Your Strategy Needs a Strategy: How to Choose and Execute the Right Approach
Reeves, Martin, et al. Your Strategy Needs a Strategy: How to Choose and Execute the Right Approach. Harvard Business Review Press, 2015. Kindle file.
Chapter 1 Introduction
Today, we face a business environment that is faster changing and more uncertain than ever because of, among other factors, globalization, rapid technological change, and economic interconnectedness.
One size doesn’t fit all.
The number of strategy tools and frameworks that leaders can choose from has grown massively since the birth of business strategy in the early 1960s ( figure 1-3 ).
It’s not that we lack powerful ways to approach strategy; it’s that we lack a robust way to select the right ones for the right circumstances. The five-forces framework for strategy may be valid in one arena, blue ocean or open innovation in another, but each approach to strategy tends to be presented or perceived as a
Source : Pankaj Ghemawat, “Competition and Business Strategy in Historical Perspective,” Business History Review 76 (Spring 2002): 37–74; Lawrence Freedman, Strategy: A History (New York: Oxford University Press, 2013); research by The Boston Consulting Group Strategy Institute.
Dimensions: Predictability (can you forecast it?), malleability (can you, either alone or in collaboration with others, shape it?), and harshness (can you survive it?). Combining these dimensions into a matrix reveals five distinct environments, each of which requires a distinct approach to strategy and execution ( figure 1-4 ). • Classical: I can predict it, but I can’t change it.
Adaptive: I can’t predict it, and I can’t change it. • Visionary: I can predict it, and I can change it. • Shaping: I can’t predict it, but I can change it. • Renewal: My resources are severely constrained.
Adaptive environments require continuous experimentation because planning does not work under conditions of rapid change and unpredictability. In a visionary setting, firms win by being the first to create a new market or to disrupt an existing
In a shaping environment, firms can collaboratively shape an industry to their advantage by orchestrating the activities of other stakeholders. Finally, under the harsh conditions of a renewal environment, a firm needs to first conserve and free up resources to ensure its viability and then go on to choose one of the other four approaches to rejuvenate growth and ensure long-term prosperity. The resulting overriding
imperatives, at the simplest level, vary starkly for each approach: • Classical: Be big. • Adaptive: Be fast. • Visionary: Be first. • Shaping: Be the orchestrator. • Renewal: Be viable.
firms master three essential thinking steps: they continuously vary their approach, generating a range of strategic options to test. They carefully select the most successful ones to scale up and exploit ( figure 1-6 ). And as the environment changes, the firms rapidly iterate on this evolutionary loop to ensure that they continuously renew their advantage.
Such an opportunity requires you to collaborate with others because you cannot shape the industry alone—
In the shaping approach, firms engage other stakeholders to create a shared vision of the future at the right point in time.
They build a platform through which they can orchestrate collaboration and then evolve that platform and its associated stakeholder ecosystem by scaling it and maintaining its flexibility and diversity
Shaping strategies are very different
from classical, adaptive, or visionary strategies—they concern ecosystems rather than individual enterprises and rely as much on collaboration as on competition.
Apple, for example, created its iPhone using a visionary approach, then used a shaping strategy to develop a collaborative ecosystem with app developers, telecom firms, and content providers.
There is perhaps a human tendency to believe that we can predict and control our environment—but in many cases we can’t,
Chapter 2 Classical: Be Big
the Milky Way, 1923; Snickers, 1930; the Mars Bar, 1932; M&M’s, 1941; Twix, 1979. What were the biggest-selling candies in the world in 2014? Snickers and M&M’s. 1
When applied correctly, a classical strategy can be very impactful and create durable and valuable leadership positions.
BCG’s founder Bruce Henderson proposed the experience curve , the idea that accumulated experience, and therefore overall size, can be a source of durable advantage. 8 The experience curve has been an important tool in guiding companies on how to manage costs and prices
resource-based view of the firm. 12 The resources that confer advantage need to be valuable, rare, inimitable, and nonsubstitutable.
Jack Welch once observed: “In real life, strategy is actually very straightforward. You pick a direction and implement like hell.”
Chapter 3 Adaptive: Be Fast
adaptive approach can drive growth and advantage by continuously adjusting to new opportunities and conditions
like painting a landscape under changing light conditions.
As Rupert Murdoch, the chairman of News Corporation, noted: “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.”
there is no one “strategy,” the emphasis is on experimentation rather than analysis and planning,
Until the 1980s, less than a third of business sectors regularly experienced turbulence. But because of globalization, accelerated technological innovation, deregulation, and other forces, roughly two-thirds of the sectors now do. 17
Take mining and metals, for instance. The volatility of metals and minerals prices from 2000 to 2010 was more than six times that of the previous decade.
