Finding The Most Effective Business Strategy Style

By M. Isi Eromosele

Strategy usually begins with an assessment of your industry. Your choice of strategic style should begin there as well.

Although many industry factors will play into the strategy you actually formulate, you can narrow down your options by considering just two critical factors: predictability (How far into the future and how accurately can you confidently forecast demand, corporate performance, competitive dynamics, and market expectations and malleability (To what extent can you or your competitors influence those factors?).

There are   four broad strategic styles: classical, adaptive, shaping and visionary.

Classical

When you operate in an industry whose environment is predictable but hard for your company to change, a classical strategic style has the best chance of success. This is the style familiar to most managers.

A company sets a goal, targeting the most favorable market position it can attain by capitalizing on its particular capabilities and resources and then tries to build and fortify that position through orderly, successive rounds of planning, using quantitative predictive methods that allow it to project well into the future.

Once such plans are set, they tend to stay in place for several years. Classical strategic planning can work well as a stand-alone function because it requires special analytic and quantitative skills and things move slowly enough to allow for information to pass between departments.

Adaptive

This style is effective where global competition, technological innovation; social feedback loops and economic uncertainty combine to make the environment radically and persistently unpredictable. In such an environment, a carefully crafted classical strategy may become obsolete within months or even weeks.

Companies in this situation need a more adaptive approach, where they can constantly refine goals and tactics and shift, acquire or divest resources smoothly and promptly.

In such a fast-moving, reactive environment, where predictions are likely to be wrong and long-term plans are essentially useless, the goal cannot be to optimize efficiency. Rather, it must be to engineer flexibility.

Accordingly, planning cycles may shrink to less than a year or even become continual. Plans take the form not of carefully specified blueprints but of rough hypotheses based on the best available data. In testing them out, strategy must be tightly linked with or embedded in operations, to best capture change signals and minimize information loss and time lags.

Specialty fashion retailing is a good example of this. Tastes change quickly. Brands become hot (or not) overnight. No amount of data or planning will grant fashion executives the luxury of knowing far in advance what to make.

So their best bet is to set up their organizations to continually produce, roll out and test a variety of products as fast as they can, constantly adapting production in light of new learning.

Shaping 

In new or young high-growth industries where barriers to entry are low, innovation rates are high, demand is very hard to predict and the relative positions of competitors are in flux, a company can often radically shift the course of industry development through some innovative move.

A mature industry that’s similarly fragmented and not dominated by a few powerful incumbents or is stagnant and ripe for disruption, is also likely to be similarly malleable.

In such an environment, a company employing a classical or even an adaptive strategy to find the best possible market position runs the risk of selling itself short, being overrun by events and missing opportunities to control its own fate.

It would do better to employ a strategy in which the goal is to shape the unpredictable environment to its own advantage before someone else does so that it benefits no matter how things play out.

Like an adaptive strategy, a shaping strategy embraces short or continual planning cycles. Flexibility is paramount, little reliance is placed on elaborate prediction mechanisms, and the strategy is most commonly implemented as a portfolio of experiments.

But unlike adapters, shapers focus beyond the boundaries of their own company, often by rallying a formidable ecosystem of customers, suppliers, and/or complementors to their cause by defining attractive new markets, standards, technology platforms and business practices. They propagate these through marketing, lobbying and savvy partnerships.

In the early stages of the digital revolution, Internet software companies frequently used shaping strategies to create new communities, standards, and platforms that became the foundations for new markets and businesses.

Visionary 

Sometimes, not only does a company have the power to shape the future, but it’s possible to know that future and to predict the path to realizing it. Those times call for bold strategies, the kind entrepreneurs use to create entirely new market or corporate leaders use to revitalize a company with a wholly new vision. These are the big bets, the build-it-and-they-will-come strategies.

Like a shaping strategist, the visionary considers the environment not as a given but as something that can be molded to advantage. Even so, the visionary style has more in common with a classical than with an adaptive approach.

Because the goal is clear, strategists can take deliberate steps to reach it without having to keep many options open. It’s more important for them to take the time and care they need to marshal resources, plan thoroughly and implement correctly so that the vision doesn’t fall victim to poor execution.

Visionary strategists must have the courage to stay the course and the will to commit the necessary resources.

Avoiding The Traps

Understanding how different the various approaches are and in which environment each best applies can go a long way toward correcting mismatches between strategic style and business environment. But as strategists think through the implications of the framework, they need to avoid three traps.

Misplaced confidence 

You can’t choose the right strategic style unless you accurately judge how predictable and malleable your market environment is. However, when company executives’ compare their perceptions with objective measures of their actual environments, there is a common tendency to overestimate both factors.

In a recent survey, nearly half the executives believe they could control uncertainty in the business environment through their own actions. More than 80 percent said that achieving goals depended on their own actions more than on things they could not control.

Unexamined Habits 

Many executives recognize the importance of building adaptive capabilities required to address unpredictable environments but few are sufficiently competent in them. In part that’s because many executives learned only the classical style through experience or at business school.

In practice, most company executives begin their strategic planning by articulating a goal and then analyzing how best to get there. What’s more, many of them value accuracy over speed of decisions, even when they are well aware that their environment is fast-moving and unpredictable.

As a result, a lot of time is being wasted making untenable predictions when a faster, more iterative and more experimental approach would be more effective. Executives are also closely attuned to quarterly and annual financial reporting, which heavily influences their strategic-planning cycles.

Many of them develop strategic plans on an annual basis, regardless of the actual pace of change in their business environments or even what they perceive it to be.

Culture Mismatches 

Avoiding some of these traps can be straightforward once the differing requirements of the four strategic styles are understood. Simply being aware that adaptive planning horizons don’t necessarily correlate well with the rhythms of financial markets, for instance, might go a long way toward eliminating ingrained planning habits.

Similarly, understanding that the point of shaping and visionary strategies is to change the game rather than to optimize your position in the market may be all that’s needed to avoid starting with the wrong approach.

Operating In Many Modes

Matching your company’s strategic style to the predictability and malleability of your industry should align overall strategy with the broad economic conditions in which the company operates.

Various company units may well operate in differing subsidiary or geographic markets that are more or less predictable and malleable than the industry at large. Strategists in these units and markets can use the same process to select the most effective style for their particular environment.

A company moving into a different stage of its life cycle may well require a shift in strategic style. Environments for start-ups tend to be malleable, calling for visionary or shaping strategies.

In a company’s growth and maturity phases, when the environment is less malleable, adaptive or classical styles are often best. For companies in a declining phase, the environment becomes more malleable again, generating opportunities for disruption and rejuvenation through either a shaping or a visionary strategy.

Once you have correctly analyzed your environment, not only for the business as a whole but for each of your functions, divisions, and geographic markets, identify which strategic styles should be used.

Correct your own biases and take steps to prime your company’s culture so that the appropriate styles can applied successfully. You will need to monitor your environment and be prepared to adjust as conditions change over time.

Companies that continually match their strategic styles to their situation will enjoy a tremendous advantage over those that don’t.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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