Rotman Management

The Strategy Palette: Five Approaches to Strategy for a Complex World

IN OUR WORK WITH CLIENTS IN RECENT YEARS, my colleagues and I have noted considerable confusion and stress around the role of strategy and the effectiveness of the annual planning process. So much so that we decided to take a serious look at ‘the state of strategy’ in an ever-changing world.

When we looked at the literature, we found several views. One was that ‘strategy has been eclipsed by technology’; another was that ‘the possibility of even having a strategic plan is killed by the velocity of the modern world’. Many practitioners were also asserting that what makes the difference between a mediocre company and a great one is not strategy at all, but execution.

We began to wonder: Is strategy still relevant? We set out to analyze 135,000 U.S. companies over a 65-year period, asking, What is the difference between successful and unsuccessful companies?

A clear pattern emerged: When we compared the top quartile of all companies to the bottom quartile, we found that whatever constitutes ‘doing things in a differentiated way’ is becoming more important — not less. There is actually increasing inequality between the highest-performing companies and the lowest-performing companies in each industry, and this tells us that strategy is definitely still important.

Of course, much has changed since the early days of strategy. Today’s strategists face factors like globalization, changes in geopolitics, technology, Millennial values, and connectivity combined with cheap computing power — to name just a few. However, it became clear that one of the most important characteristics of modern business is that the diversity of strategic environments has grown substantially.

We realized that we were asking the wrong question. The question was not, ‘Which approach to strategy approach to strategy that depends on three characteristics of the business environment they face: predictability, malleability and harshness. Companies facing high unpredictability, for example, will require a different approach to strategy than the one employed by traditional players facing a more stable environment.

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