.

Characteristics of adaptive strategy:

• Continuous monitoring of environmental changes
• Portfolio of small-scale experiments
• Rapid iteration and learning cycles
• Flexible resource allocation
• Decentralized decision-making

Tata Consultancy Services exemplifies the adaptive approach, constantly evolving its services in response to rapidly changing technology and client needs in the IT industry.

4. Visionary Strategy: Imagine and Create New Markets

Be first.

Breakthrough innovation. Visionary strategy is appropriate when a company can create or recreate an industry through breakthrough innovation or disruptive business models. This approach requires the ability to envision a radically different future and the persistence to bring it to life.

Key aspects of visionary strategy:

• Identifying unmet customer needs or latent demand
• Developing revolutionary products or business models
• Educating the market and shaping customer preferences
• Focusing on long-term vision over short-term profits
• Building ecosystems to support the new market

23andMe's creation of the direct-to-consumer genetic testing market illustrates the visionary approach, reimagining how individuals access and use genetic information.

5. Shaping Strategy: Collaborate to Influence Industry Evolution

Be the orchestrator.

Ecosystem orchestration. Shaping strategies are suitable in malleable but unpredictable environments where no single player can define the industry alone. Companies adopt this approach by collaborating with various stakeholders to create a shared vision and build platforms that orchestrate ecosystem activities.

Elements of shaping strategy:

• Engaging diverse stakeholders
• Creating win-win value propositions
• Building and evolving collaboration platforms
• Establishing industry standards or protocols
• Balancing cooperation and competition

Novo Nordisk's approach in developing China's diabetes care market demonstrates shaping strategy, collaborating with healthcare providers, regulators, and patients to build a robust ecosystem.

6. Renewal Strategy: Economize to Survive, Then Pivot for Growth

Be viable.

Two-phase transformation. Renewal strategy is necessary when a company faces harsh circumstances due to internal or external shocks. It involves two distinct phases: first, economizing to ensure survival, and second, pivoting towards a new growth strategy.

Renewal strategy components:

• Swift recognition and response to crisis
• Aggressive cost-cutting and focus on core activities
• Preservation of key assets and capabilities
• Development of a new strategic vision
• Transition to a different strategic approach for growth

American Express's response to the 2008 financial crisis exemplifies renewal strategy, cutting costs while simultaneously investing in digital capabilities for future growth.

7. Ambidexterity: Balancing Multiple Strategic Approaches

Be polychromatic.

Strategic flexibility. Large corporations often need to employ multiple strategic approaches simultaneously across different business units, geographies, or time horizons. Ambidexterity refers to the ability to balance these diverse approaches effectively.

Approaches to ambidexterity:

• Separation: Managing different units with distinct strategies
• Switching: Alternating between approaches over time
• Self-organization: Allowing units to choose their own approach
• Ecosystem: Sourcing different approaches from external partners

PepsiCo demonstrates ambidexterity by using a classical approach in its core beverage business while adopting more adaptive strategies in emerging markets and new product categories.

8. Leaders as Strategy Animators: Navigating Complexity and Change

Be the animator.

Dynamic leadership. In complex and changing environments, leaders must animate the strategy collage, continuously adjusting the mix of approaches across the organization. This role requires a unique set of skills and perspectives.

Key leadership roles in strategy animation:

• Diagnostician: Assessing environments and matching strategies
• Segmenter: Structuring the organization to support diverse approaches
• Disrupter: Challenging status quo and initiating strategic shifts
• Team coach: Developing strategic capabilities across the organization
• Salesperson: Communicating the strategic narrative
• Inquisitor: Asking probing questions to guide strategic thinking
• Antenna: Sensing external changes and amplifying important signals
• Accelerator: Driving implementation of critical initiatives

Pfizer's CEO Ian Read exemplifies this approach, managing a diverse portfolio of businesses with tailored strategies while maintaining a coherent overall vision.

Last updated: November 20, 2024