Magazine Fall 2011 Research Feature

Which Strategy When?

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.

Christopher B. Bingham, Kathleen M. Eisenhardt and Nathan R. Furr Reading Time: 21 min 

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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.

Pixar Animation Studios, whose worldwide megahits include the Toy Story movies and Finding Nemo, uses rules such as “great story first, then animation” to guide its strategy.

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.

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About the Authors

Christopher Bingham is assistant professor and Phillip Hettleman Fellow of strategy and entrepreneurship at the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School. Kathleen Eisenhardt is the Stanford W. Ascherman M.D. Professor of Strategy and Organization at Stanford University. Nathan Furr is assistant professor of entrepreneurship and strategy at Brigham Young University.

References

1. M.E. Porter, “Competitive Strategy” (New York: Free Press, 1980); M.E. Porter, “What Is Strategy?,” Harvard Business Review 74, no. 6 (1996); J.W. Rivkin, “Imitation of Complex Strategies,” Management Science 46, no. 6 (2000): 824-844; N. Siggelkow, “Evolution Toward Fit,” Administrative Science Quarterly 47, no. 1 (2002): 125-159 C.B. Bingham and K.M. Eisenhardt, “Position, Leverage and Opportunity: A Typology of Strategic Logics Linking Resources with Competitive Advantage,” Managerial and Decision Economics 29, no. 2-3 (2008): 241-256.

2. N. Siggelkow, “Change in the Presence of Fit: The Rise, the Fall, and the Renaissance of Liz Claiborne,” Academy of Management Journal 44, no. 4 (2001): 838-857.

3. C.K. Pralahad and G. Hamel, “The Core Competence of the Corporation,” Harvard Business Review 68, no. 3 (1990); D.J. Collis and C.A. Montgomery, “Competing on Resources,” Harvard Business Review 73, no. 4 (1995): 118-128 J. Barney, “Firm Resources and Sustained Competitive Advantage,” Journal of Management 17, no. 1 (1991): 99-120; M.A. Peteraf, “The Cornerstones of Competitive Advantage: A Resource-Based View,” Strategic Management Journal 14, no. 3 (1993): 179-191.

4. J.P. Davis, K.M. Eisenhardt and C. B. Bingham, “Optimal Structure, Market Dynamism and the Strategy of Simple Rules,” Administrative Science Quarterly 54 (2009): 413-452.

5. S.L. Brown and K.M. Eisenhardt, “Competing on the Edge: Strategy as Structured Chaos” (Boston: Harvard Business School Press, 1998); K.M. Eisenhardt and D.N. Sull, “Strategy as Simple Rules,” Harvard Business Review 79, no. 1 (2001): 107-116; C.B. Bingham, K.M. Eisenhardt and N.R. Furr, “What Makes a Process a Capability? Heuristics, Strategy and Effective Capture of Opportunities,” Strategic Entrepreneurship Journal 1, no. 1-2 (2007): 27-47; C.B. Bingham and K.M. Eisenhardt, “Rational Heuristics: The ‘Simple Rules’ That Strategists Learn from Their Process Experiences,” Strategic Management Journal (in press); C.B. Bingham and J. Haleblian, “How Entrepreneurial Firms Learn Heuristics: Similarities and Differences Between Individual and Organizational Learning,” Strategic Entrepreneurship Journal (in press).

Acknowledgements

The authors thank Kenan-Flagler Business School at UNC, Stanford Technology Ventures Program, Marriott School of Management at BYU and the National Science Foundation (grant #0323176) for their support.

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Comments (5)
SYUKRI LKMAN
I find the articles from MIT Sloan Management Review can develop my mind about new development in strategic management field. New ideas are developed by experts in this field to add my horizons as a lecturer and also in the subject of strategic management. As an observer in this field article published in this magazine is very useful for me in writing and teaching. The article wrote by Christopher Bingham and Phillip Hettleman is unique and very useful.
Mni Nomnga
I find this article re-inforcing the old resource view vs positioning view of strategy, whilst in reality it is neither resource view or positioning view,It is all of them. A book by Roger Martin and A.G Lafley, Playing to win would assist the authors in removing their blinkers.They define strategy as an intergrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition. A strategy according to these authors then is a co-ordinated and intergrated set of cascading five choices: a winning aspiration, Where to play, How to win (Positioning view). Core capabilities and management systems (Resource View). In reality positioning, Opportunity and Resource view are mutually re-inforcing.
Jimbo Holloway
It seems that changing strategies is something common to all business managers in today's business climate. With technology rapidly advancing business, being flexible and willing to adjust are necessities. We are in the luxury real estate business and need to change our way of doing business constantly to keep up.

Jimbo Holloway
http://www.realestate30aflorida.com/
Michelle Grey
I've often had to change strategies midstream, and it does get to be a bit bewildering, leaving you with thoughts of uncertainty, however a strong belief and confidence in the change usually helps towards a positive result! 
Michelle
http://excellentprinting.co.uk/
Kaythi Aung
That's a great and interesting article. It raised the awareness of strategy framework complied with implementation. One interest point I have is that in case the failure or breakdown of one resource happens, will other resources be easily vulnerable as a disadvantage of interlocking resources or will the breakdown be quickly repaired/replaced as an advantage of interlocking resources?