The Strategy Palette

Classical strategy is based on achieving sustainable competitive advantage by positioning a firm optimally in an attractive market. Since the basis of competitive advantage in these environments is known and nonmalleable, advantage can be based on superior scale, differentiation, or superior capabilities.

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. 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.

A visionary approach empowers a firm to create or re-create an industry with some degree of predictability by seeing an opportunity and pursuing it single-mindedly. Being first confers the advantage of superior size that comes with being ahead of rivals, and allows a firm to set industry standards, influence customer preferences, develop a superior cost position, and determine the direction for an entire market. Deploy a visionary strategy when there is an opportunity to create or re-create an industry.

A shaping firm molds or reshapes an industry by influencing the development of a market in its favor through coordination with other players. A shaping approach both permits and requires a firm to collaborate with others in a diverse ecosystem that distributes risk, supplies complementary capabilities and resources, and builds the market quickly through strength in numbers. Deploy a shaping strategy when there is an opportunity to write or rewrite the rules of an industry at a nascent stage of its development.

A renewal approach to strategy refreshes the vitality and competitiveness of a firm when it is operating in a harsh environment. When circumstances are so difficult that the current way of doing business cannot be sustained, changing course to preserve and free up resources—and later to redirect them toward growth—is the only way to not merely survive but to eventually thrive again.