It's no secret that the pace of change today is head-spinningly fast. But while talk of globalisation and advances in technology usually take center stage, another challenge is often overlooked: the fact that competitive environments are becoming both more diverse and more dynamic.
In the declining number of industries that remain stable and predictable, the classical approach to strategy and leadership taught in business schools still applies. But one size no longer fits all. Leaders that want to win increasingly find it necessary to match their strategic approach to the environments they face. But how?
In Your Strategy Needs a Strategy, my co-authors and I introduce the ‘strategy palette’, a tool that helps executives classify their competitive environments and identify the relevant strategy for each. We found five distinct strategic approaches defined by three environmental characteristics: unpredictability, malleability and harshness.
1. The classical approach is the traditional analyse-plan-execute method, with a goal of achieving sustainable competitive advantage through scale or differentiation.
2. The adaptive approach is about responding rapidly to changing market conditions by continuously experimenting, and then selecting and quickly scaling up whatever works.
3. The visionary approach — the strategy of entrepreneurs — envisions and realises new business possibilities. Although this approach is typically associated with small start-ups, large companies now also may need to be visionary to stay relevant in the face of frequent disruptions.
4. The shaping strategy is about partnering with other companies to reshape an entire industry through collaboration, often using a digital market platform.
5. Finally, the renewal strategy is the option to choose when a business is in jeopardy and needs to conserve its resources to fund the journey back to viability and growth.
Adding another layer of complexity, most large companies compete in more than one environment, or in ones that shift over time. Leaders increasingly need to lead by deploying the right strategies and resources across these diverse areas. They need to create a pattern
Successful CEOs understand this. Pfizer's Ian Read, for example, reorganised the company by defining new business units around products that face similar market challenges, so that each unit could develop the culture and capabilities needed to win. And Pepsico's Indra Nooyi runs and reinvents the company at the same time with ‘disruption’ teams that work in parallel with the day-to-day operations teams in most of the company's business units.of distinct approaches across the business, keeping it up-to-date by asking the right questions and by putting their weight behind critical change initiatives. It’s more an exercise in constant self-disruption, than one of perfecting an unchanging recipe for success.
The strategies and roles you take on as a leader will depend on how complex and dynamic your business is. But the goal is always to mix, match and evolve your company's capabilities and resources in response to the world changing around you. That is the ultimate leadership strategy.
Martin Reeves is senior partner at The Boston Consulting Group, and director of BCG's Bruce Henderson Institute. His new book Your Strategy Needs a Strategy comes out on June 9.