If have said it ad nauseum, that businesses need to be more strategic in their thinking and decision making. However the magnitude of changes coming from the technological, geopolitical, social and natural environment spheres are such that the formulation of business strategy is becoming an ongoing process.
Why is this so?
- Dynamic Change: The increase rate of change has meant that any competitive advantage does not last long. This means that being agile in changing things and transforming a business has become a prevalent and strategic capability for renewing businesses which have reached maturity or fallen into decline. This also means that the strategic thinking caps have to be on all the time and the time to sit on your laurels to enjoy the fruits of any business transformation is vanishing fast.
- Uncertainty: The uncertainty brought about first by the pandemic and then the war in Ukraine coupled with the present accelerated technology revolution have resulted in having business plans that are less predictable. This is expected to continue with further waves of technological disruption like AI. This could mean that small businesses need to think out of the box to create larger economies of scale – possibly by partnering with others. In environments with high rates of change, creating economies of scale can potentially help companies manage risk through superior access to information, to maintain operational and financial buffers, and to conduct rapid changes. These capabilities combined help create a new dynamic type of advantage: resilience.
- Ability to Adapt: As outlined, the business environment has become more dynamic and uncertain. This means that the more you are able to compete on different types of strategies the better you are poised in the market. Thus being able to adapt from different strategies like classical strategy (in which firms compete on scale and position), adaptive strategy (they compete on their ability to learn), vision-driven strategy (they compete on imagination, creativity, and innovation), shaping strategy (they compete on their ability to collaborate with partners), or turnaround (they compete on their ability to renew a business) is likely to become a critical capability.
- Be connected to reality: For a great part of the last 50 years, succeeding in business was determined by a relatively small set of variables: customer, product, competitor and investor. The present environment does not allow such a simplified view. Businesses now need to demonstrate purpose, social contribution, trustworthiness, and environmental responsibility. This involves not only matters of intent, measurement, compliance and communication, but also increasingly issues of competitive advantage. A corporate strategy must now create credibility, social contribution, and generate advantage by dealing creatively with new social and ecological constraints, as well as deliver on the traditional variables.
Leading a business without a strategic mindset is likely to run the business into extinction. However, the pace of change means that strategic thinking has literally become on ongoing process as businesses need to respond to changing circumstances at an accelerated pace.