VUCA environments (those with volatility, uncertainty, complexity, and ambiguity) and extolling the virtues of agility and adaptability.
As Niels Bohr, the Danish Nobel Prize–winning physicist once put it: “Prediction is very difficult, especially if it’s about the future.”
This information map can shift constantly in a changing environment. In some cases, firms underleverage new information available to them—what we might call underexploited knowns , or elephants . There is also much that you may erroneously think you know—false knowns , or unicorns and may need to challenge. Most challengingly, some things cannot be known at the time, without a change of perspective or further experimentation—double question marks , or unknown unknowns , to borrow an expression from Donald Rumsfeld, the former US secretary of defense
Over the past ten years, Google has both launched and killed roughly ten to fifteen products annually without major customer or organizational resentment.
Because of the need to stimulate bottom-up learning and individual creativity, adaptive organizations often foster a high degree of autonomy and are relatively flat and decentralized. The organizations are often characterized by the existence of informal, temporary, or horizontal structures, like internal forums, task forces, or councils that break down traditional functional silos to allow for sharing of information and flexibility in
Chapter 4 Visionary: Be First
A visionary approach involves three steps ( figure 4-1 ). First, you need to envisage an opportunity by tapping into a megatrend early, applying a new technology, or addressing customer dissatisfaction or a latent need. Second, you need to be the first to build the company and the product that realize this vision. Finally, you must persist in pursuing a fixed goal, while being flexible about the means to overcome unforeseen obstacles.
Since there is only a short moment between the opportunity opening up and the first reaction by other players, timing is critical. Successful visionary firms capitalize on this gap between the emergence of the opportunity, the recognition and acceptance of the idea, and the reaction by established players. Fortunately for visionary entrepreneurs, other firms’ reaction is often delayed by initial skepticism and organizational inertia.
three signals that help identify the pivotal moment in an industry when a visionary strategy can be applied. One signal is emerging megatrends, large structural shifts that can reshape the market and that go beyond industry-specific supply and demand conditions.
Another signal is the emergence of a new technology, like the automobile or mobile phone, which may provide entirely novel or disruptive opportunities in existing markets.
A third is consumer dissatisfaction or unmet needs with the status quo offering. This can be explicit in the minds of consumers, but more often it is latent—consumers may not have a clear idea of what they are missing.
BCG has pioneered the technique of learning from mavericks , a practice that enables large companies to recognize and tap into potentially disruptive entrepreneurial activity on the fringes of their industry.
The fact that eight out of ten entrepreneurs fail underlines this difficulty. 20
As Henry Ford, father of the automotive industry, reputedly remarked: “If I had asked my customers what they wanted, they would have said a faster horse.”
“I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance,” said Steve Jobs.
Chapter 5 Shaping: Be the Orchestrator
Novo invested heavily in physician education to teach the medical community—potential customers and evangelists—about the diabetes threat and potential treatments.
this shaping approach is a blueprint for his company’s strategy in other emerging markets: “The strategy we
employ is exactly the same in emerging economies . . . Basically, we start by building a relationship with the ministry of health, with the medical association for diabetes and with the patient associations, and then start to educate doctors about diabetes. That means that after they start diagnosing people with diabetes, they can start treating them. We teach them how to treat the patients and they eventually end up buying our products. It’s a very simple model.”
engage other stakeholders to create a shared vision at the right point in time, building a platform through which they can exercise influence and orchestrate the collaboration, and finally they evolve the platform and ecosystem by scaling it and keeping it flexible
creating a large mural with the help of many artists.
the shaping firm builds a new market collaboratively with other players.
James Moore and, later, Marco Iansiti and Simon Levin formalized the concept of a business ecosystem : a set of firms that could benefit from mutually beneficial coevolution. Around the same time, Adam Brandenburger and Barry Nalebuff published the idea of co-opetition ,
which held that firms sometimes needed to cooperate with potential competitors, rather than just with external stakeholders not
Henry Chesbrough codified the idea of open innovation , which advocates for the incorporation of external ideas and players in the innovation process to share resources and risks.
In 2004, C. K. Prahalad and Venkat Ramaswamy introduced the concept of cocreation of products between firms and their customers, arguing that value creation was increasingly shifting beyond the traditional boundaries of the firm.
Google and Apple ceded control of app creation to outsiders during the infancy of the smart-phone industry, inviting external developers onto their platforms in a mutually beneficial arrangement.
At the same time, incumbent players like Nokia were challenged by legacy software architectures. The Symbian platform, used by most of the leading mobile phone
companies before Android and iOS emerged, lacked the architectural flexibility and proper app store infrastructure to create a wide variety of apps quickly.
“Our competitors aren’t taking market share with devices; they are taking market share with an entire ecosystem.”
