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May | Strategic Planning | Read time: calculating...

Is your business and management ready for an adaptive strategy approach?

In this constant state of flux and uncertainty, organisations need to be willing and able to adapt their strategy as new information comes to light. Planning for the unknown may seem like an oxymoron, however that’s what adaptive strategy offers: a way to create your own path where the traditional ‘contingency plan’ runs out of road.

 

In the midst of climate change, economic sanctions, evolving consumer trends and, of course, COVID-19, there’s one thing that we can be certain of: change. In the face of uncertainty, how can your organisation be better prepared for approaching the unknown, adapting to a forced hand, and creating value in a unique situation? 

Change is rapid-pace. Pervasive. Strategy specialist Jeff Schwisow pointed out: “it is not just the so-called disrupted industries…that are being impacted by the pace of change, it’s happening everywhere.” Now change is a non-negotiable that needs to be managed, no matter the organisation or the industry in which it operates. 

It’s likely that one or all of the following is true: there is a challenger brand preparing their launch that will affect your revenue; consumers are sharing information about your industry in private online groups; businesses you rely on as a client are about to pivot; or, technology is in development that will change how your industry operates.

To put it into numbers, the BCG Henderson Institute states that ‘roughly two-thirds of all industry sectors experience high volatility in demand, competitive rankings, and earnings, making long-term plans obsolete more quickly’. So, gone are the days where businesses can sit on a traditional 5-year plan without some modification.

Planning for the unknown seems like an oxymoron, however that’s what adaptive strategy offers: a way to create your own path where the traditional ‘contingency plan’ runs out of road.

Adaptive strategy, what it is and why it matters to modern businesses

An adaptive strategy approach is applicable in industries where an advantage over competitors is usually short-lived (hard to maintain). Adaptive strategy (or the adaptive planning model) is based on the idea of ‘serial temporary advantage’. This approach diverts some of the energy invested in long-term planning to instead focus on continual testing and adjusting. 

Let’s imagine you’re in the car insurance industry. Ride-sharing services have already changed the landscape, and on the horizon is the rise of autonomous vehicles. The ability to develop a policy around that self-driving technology first won’t ensure permanent dominance in the space. Instead, the organisation’s ability to adapt as technologies are developed is the competitive advantage

One way to implement an adaptive strategy is in the ‘two engines’ approach. Firms switch between a focus on their core (we’ll call that Engine 1) and creating a new business to ensure sustainability (Engine 2). Whilst both will be managed under the corporate umbrella, they will be structured, resourced and funded differently.

Engine 1 requires discipline, standardisation, a focus on continuous improvement and the use of conventional risk and financial models. It may well follow a five-year plan.

Engine 2 requires agility and creativity, an increased risk appetite and experimentation. It can follow trends and take risks.

  • Marvel used a two engine approach to continue its publishing core while expanding its character licensing business which ultimately became its new core.
  • Google is part of the larger holding company, Alphabet Inc, that organises business units into two distinct streams. The first consists of Google’s core internet capability – Search, Maps, Chrome, YouTube, etc. The second is a group of companies focused on long-term pursuits such as driverless cars, life sciences and robots.
  • IBM has shrunk its traditional hardware business, while dramatically expanding its newer software and service offerings.
  • Netflix used its core DVD business to fund the rapid growth of the streaming business. – Firm of the Future

Adaptive Advantage: Adaptive strategy vs traditional strategy approach

A traditional approach to strategy focuses on developing a key competitive advantage, such as the most locations, becoming the cheapest, or finding a niche need and doubling down. Traditional strategic planning requires a fairly set-in-stone direction and structure, with some forecasting involved to make decisions. 

However, in failing to adapt to how the world is changing, a traditional strategic planning approach can quickly become pointless. Blockbuster’s number of locations did little for the business as the world moved to mail-order movies then VOD streaming. Like trends, competitive advantages continue to evolve. 

