Your strategy needs a strategy: How to choose and execute the right approach
When it comes to strategy, one size doesn’t fit all. Companies need to tailor their strategies to their specific business environments, whether it means aiming for size in mature industries or for nimble innovation in more turbulent ones. Experts from BCG offer a new method to guide leaders to success across a wide array of business environments, based on a detailed survey of 150 firms and more than 20 in-depth interviews with CEOs.
The co-authors outline five archetypal strategies, which are each suited to one of five distinct types of business environments.
Approaches for non-malleable environments (when the company cannot significantly change the rules of the game):
• Classical approach (“be big”): sizable companies with established, strong brands, such as Milky Way or M&M’s, succeed by driving scale economies through category and brand leadership and rigorous planning.
• Adaptive approach (“be fast”): companies rely on temporary competitive advantage and the ability to adapt to constant change.
Approaches suited for malleable environments (fragmented, with low entry barriers and high innovation rates):
• Visionary approach (“be the first”): a visionary leader sees a clear opportunity for the creation of a new market segment or the disruption of an existing one
• Shaping (“be the orchestrator”): there is scope to shape or reshape an industry at an early point in its development, but no company is able to do so single-handedly, so it collaborates with others to share the risk and supply complementary capabilities and resources, thereby forming a whole ecosystem.
When the environment is so harsh as to make a company’s usual way of doing business unsustainable – either because of political or economic shocks, or a sudden drop in consumer demand – it must drastically change course. The authors recommend economizing to decisively address immediate impediments to survival. The second part of the renewal journey involves turning to one of the four strategies, in order to match the strategic direction with the environment, foster innovation, and ensure lasting growth.
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Based on Your Strategy Needs a Strategy: How to choose and execute the right approach by Martin Reeves , Knut Haanaes , Janmejaya Sinha (Harvard Business Review Press, June 2015) and the interview with Jim Whitehurst, CEO of Red Hat, USA, July 2015.
Published in the Harvard Business Review in 2012, this article is one of the starting points for the research subsequently carried out by consultants from BCG. It presents a brief, illustrated overview of their four strategic approaches.