Our brief take on Business Strategy

Updated: Jan 7, 2019

Agility provides strategy consulting services for a wide range of clientele, large and small. Our approach to strategy is far from templated and we believe fundamentally in a 'skin in the game' approach that imparts ownership and accountability for us to deliver the best quality of support to our clients.

#strategy #chaos

A look back in history

There was a time when business strategy was relatively straightforward. Frameworks like the BCG growth-share matrix, SCP, Pestle, Porters five forces were all the toolkit most strategists needed to describe, understand and win their market segments.

Briefly, for reference;

  • BCG growth-share: Value creation in any industry is governed by how much growth potential is available and how competitive the product landscape is; and it is generally lopsided towards products and players that have largest market share, due to economies of scale and scope.

  • Porters Five Forces: Companies need to have their own competitive strategy in order to improve their chances of gaining an edge over rivals. But to formulate the best competitive strategy it must first understand how competition itself works. Industry competition is driven by five fundamental forces.

  • Structure Conduct Performance: The structure of an industry defines the conduct of players within that industry, which then has direct influence on the performance and economic profitability of players. This equilibrium can only be disrupted by exogenous shocks that alter one of the three factors thus forcing a new equilibrium to be reached.

In actual fact, today, an inordinate proportion of time is spent by CEOs and strategy managers actually managing the strategy process through planning and budgeting discussions rather than focusing on the strategy itself. Times have now changed, and as industry boundaries blur the competitive landscape is not so easily defined; naturally, the old frameworks that assumed individual industries were finite are fast becoming less relevant toolkits. In fact Porters book “Competitive Strategy” written in 1985 was one of the last seminal books that laid out a new strategy framework for the business world.

If one dials back further in time, the term strategy is rooted in times of war, where it was used to describe the skills and tactics, as well as ruses and trickery used to fool opponents on the battle field. This was achieved through deep and careful observation of the surrounding battlefield, the opponents army and ones own men and their condition. According to Sun Tzu’s Art of War, for example, if the opponents army are leaning on their spears then it can be surmised that they are faint from starvation; and if they begin to slaughter their own cattle it is likely they are willing to fight to the death. This information can be used to improve ones position for example through launching surprise attacks at the right moment towards points of vulnerability.

Why then has business strategy been distilled to a few frameworks and rigid processes like the annual planning cycle? Why does it feel like a routine affair that is pursued once a year? Should it not at least be all year round, real-time and dynamic, requiring the most curious minds to uncover the most intricate details? After all it has no objective black and white answer, and multiple iterative passes are fundamental to a robust strategy.

stratagem /ˈstratədʒəm/: a plan or scheme, especially one used to outwit an opponent or achieve an end.

Crucially it is important to establish perhaps some principles of strategy development based on the historic context;

(1) it is about competition, and beating them. A strategy that looks at the world purely from a firms point of view, ie what products to sell at what price, to deliver what outcome, is only at best one fifth complete; as it misses the dimension of competition, marketplace, industry and customers. Be very wary of strategy that is formed this way.

(2) uncomfortable guesswork will be required, about surroundings and what/how will happen vis a vis competitors and marketplace. This could be clearer if one thinks of strategy as ‘reactions to possible actions’, thus one cannot decouple the two, or conceive any reactionary steps if those initial actions are not first hypothesised in the first place. Think of chess moves; while an opening is a great initial starting point, the game must be played assuming certain moves made by the opponent.

(3) wit and skills play a key role in winning. Ultimately the extent of success in a winning strategy is a relative measure at best, there is no such thing as the permanently best strategy, period. And given that today, there are more competitors in any market segment, you can be quite certain there are more and more intelligent and skilful people joining the fray every day. Putting your best people in strategy and giving them wide latitude to think and tinker may be the best thing you can do if your starting point is a rigid strategy planning process that feels like a compliance exercise.

