The Strategy Palette -- OVERVIEW

Boston Consulting Group FRAMEWORK

Five Choices for STRATEGY

# Domain Feature
1 Classical- can predict, cannot change Be BIG
2 Adaptive- cannot predict, cannot change Be FAST
3 Visionary- can predict, can change Be FIRST
4 Shaping-cannot predict, can change Be an ORCHESTRATOR
5 Renewal- drastic action needed to continue Be VIABLE & SUSTAIN

Boston Consulting Group – Please review all inks as part of your pre-course reading
http://media-publications.bcg.com/pdf/Your-Strategy-Needs-a-Strategy-chapter-01.pdf
Articles
https://www.bcgperspectives.com/yourstrategyneedsastrategy
http://www.economist.com/news/business/21652318-choosing-strategy-lot-more-complex-
companies-it-used-be-palette-plans
Video
https://www.youtube.com/watch?v=zwSq0nf5TtM
Five approaches to using a strategy palette
HARVEY SCHACHTER
The Globe and Mail on August 09, 2015
http://www.theglobeandmail.com/report-on-business/careers/management/five-approaches-to-using-a-strategy-
palette/article25878353/

Setting strategy is an art. Perhaps you could use a palette. Three management experts from Boston
Consulting Group have developed one, intended to show the various ways you can approach strategy in
this complicated, turbulent world. “It’s not that we lack powerful ways to approach strategy; it’s that we
lack a robust way to select the right one for the right circumstances,” Martin Reeves, Knut Haanaes, and
Janmejaya Sinha write in Your Strategy Needs a Strategy.

Since strategy involves problem-solving, the best approach depends on the specific problem at hand.
They zeroed in on three dimensions by which business environments can differ: Predictability (whether
you can forecast what’s ahead), malleability (whether you can, alone or in collaboration with others,
shape it), and harshness (whether you can survive it).

The spread between companies in the intensity of those three dimensions has increased dramatically
recently, requiring far more care in choosing how to approach strategy than when the discipline was
first developed as a concept in the late 1940s and early 1950s. “There are incredibly more conditions.
There is no single approach that can meet all these conditions,” Mr. Reeves, director of BCG research
arm the Bruce Henderson Institute, said in an interview. Considering the first two elements,
predictability and malleability, they came up with a matrix that revealed five distinct approaches:

1. Classical-- I can predict it but I can’t change it

This is the approach historically taught in business schools, where planners meet to figure out the
important elements of the environment and how they can best position themselves within it, confident
major disruption is unlikely. He points to the confectionery industry as an example of where this
approach is still viable. The method’s steps include analyzing, planning, and executing. The overriding
imperative: Be big.

2. Adaptive--I can’t predict it and I can’t change it

A lot of companies feel they are caught in this Twilight Zone of unpredictability with any advantage
short-lived and not controllable. At best, you can gain an edge repeatedly over competitors that will only
come through constant experimentation. The semiconductor and textile industries are caught in this
drama. Companies need to vary their approach, select the most successful paths, and scale up those
opportunities. In short, Mr. Reeves says, vary, select, and amplify. The overriding imperative: Be fast.

3. Visionary -- I can predict it and I can change it

Leaders in this environment – Apple’s Steve Jobs was a prime example – believe that they can reliably
create or recreate an environment largely by themselves. They are usually the first to introduce a
revolutionary new product or business model. Entrepreneurs have always done this but big companies
are now getting in on the act. He says the success algorithm is envision, realize the possibility, and
persist in scaling up the opportunity. The overriding imperative: Be first.

4. Shaping -- I can’t predict it but I can change it

When a company can write or rewrite the rules of an industry at a nascent stage of its evolution, this
strategic approach is recommended. It can apply in highly fragmented, young, dynamic industries,
freshly disrupted industries, and emerging markets. Shaping is often done with others, an ecosystem
collaborating, as with software apps or Amazon’s online platform. The shaper orchestrates the effort
following a three-pronged approach: Influence, co-evolve, and maintain. The overriding imperative: Be
the orchestrator.

In a harsh environment, however, a company may need to turn itself around, restoring vitality and
competitiveness. That leads to a fifth approach they call:
5. Renewal-- My resources are severely constrained
You need to step back and transform the organization, acting decisively, knowing that the odds of a
turnaround succeeding are probably only 25 per cent. Often cost-cutting will be an immediate goal. But
after balance is restored, you must shift your approach to one of the other four elements on the palette.
The overriding imperative: Be viable. A painter wouldn’t succeed with one colour.

