Hentry Mintzberg, the strategy guru, in his famous compilation on Strategy, Strategy Safari — A Guided Tour through the wilds of Strategic Management , had given a historical run down of evolution of Strategy Management as a field of study and the various different schools and perspectives.
In addition to an overview of existing meta-theories of strategy, including the five Ps (Plan, Ploy, Pattern, Perspective, and Position), he identifies 10 separate schools of strategy. The basic thrust of the book is that strategy is not just any one of these 10 schools alone; and that each of these schools gives a glimpse of what strategy is about — the proverbial ‘Elephant and Seven Blind Men’.
Here, my attempt is to look at strategy management as a dynamic, on-going, continuous quest on the part of the management to find a perfect ‘Fit’ — external, internal and over time.
External Fit
You start a business with a customer and his/her need in mind. The attempt is to find a competitive way of fulfilling that need. The customer is not internal to the organisation but forms an important aspect of the environment. The customer also lives in the context of a socio-economic, cultural and technological environment. Any attempt to fulfil a need of the customer hence must factor in the environmental aspects in which they live.
The ‘O’ and ‘T’ of the famous SWOT framework refers to the external environment – Opportunities and Threats. There are other frameworks such as PEST and the famous ‘Industry Structure Analysis’ (also referred to as Five Force Analysis) of Prof Michael Porter.
The objective here is to find a good match (fit) between what the customer and market needs with the capabilities of the organisation to result in a competitive value proposition.
While there have been many different perspectives and approaches in terms of ‘Inside-Out vs. Outside-In’, ‘Positioning vs. Resource-Based View (RBV)’, Core Competency and so on, the enduring debates are mostly around the ‘positioning’ vs. ‘ RBV’. The jury is still out.
Irrespective of which ever perspective one takes, the philosophy of external fit is that, success happens when your value offering fits (in terms of features, costs, value propositions, competitive offerings etc.) with the needs that are thrown up and influenced by environment.
Internal Fit
While external fit is a critical starting point, the job is not fully done. Running an organisation is, in a sense, like conducting a Western music orchestra. There are many players on the stage, sometimes more than 100, each with different skills, competency, focus and specialisation in terms of instruments. What happens when one of the 100 is not on the same note (forget being on the same line or page)? It sounds totally out of tune, correct? You hear noise and not music.
This becomes harder in the world of business organisations.
Thousands of decisions are taken in an organisation, and not just by one man or top management alone — it is taken by everyone in the hierarchy. So how do we ensure that everyone is shooting at the same target? How do we bring in that coherence? How do you align what marketing does with what R&D is pitching for?
The real challenge of getting an excellently conceived strategy, implemented, depends on getting this internal ‘fit’ appropriate. This not only requires alignment at senior functional management levels, but across hierarchy, right from top floor to shop floor. It takes a lot of communication and reinforcement; it needs tweaking of the systems and processes including incentive systems to be in sync consistently. Easier said than done. And it is certainly not a one-time task.
Dynamic Fit
Many of us celebrated the Indian cricket team achieving the numero uno status in test ranking among the cricket playing nations a few years back (feels like ages!). We also saw how temporary it was; how we were quickly dethroned and never made it again. Currently, we are floundering at the bottom. The corporate world is replete with similar and worse fates.
The first Fortune 500 list was published in 1955. Many of the names from that list are unfamiliar to most people today. Not only are they not found in the fortune list, most of them ‘Do Not Exist’ anymore.
Dramatic shifts
‘Nothing succeeds like success’, goes the saying. ‘Success comes with seeds of destruction built within’ says another. The unfortunate fact is that the hard earned and achieved ‘fits’ (both external and internal — a no mean achievement in itself) is not a source of sustained competitive advantage. Things change: the environment changes, customers and preferences undergo dramatic shifts, competition intensifies and technological upheavals alter business landscapes. What used to work doesn’t work anymore. People in organisations find change difficult to cope with.
Like the frog-in-the-hot-water story, successful organisations find themselves at the crossroads. Their strengths are now liabilities. Their core competency is not sought after anymore and is eroded. The basic rules of the game have changed — speed over size; flexibility over solidity; nimble-footedness over strength; entrepreneurial spirit over certainty etc. These changes are an inevitable part of natural evolution. And as these changes are gradual, the organisation (frog) fails to recognise the same and perishes.
Whether it is the ‘Railroads’ of Theodore Levitt in his famous Harvard Business Review article ‘Marketing Myopia’ or GE’s famous twin ‘Westinghouse’ that doesn’t exist any more, the fundamental reason has been the lack of ‘Dynamic Fit’.
GE, one of the few companies that not only survived till this day but has remained always among the top 10 among the Fortune 500 companies, is a classic example of finding this ‘Dynamic Fit’. It requires reinventing the corporation every once in a while at the same time maintaining the basic DNA intact.
To sum-up, a successful quest of these ‘fits’ leads to the enduring success of business organisations.