It’s Time for Business Leaders to Rethink Their Approach to Strategy

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The FINANCIAL — One in three public companies likely won’t be around in five years, and the spread between the highest- and lowest-performing companies has never been greater, according to new research from The Boston Consulting Group (BCG). Identifying effective corporate strategy is more important than ever before, and this is the central theme of the latest BCG book, Your Strategy Needs a Strategy.

For many companies, the traditional approach to strategy—the kind most managers learned in business school—does not always work well in today’s increasingly diverse and changeable business environments. For industries in which environments are unpredictable and industry leaders change position frequently, experimentation may be the right approach, instead of following a fixed long-term plan. In other industries, the right approach might be to orchestrate an ecosystem of players outside the company to shape an entire sector, much as Facebook has done.

Your Strategy Needs a Strategy, authored by BCG senior partners Martin Reeves, Knut Haanæs, and Janmejaya Sinha, explores the different environments that businesses currently face, identifying and matching the right strategic approach to a given situation. Their framework is called the “strategy palette.”

The strategy palette is made up of five highly distinctive kinds of environments and the strategic approach best suited to each. If one’s environment is predictable but hard to shape, it requires a classical approach (be big); if the environment is unpredictable but hard to shape, it needs an adaptive approach (be fast); if the environment is both predictable and shapeable, use a visionary approach (be first); if the environment is unpredictable but potentially shapeable, it calls for a shaping approach (orchestrate); and if the company is in survival mode in a harsh environment, it needs a renewal approach (be viable).

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“If a business is going to win today, it can no longer follow a one-size-fits-all model for setting strategy,” says Reeves. “The framework we’ve developed is designed to help leaders select the best approach to strategy and execution. Each company’s approach needs to be uniquely tailored to the circumstances at hand.

“To know what kind of environment your company is operating in, you need to ask a few fundamental questions,” notes Reeves. “First, is the environmental predictable or unpredictable? Second, is it easy or hard to shape? That is, can you change the course of the industry by your actions, the way Apple has done with the iPhone? Or do you have to conform to an established set of conditions? Finally, how harsh is the environment? Do you have to fight every day for your survival, or do you have the luxury of allocating resources against longer-term payoffs?”

Your Strategy Needs a Strategy reframes the way to think about formulating and implementing winning strategies in today’s increasingly diverse and dynamic business environments. The book lays out how strategy connects with innovation, implementation, organization, culture, and leadership.

 

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