And you probably won’t succeed with just one strategy on your palette. Different arms of your
organization are probably competing in different environments, and you must select accordingly.
It’s hard for companies to embrace contradictory strategies. They might, for example, be pushing cost
restraint. But a new business unit within the company might require deliberate inefficiency in order to
test the market and find its way. This is not a dilettantish idea, despite the artistic metaphor. He says
that statistics show that 32 per cent of companies will be gone in five years’ time, dead or swallowed by
another organization. In such stark conditions, some argue that strategy is dead. But you need strategy –
and that strategy needs a properly picked approach.

“Strategy is not dead. It’s more important than ever. What you learned in business school – classical
strategy – is not a panacea. It works in some situations and not in others,” he warns.

Used with permission for LDRS 501: Strategic Leadership

What kind of strategic thinker are you?

Harvey Schachter
The Globe and Mail June 30, 2015
http://www.theglobeandmail.com/report-on-business/careers/management/what-kind-of-
strategic-thinker-are-you/article25189762/

Based on A.Olson and K.Simerson (2015)

Leading with Strategic Thinking Wiley Publishers
Much has been written about strategic planning. Much confusion persists. Perhaps that is
inevitable given how complicated strategic thinking is. From an academic perspective, strategic
thinking is at the intersection of cognitive psychology, systems thinking, and game theory,
according to consultants Aaron Olson and Keith Simerson. If that isn’t daunting enough, they
note that strategic leaders must be adept at integrating strategic thinking and leadership. They
must not only form strategy but also execute it.

We tend to think of strategic leaders as gathering a team together at a retreat centre, prodding
them into adopting a new approach, and then returning to the office to issue a detailed set of
instructions for turning that vision into reality. But the authors of Leading with Strategic Thinking
suggest there are actually four types of such leaders, depending on whether strategy formation
is planned or emergent, unfolding and evolving over time, and whether the execution is directed
from the top or collaborative. While we may each have an instinctive preference, ideally the
approach should fit the situation. Here they are:

1. Visionary
These are the leaders we most associate with brilliant strategy – charismatic and colourful
figures like Steve Jobs and Walt Disney, who drive strategy through personal insight. They
combine emergent strategy formation – leaping on ideas that come to them rather than fixating
on elaborate strategic planning sessions – with highly directive execution. Their strengths are
that they tend to be insightful and inspirational but their weaknesses are impatience and a
tendency to be difficult to work with.

“We find that the primary focus of visionary leaders is their own world view. By this we mean
that their main (and sometimes only) priority is their vision, which serves as the centerpiece and
the guiding principle for all their energy, perceptions, priorities, and actions. Often that vision is
intertwined or even synonymous with a view of the world and how it does – or should –
operate,” they write. When it comes to execution, these leaders go beyond vision to
experimenting with ways to implement, while motivating other stakeholders to support their
world view.

2. Directive
Strategy formation is planned and execution is directive as leaders use structure and process to
attain their goals. General Electric has epitomized this with a top-down approach, and you also
find it in the military and on sports teams. Directive leaders tend to be confident and decisive but
unfortunately also controlling and removed.

“Directive leaders are highly intentional in every aspect of how they perform their role,” the
authors note. Such leaders set direction, establish roles and processes, motivate others,
monitor performance, and intervene and adjust. The authors stress directive leaders don’t just
tell people what to do, as the title might imply, but actually spend as much time encouraging
as they do telling.

3. Incubating
These leaders empower others to achieve strategic objectives, mixing emergent strategy
formation with participative execution. 3M is a model, allowing staff 15 per cent of time to
explore ideas of their own choosing and then letting strategy emerge from the best ideas. The
ideal incubating leaders are called perceptive and encouraging but weaker ones are seen as
providing poor direction. While both visionary and incubating leaders seek to capitalize on new
ideas and disruptive change, visionary leaders make themselves and their own world view the
centre of the creative process, while incubating leaders are to some extent outsiders looking in.

“They focus less on developing their own vision and more as a resource to others,” they write.
These leaders build networks, forming relationships in their area of expertise and beyond,
assessing opportunities and diversifying their bets. For execution, they deploy resources
where needed and create supportive mechanisms for staff.

4. Collaborative
These leaders rely on co-creation to achieve strategic ends, melding planned strategy
formation with participative execution. An example is Nelson Mandela, who established the
Truth and Reconciliation Commission in post-apartheid South Africa and then encouraged
citizens to play a part in its deliberations. The best are considered engaging and trustworthy
although they can seem indecisive as they keep seeking out the opinions of more people. “In
both strategy formation and strategy execution, these collaborative leaders distinguish
themselves through a focus on participation,” the authors note. All strategic thinkers need to
be competent at systems thinking, decision making, and managing risk. But in addition, each
type requires different skills.

The authors explore these skills and other factors that can lead to success or failure at strategic
planning. Their model and explanation of the four types is intriguing but unfortunately their
storytelling is weak and writing a little stilted, so the reading is not as appealing as the concepts.

Used with permission for LDRS 501: Strategic Leadership.

August 31, 2015.