Shaping conditions are on the rise because of accelerating technological change, increased global connectivity, the liberalization of trade, and demographic shifts that create new customer needs.
a firm must also have enough influence to attract other powerful stakeholders to its ecosystem.
Classical strategy is often called competitive strategy: winning classical firms concentrate primarily on exceeding their competitors. In contrast, shaping strategy is essentially collaborative.
the greater the number of participants, the greater the value of the system to those participants.
It didn’t matter to Apple that the most popular app in 2014 was Goblin Sword, and no longer Koi Pond, as it was in 2008, the year in which the App Store—the realization of the ecosystem vision—was launched. 25 What matters to Apple is that the system itself, rather than any specific app, stays attractive for developers and users and profitable for itself, the orchestrator.
the focus is on locking in stakeholders, monetizing value created, and adjusting the system to maintain win-win outcomes.
Consider the platform operation of supply chain orchestrator Li & Fung: the company owns no looms, sewing machines, or textile factories, yet it is one of the largest consumer products trading companies in the world, providing time-sensitive, high-volume production and distribution services.
work is done by an extensive network of third-party suppliers that connect with one another via Li & Fung’s platform, which matches independent production facilities and retailer needs.
keep the ecosystem flexible—
We see ecosystems fail when they become rigid.
Alibaba’s orchestration philosophy is market-based rather than managerial. “We try to . . . intervene as little as possible,” said Zeng.
a market-based adjustment mechanism not requiring the constant intervention of the orchestrator.
Finally, select quantitative measurements can tell orchestrators whether the coevolution process is working. Measurements could include capturing a new-product vitality index, ecosystem growth, and combined profitability or the
market share of an ecosystem as a whole. For Apple, measurements could include, for instance, the profitability and concentration of its app developers and the market share of end users who have iOS devices versus other devices, like Android.
unit of analysis in a shaping context is the business ecosystem, not just the firm itself. This larger view has implications for organizational structure, culture, and leadership. Shaping organizations need to be open to, and intertwined with, the external environment, in order to extend their reach beyond the boundaries of the firm and build a covenant of trust.
Chapter 6 Renewal: Be Viable
In terms of our art metaphor, renewal strategy is perhaps like a cubist painting. Cubism breaks with the complexity of previous schools of art; objects are analyzed, broken up, stripped of nonessential forms and shapes, and then reassembled to create a new perspective.
In 1975 Kodak owned 90 percent of the US film market and 85 percent of its camera sales.
Few brands were as synonymous with their industry. So it was a sad day when the company filed for bankruptcy in 2012.
Kodak developed and patented the first digital camera in 1975.
It wasn’t until 1981 that Sony announced the first commercial product, the Mavica, but the camera’s quality was low and its price inaccessible to the mass market.
To some extent, Kodak’s mistakes are understandable. For instance, it made major capital expenditures in film manufacturing facilities in China in the late 1990s, anticipating that that country would become the world’s last and largest market for film photography. Instead, China leapfrogged film photography altogether.
Chapter 7 Ambidexterity: Be Polychromatic
the art of ambidexterity. “Different businesses at different times go through different stages of strategy,”
to be ambidextrous, which we define as the ability to apply multiple approaches to strategy at any given time or successively.
using the five basic colors in combination with one another.
Pablo Picasso, who not only mastered classical technique but also shifted his style markedly on multiple occasions throughout his life: the Blue Period (1901–1904), the Rose Period (1904–1906), the African-influenced Period
Appendix B: Further Reading
Brandenburger, Adam M., and Barry J. Nalebuff. Co-opetition . New York: Currency Doubleday, 1996.
Competition: Leadership and Strategy in the Age of Business Ecosystems . New York: Harper Business Press, 1996.
Prahalad, C. K., and Venkat Ramaswamy. The Future of Competition: Co-creating Unique Value with Customers . Boston: Harvard Business School Press, 2004.
Nathan Bennett, “What VUCA Really Means for You,” Harvard Business Review , January–February 2014.
Alison Sander, Knut Haanæs, and Mike Deimler, “Megatrends: Tailwinds for Growth in a Low-Growth Environment,” BCG Perspectives , May 2010, www.bcgperspectives.com/content/articles/managing_two_speed_economy_growth_ megatrends/ .
Eric T. Wagner, “Five Reasons 8 out of 10 Businesses Fail,” Forbes , September 12, 2013, www.forbes.com/sites/ericwagner/2013/09/12/five-reasons-8-out-of-10-businesses-fail/ .
Christopher Null, “The End of Symbian: Nokia Ships Last Handset with the Mobile OS,” PC World , June 14, 2013, www.pcworld.com/article/2042071/the-end-of-symbian-nokia-ships-last-handset-with-the-mobile-os.html .