While the future is as uncertain as ever, all businesses have access to tools to map trends that can be factored into an adaptive strategy. You have access to RSS feeds, tech & business journals, big data and industry consultants to start with. Quality news sources (that aren’t echo-chambers of emotional button-pushing) also have a place in building an understanding of the bigger picture and what we can do to colour it. 

With all the information freely available, we’re seeing the end to the ‘special sauce’. There are few true big secrets you can toil away on for years before launch to gain the advantage. The capacity to adapt and act almost immediately matters more than ever.

If we ignore trends as ‘blips’ and relying solely on the ‘five year plan’ we risk running in the wrong race. Those who adopt a more agile approach, and do it right, stand to benefit from the adaptive advantage while competitors may flail in the winds of change.

Adaptive strategies will differ between industries and organisations, however, what is important is that your organisation can identify changes as they occur within your ‘ecosystem’. Only by noticing these changes can we identify opportunities to improve and progress for the betterment of the organisation.

A side benefit is that by choosing a path of constantly innovating and moulding a strategy to meet the market, is that we also sharpen our senses around what is changing globally, not just in our industry. That, in turn, allows us to overcome larger challenges and reap the rewards that come with them.

Technology in adaptive approaches to strategy 

There are countless examples of companies using an adaptive strategy to continue their development. Some have it built into their DNA, such as Amazon, while others have transitioned from a standard model by adopting an adaptive approach. 

For example, UK grocery giant Tesco utilises consumer data collected from more than 13 million loyalty card program members in real-time to analyse their buying behaviours. From this information, they are able to offer custom offerings for specific stores and customer groups. By developing a hugely successful online platform, and offering other enterprises access to its technologies and insights (for a fee) they have reshaped the business model away from being tied solely to a bricks & mortar model. 

What happens when the world changes and the strategy doesn’t?

One common occurrence is when the first movers’ advantage comes back to bite a business. Those who are first in the market risk becoming obsolete as new entrants step up with more innovative or modern offerings. The strategy that secured market dominance may not be the same as one that keeps it, as was the case with Polaroid.

Founded in 1937, entering a market very early on meant that they benefited from having very little competition. They saw early success with their instant film and cameras. The company declared bankruptcy in 2001, almost 7 decades later, due in part to a lack of innovation in the digital camera space which is what the market was asking for.  

Closer to home, electronics retailer Dick Smith collapsed, stating a primary reason for this was due to “rapid changes in consumer demand patterns”, and inventory decisions that did not reflect this demand. Revenue growth was based on store growth, even while consumers of fast moving electronics were shifting online.

So, how can leaders implement an adaptive strategy?

Adaptive strategy requires eagle-eyed surveillance of the organisation’s environment, including: how are our customers responding to trends, and what technology is being used? Recognising signals and then testing and experimenting with different ways of thinking and doing is at the core of adaptive strategy planning; being agile and responsive to changes as they occur, or even before they happen. The adaptive advantage comes when you can respond quickly or more effectively than your competition. 

Implementing an adaptive strategy also requires looking at your org structure and leadership. At Keogh, we often speak of the importance of developing future and digital-ready leaders. Leaders who are open-minded, are able to identify opportunities and have the know-how to adapt models to the changing business landscape will be far more likely to sustain their organisation into the future, compared to leaders who are unwilling to relinquish ‘the way things are done around here’. 

Need an adaptive strategy approach for a changing world?

In this constant state of flux and uncertainty, organisations need to be willing and able to adapt their strategy as new information comes to light. The Keogh team are experienced and well-aligned to assist in strategic planning, partnering with organisations to guide them through the human side of business transformation. If you would like to discuss adopting an adaptive approach to your strategic planning, get in touch. Let’s start the conversation.

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1. Change
2. What adaptive strategy is and why it matters
3. Adaptive Advantage
4. Technology in adaptive approaches to strategy
5. How leaders can implement an adaptive strategy
6. Need an adaptive strategy approach for a changing world?

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Yvette Henderson

Yvette Henderson

Senior Consultant

Email Yvette Henderson

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