Over the last several years we have discussed what a competitive strategy is and what a typical strategic planning process looks like for for-profit firms. But there is very good work now going on at the Boston Consulting Group that discusses the best way among five approaches to formulate and articulate your firm’s strategy. Now one size does not fit all. This is presented in their new book Your Strategy Needs a Strategy: How to Choose and Execute the Right Approach. I will draw on it for this article. This work corroborates my work as well over the last thirty years and I will cite it as well.
Most business students and strategic planning departments at firms for years have used the Classical approach to strategy. You know this as articulating your firm’s Strengths, Weaknesses, Opportunities and Threats and then trying to leverage strengths and opportunities and neutralize weaknesses and threats. The classical approach then has the team articulate the best positioning that will give the firm the best chance to be one of the top three competitors in their industries.
But the Classical approach works best in environments that are predictable but where the incumbents and new entrants cannot really shape the environment to their advantage. Thus the race to become one of the top three players in their competitive space or industry becomes key.
Measure external environments in three dimensions:
- The degree of predictability
- The degree of malleability (this means the degree to which firms can shape the external environment to their advantage)
- Degree of harshness of the industry (I call this the degree of hostility)
By analyzing these realities in your industry or competitive space, we can choose among five approaches to making strategy:
Classical approach – High predictability but low malleability. Key theme is to Be Big
Adaptive approach – High unpredictability and low malleability. Key theme is to Be Fast
Visionary approach – High predictability and high malleability. Key theme is to Be First
Shaping approach – High unpredictability but high malleability> Key theme is to Be the Orchestrator
Renewal – Where the harshness or hostility of the environment has caused the firm to flounder. Key theme is to Be Viable Again via a Turnaround or Transformation
I was trained in the Classical approach and used it for over thirty years working with firms. But over those years I sensed something just did not fit properly with the Classical approach sometimes and I would adjust on the fly. Now we have a language to discuss this.
Example firms using the various approaches:
Classical – Mars Corporation (candy, pet foods, etc.)
Adaptive – Data Consulting Services (the giant Indian technology firm), Google
Visionary – Quintiles, Apple
Shaping – Amazon
Renewal – American Express
Had these firms used a non-useful approach for the nature of their competitive environment, their growth and profitability could have seriously suffered. Each approach has different demands on the appropriate culture, organizational structure, leadership style and human resources approach. For example the Classical approach tends to be top down, command and control in nature with only a small group of people making strategy. The Adaptive approach tends to be bottom up, very inclusive of many people and more experimenting in nature. The reader can see how a mismatch could cause serious headaches.
In addition, as a firm’s competitive environment changes, so should its approach to making strategy. And some firms like Pepsi Co use an “ambidextrous” approach. As CEO Noori Indira says, “We run the day to day business but also are disrupting those same businesses at the same time”. For instance, they are working on carbonation products for people to make their own soft drinks.
What kind of environment is your firm facing now? Which approach to strategy making is best for your firm now?
This article is part of a series on what causes a firm’s value to increase
Bill Bigler is Director of MBA Programs and associate professor of strategy at LSU Shreveport. He spent twenty-five years in the strategy consulting industry before returning to academia full time at LSUS. He is involved with several global professional strategy organizations and can be reached at email@example.com or www.billbigler.com.