(4) iteration and seeking multiple viewpoints is key. Once you accept that strategy is a large part ‘reactions to possible actions’, then you will consider the first iteration less sacrosanct and cast in stone. The marketplace, consumers and competitors are ever evolving, and enabled by digital, more rapidly than before. The five forces help provide dimensionality (often B2C companies miss the supplier, and B2B companies miss substitutes), however the impact of changes in each factor are unique by player and sector. The point here is to seek input from a broad range of viewpoints all along the value chain.

Michael Porter

"The underlying principles of strategy are enduring, regardless of technology or the pace of change."

Strategy as structured chaos

Agility understands that in today's environment of unstable markets, fierce competition, and relentless change strategy becomes the approach of developing structure around chaos, i.e. strategy is inherently itself a process of applying structure to a chaotic set of inputs. This entails looking at market trends and opportunities from a range of different lenses - namely customer, competitor and partners, a detailed view of the value-chain from investor to consumers, and a creative review of different hypothetical scenarios governing movement of competitors within and from outside the industry.

Shona Brown, "Competing on the Edge", Book, 1998

“ According to complexity theory, adaptation is most effective in systems that are only partially connected. The argument is that too much structure creates gridlock, while too little structure creates chaos. A good example would be the traffic lights in a city. If there are no lights, traffic is chaotic. If there are too many lights, traffic stops. A moderate number of lights creates structure, but still allows drivers to adapt their routes in surprising ways in response to changing traffic conditions."
"Consequently, the key to effective change is to stay poised on this edge of chaos. Complexity theory focuses managerial thinking on the interrelationships among different parts of an organisation and on the trade-off of less control for greater adaptation.”

Different strokes for different folks

Depending on the stage of life your company is in, the strategy developed would need to tailored to the context in question. While large corporations may need a strategy that looks 5 years out into the future, requiring a deep look into new markets or product lines, a small enterprise may require a more tactical 12 month strategy that allows it to penetrate into new segments of customers. And to add, over these two differing periods, the consideration of market evolution, competitive dynamics, partner options, and resource requirement would be very different.

"Strategy Beyond the Hockey Stick", Book

“ In the strategy room, human bias and social dynamics can prevent the necessary big moves from getting on the table, let alone getting executed."
"Companies that rapidly reallocate capital to new growth businesses outperform those that take a steady state approach."

Execution is key. Be action oriented

All too often, companies will spend 3-6 months developing strategies and budget requests, only to fall flat on executing against the outlined strategies. The key here is to develop strategies that can be attained within the timeframe, with the current or aspired resources needed. Agility works directly with top management within the organisation to co-develop the strategies, balancing (i) execution ability and motivations of leaders, (ii) resource availability and needs, and (iii) probability weighted and risk adjusted impact to the business.

Stakeholder involvement

Today's decision making around strategy is made even more complex by the gap between incumbent historic expectations of ROI from board members and shareholders, with the realities of what the market can offer. The issue is driven by the harsh realities in the competitive marketplace of today, given expanded players at a global scale. We believe that involving all key stakeholders early and continuously throughout the process will greatly improve the quality of the answer, and its viability for funding and execution.

"Strategy Beyond the Hockey Stick", Book

"The role of the industry in a company's position on the power curve is so substantial that you would rather be an average company in a great industry than a great company in an average industry... Where to play is one of the most critical choices of strategy."

Agility is willing to take skin in the game

We at Agility want to be sure you are getting value for money on your fees. We are thus open to considering a delayed partial payment of our fees based on execution attainment of strategies developed, or any other mechanism that would ensure that we are committed to delivering the best value to clients.

It's never been as important today to reimagine your strategy

The world is changing at a rapid pace, and many companies are under the threat of disruption. In the face of industry disruption, companies have two binary choices: get out of the industry, or transform the industry. And industry change is not an overnight process; nor is altering the dynamics given this requires, at the least, unknown knowledge of competitor movements too. Incumbent players are further weighed down by the difficulty in reacting nimbly enough to face the disruptions head on. The process is chaotic but a necessary one to get done right. Agility is here to help.


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