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Adaptive Strategy

What

Unlike the classical approach of sustainable competitive advantage, an adaptive approach to strategy rests on the idea of serial temporary advantage. In unpredictable and nonmalleable environments, the emphasis is on continuous experimentation and real-time adjustment rather than on long-term analysis and planning. Since advantage is temporary, the focus is on means, not ends.

When

An adaptive approach works when the business environment is hard to predict and to shape, and when advantage may be short-lived. Ongoing, substantial changes in technologies, customer needs, competitive offerings, or industry structure may all signal the need for an adaptive approach. Business environments increasingly require this mind-set: today, roughly two-thirds of all industry sectors experience high volatility in demand, competitive rankings, and earnings, making long-term plans obsolete more quickly.

How

Strategizing in the adaptive context requires a process of watching and responding to changes in the environment by capturing change signals and managing a portfolio of experiments. Adaptive firms continuously vary the way they do business by trying many novel approaches and then scaling up and exploiting the most promising before repeating the cycle. Successful adaptive firms outperform rivals by iterating more rapidly and effectively than their competitors.

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