RSS Feed
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
Copyright Control ©
2012 Oseme Group
Get Social Share 2.0!