Evaluating corporate strategy today2 min read . Updated: 23 Mar 2018, 03:16 AM IST
For the Mint Corporate Strategy Awards 2018, with BCG's Strategy Palette as a basis, firms are classified by strategic environment
Companies today operate amid growing complexity thanks to rapidly changing customer behaviour, evolving regulatory landscape, and the advent of digital technologies. As a result, they face a range of strategic choices—what kinds of products to introduce, how to position them, which customers to sell them to, etc.—even as the very nature of their markets is changing.
Building on several years of research into companies and successful strategies all around the world, The Boston Consulting Group (BCG) developed the Strategy Palette to help companies understand and navigate the strategic environment that they compete in. The Strategy Palette interprets a “strategic environment" as being defined by the levels of unpredictability, malleability and harshness.
Unpredictability is often reflected in the volatility of demand trends, earnings, and competitive rankings. Malleable markets are those in an early stage of development with the rules of the game (such as, regulatory structures, standards, etc.) and/or customer expectations still evolving. Harshness is defined when an industry goes through a period of low or negative growth, loses money and many companies in that industry face the challenge of even staying viable.
Each environment requires a different strategic approach to be successful. Successful approaches in one environment will not replicate sustainable success in another environment.
Based on this thinking, the companies evaluated for the Mint Corporate Strategy Awards were grouped into one of four strategic environments depending on the level of unpredictability, malleability and harshness of their respective industries. Using three-year data on sales, profitability, return on capital, and debt-to-equity, performance was quantified relative to industry averages; and combined with “soft-score" components for corporate social responsibility, women’s initiatives, and work environment, to rank companies within each strategic environment.
Mint then constituted a jury of industry leaders and influencers to examine the list of finalists, discuss recent developments for each company, and select the winners. In each category, the winners reflect the strength of their performance and strategic position relative to other companies in a similar strategic environment.
Rajah Augustinraj is project leader at the Boston Consulting Group.
How to select and execute the right approach to strategy
Strategy is a means to an end: favourable business outcomes. When we think about strategy, we tend to think about planning: study your situation, define a goal, and draw up a step-by-step path to get there.
For a long time, planning was the dominant approach in business strategy—in both the boardroom and the classroom. But effective business strategy has never really consisted of just this one approach.
The multidecade plans that oil companies make would feel inappropriate to the CEO of a software firm that faces new products and competitors every day and therefore adopts a more fluid and opportunistic approach to strategy.
Neither would such long-term plans feel natural to an entrepreneur creating and bringing a new product or business model to market.
Today, we face a business environment that is faster changing and more uncertain than ever before because of, among other factors, globalization, rapid technological change, and economic inter-connectedness.
Perhaps less well known is that the diversity and range of business environments that we face have also increased.
Large corporations in particular, are stretched across an increasing number of environments that change more rapidly over time, requiring businesses not only to choose the right approach to strategy or even the right combination of approaches, but also to adjust the mix as environments shift.
Excerpted from Your Strategy Needs a Strategy with permission from Harvard Business Review Press.