The big shift in strategy

The last decades have brought a dramatic change in the external environment for almost every business. What has been a fairly stable and predictable landscape for a very long time has become a mix of dynamic, ever-changing and unpredictable forces. It is almost common sense now that the traditional approach to strategy, which builds on a more stable environment, needs an update. However, many businesses are still struggling to replace their strategy process of internal and external analysis with something more suitable. I guess this is partly due to the fact that there aren’t many workable approaches around.

The Articles The big shift in strategy part 1 and part 2 from John Hagel III may provide a solution.

John starts with a critique of the traditional approach to strategy, which he calls strategies of terrain. The starting point for strategies was always the current position in the current external environment. From there, the business determined its favorable future position where it could build a sustainable competitive advantage.

As the external terrain became more unstable, strategists shrinked their focus two ways:

  • They increasingly looked inwards, focusing on core competencies and
  • Attempted to quickly respond to near-term events and changes

John Hagel states that these approaches are yielding rapidly diminishing returns. He suggests focusing our attention to strategies of trajectory instead. This means that new strategies should focus on the most attractive and advantaged positions in future landscapes, not the current landscape.

Strategies of trajectory start with a view of the future and work back to actions in the present.

Strategies of terrain vs. strategies of trajectory: a shift in focus

From there, you can work back to the implications for action in the present.

At first sight, this seems to be an almost impossible task. However, John assures us that we don’t need a detailed idea about what that future might look like. It will be enough to have a sense of direction and to understand the fundamental forces at work.

He also provides five elements to successfully develop such strategies of trajectory:

  • Challenging: to “unlearn” some of our basic believes about how the world works; scenarios are a good approach here
  • Shaping: to ask which future is most attractive and then to take actions to shape the probable future into that direction
  • Motivating: to motivate people to overcome risk averseness and to take bolder action
  • Measuring: to measure the progress in a particular direction; don’t focus on lagging financial indicators – find suitable operating metrics that are leading indicators
  • Learning: to reflect on the experiences from the progress so far and to adjust further actions accordingly
The future positon is the starting point to derive actions in the present

The future positon is the starting point to derive actions in the present

Finally, here are my favorite quotes from these two articles:

Playing a wait and see game in the hope that things will become clearer over time can be very dangerous. By the time you see what’s happening, it may be too late to do anything about it. Fast followers in an exponential world will increasingly find that they are on a path to the grave.

In times of rapid change and growing uncertainty, we actually have far more degrees of freedom to restructure entire markets and industries than in more stable times.

Whatever we know today is depreciating in value at an increasing rate.

Forget about the path in front of you, no matter how familiar or well paved it might be. First, figure out where you want to be, then craft the path that will be most likely to get you there quickly.

Link: The big shift in strategy part 1 and part 2 from John Hagel III

Books from John Hagel III