Just when you think you have settled on the right strategy, you may need to change. By understanding the particular circumstances and forces shaping your company’s competitive environment, you can choose the most appropriate strategic framework.
Markets are changing, competition is shifting and your business may be suffering or perhaps thriving, at least for now. Whatever the immediate circumstances, managers are forever asking the same questions: Where do we go from here, and which strategy will get us there? Should we fortify our strategic position, move into nearby markets or branch out into radically new territory? To help guide our decisions, most of us have a smorgasbord of strategic frameworks to draw on. But which one is the right one, and when? The strategic plans, market analyses and hefty binders that strategy consulting firms leave behind often jumble strategic lenses: Five-Forces analysis, portfolio review, assessment of core competencies; examination of profit pools, competitive landscape and so on. But which analyses are most helpful right now?
Most managers recognize that not all strategies work equally well in every setting. So to understand how to choose the right strategy at the right time, we analyzed the logic of the leading strategic frameworks used in business and engineering schools around the world. Then we matched those frameworks with the key strategic choices faced by dozens of industry leaders at different times, during periods of stability as well as change. (See “About the Research") Two surprising insights emerged.
Image courtesy of Pixar Animation Studios
First, we discovered that the logics of the different strategic frameworks break into three archetypes: strategies of position, strategies of leverage and strategies of opportunity. What’s right for a company depends on its circumstances, its available resources and how management combines those resources together. (See “Choosing the Right Strategy.”)
Second, by observing market leaders employing archetypal strategies, we found that many assumptions about competitive advantage simply don’t hold. For example, although strategy gurus talk about strategically valuable resources, sometimes very ordinary resources assembled well are all that’s required for competitive advantage. Sometimes it makes good sense to bypass the largest markets and focus instead on where resources fit best. In other circumstances, it may be preferable to ignore existing resources and attack an emergent market. In some situations, basic rules of thumb work better than detailed plans.