The Strategy of Change
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Company leaders are encouraged to believe that they face a stark choice when it comes to change: either double down on their existing strategy or pivot to pursue some form of radical transformation. Our research reveals that this advice is appropriate for only one-third of companies. For the other two-thirds, the better response to a changing environment is to innovate the activities used to deliver value to customers and other stakeholders.
In recent articles for MIT Sloan Management Review, “Changing How We Think About Change” and “The Essence of Strategy Is Now How to Change,” we described how change can take three forms — magnitude, activity, or direction — and how companies can identify which form of change is appropriate for their business by evaluating their performance on two dimensions: fit to purpose (the quality of their fit with the expectations of customers and other stakeholders) and relative advantage (the vulnerability of the company’s capabilities to substitution).
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Companies with high fit-to-purpose and relative advantage scores land in the Enhance Magnitude zone (see “How Relevant and Distinct Are Your Company’s Offerings?”), meaning that their priority is to dial up the volume on the strategies currently fueling their success — in other words, to double down. At the opposite extreme, weak performance on fit to purpose and relative advantage means that a company falls into the Shift Direction zone. For these businesses, it’s time to pivot.
Companies with average scores on both dimensions — or a combination of high and low scores on the two dimensions — plot in the Reimagine Activity zone. A company in this zone has valid strategic goals but has a pressing need to innovate the means it is using to achieve those goals, whether the aim is to improve market fit or differentiate from competitors.
In a previous article, we included the link to a free self-assessment tool that readers can use to determine the appropriate change signal for their business. To date, executive teams from nearly 100 companies have completed this assessment. This article reviews three major insights that have emerged from their responses and the implications for business leaders who are looking for reliable change signals to inform the strategic priorities of their business.
1. Only one-third of companies should double down or pivot.