Senior executives commonly ponder such questions as “What might give us continued competitive advantage?” and “What new products should we make or markets should we enter and how?” These questions go to the heart of a firm’s strategic vision — the shared understanding of what the firm should be and how it must change. I present a framework to help managers answer such questions critically and creatively. Knowing the answers constitutes the difference between muddling through and managing with confidence and foresight.
The framework has four steps:
- Generate broad scenarios of possible futures that your firm may encounter.
- Conduct a competitive analysis of the industry and its strategic segments.
- Analyze your company’s and your competition’s core capabilities.
- Develop a strategic vision and identify your strategic options.
The information generated by the first three steps is plotted on a matrix that helps managers see the direction (step four) they should take. The goal is to develop those core capabilities that will be effective for multiple strategic segments in several different possible futures. My approach to strategic vision building belongs to a newly emerging school of strategy called the “resource-based view.”1 Proponents of this approach view the successful firm as a bundle of somewhat unique resources and capabilities. If a firm’s core capabilities are scarce, durable, defensible, or hard to imitate, they can form the basis for sustainable competitive advantage and surplus profit. They also need to be well aligned with the future key success factors of the industry.
The methodology has been applied at corporate and divisional levels in U.S. and overseas firms and to functional strategy development as well (e.g., in marketing and R&D). It can prevent overconfidence and myopic framing of strategic issues from misleading the organization’s planning effort. The methodology has successfully encouraged top management at several companies to break out of traditional frames of mind and challenge conventional wisdom.
Throughout, I apply the methodology to Apple Computer, a company with a case history well known to most managers. I do not intend to explain all of Apple’s strategic problems but to illustrate the complexities of formulating a winning strategy. To establish a foundation for this exercise, I offer the following overview of Apple’s strategic position.
Background: Apple Computer
As the popular story goes, Apple developed in just over ten years from a garage operation into a multibillion-dollar company.