Insight on the importance of adaptive strategy in today's environment and the ways that companies can develop new types of strategies.
Martin, a BCG fellow, has led strategy assignments in health care, consumer goods, financial services, and industrial goods in Japan, the United States, and Europe. Martin also heads The Strategy Institute, BCG’s vehicle for exploring ideas from beyond the world of business that have implications for strategy. He previously led BCG’s Health Care practice in Japan for eight years.
When thinking about the future of strategy, how do you think about strategy?
I think there are three aspects of strategy that are worth highlighting. One of them is strategy as a plan of action for a company to reach its goals. The second one is strategy as a series of concepts, like scale advantage and first-mover advantage, that we use in the construction of those plans. And the third one is the art of problem solving.
In what ways is the future of strategy going to be different from the past?
There are some changes in the conditions of strategy, which means that we not only need new strategies, we actually need new kinds of strategies. One of these changes is, for example, the demise of scale advantage. It used to be that companies that were bigger were generally advantaged and that advantage generally persisted. We have evidence to show that this is no longer the case.
I think a second change in the conditions of strategy is a significant and systemic increase in volatility and unpredictability. That change means that our ability to have a durable plan decreases. Strategy needs to use more of an evolutionary paradigm to get to advantaged positions. In other words, we have a rough analysis of a starting point. We have rough goals. We have a rough direction. We try, we learn, we iterate, and we evolve and adapt toward advantaged positions.
In a deconstructed world where activities flow to smaller companies—where the value of the company is its value in combination with its supplier set and its stakeholder set—we need to ask a different type of question. We need to ask,, how can a company have an advantaged network or an advantaged position in a network? We also need to ask that question in the context of open intellectual property, where an open value net helps companies create advantage.
One of the things that you can say about the current recession is that it is a massive example of systemic risk and systemic volatility. And my prediction would be that this volatility will persist for some time. It may even become a permanent feature of the business environment, which would argue for the growing importance of capabilities such as agility and resilience that confer advantage in a volatile world. A downturn is absolutely not the time to give up on strategic thinking.