Refine Your Business Strategy
Refine Your Business Strategy
Businesses should regularly review the relevance and sustainability of their current business strategies in response to changes in the economy and industry. They should refine and adapt their strategies and practices to stay ahead.
Successful businesses know when and how to improve their strategic advantage. Companies that do so direct their management and innovation efforts more effectively, and gain an advantage over their competitors.
Businesses should be aware of how industry changes might erode their existing competitive advantage. However, changes may also give rise to new opportunities.
The following framework will help businesses identify which form of strategic adaptation they should adopt. It will help companies determine whether they need a change in magnitude, activity or direction:
Magnitude: refers to the need to strengthen the implementation of the current strategy
Activity: refers to the need to adopt new ways of pursuing the current strategy
Direction: refers to the need to take a different strategy
The framework uses two perspectives to determine what form of change (magnitude, activity or direction) is needed in a given context:
1. Fit to purpose
Evaluate the market and assess how closely your product or service fits the needs of your customers. You should consider differentiation from the perspective of “Who are you different for?”
2. Relative advantage
You should assess your capabilities in relation to other available alternatives including direct competitors. You should also consider how your product or service would confer a distinctive advantage to your customers. Consider differentiation from the perspective of “How are your offerings valuably different from others?”
Strategy as a hypothesis
Strategy and its execution are integrated activities. Business failures occur when initial strategies are not revisited and updated based on new information provided by real experience.
Here, strategy is conceived as a hypothesis rather than a plan. It starts with the assessment and analysis of a situation; and must be tested through action using data gleaned from customers. This will provide vital inputs to dynamic strategy formulation that involves ongoing cycles of testing and adjusting using data that can only be obtained through execution. The process entails actively seeking anomalies that challenge assumptions underpinning a company’s current strategy.
Strategy for emerging markets
The forces of competition in new markets are in constant flux. This poses challenges for businesses when formulating strategies and business models. In such uncertainty, conventional strategic approaches may not apply. The questions that define a company’s strategy, such as who the customer is, may not be easily addressed.
Entrepreneurs can use the strategic framework below when exploring and testing new markets:
1. When starting out, borrow ideas and do not focus on differentiation
Observe what others in the market are doing and lean on their ideas. Borrowing ideas helps companies to develop a working prototype for hands-on learning quickly. The primary competitive focus initially should be on an existing substitute—what the customer currently uses.
2. Test relentlessly and then commit
In a new market, successful ventures are those that experiment relentlessly, learn from failures and feedback, and then commit to a single template for creating and capturing value.
3. Pause, watch and wait
A new market is fraught with surprises such as unforeseen customers and uses. A successful venture will intentionally leave its business model open-ended and wait until the market settles before optimising it. A partially developed business model allows entrepreneurs’ plans to evolve in tandem with a changing market.
Edmondson, Amy. C., and Verdin, Paul. J. “Your Strategy Should Be a Hypothesis You Constantly Adjust”. Posted November 9, 2017. https://hbr.org/2017/11/your-strategy-should-be-a-hypothesis-you-constantly-adjust
Hunsaker, Tom, and Knowles, Jonathan. “The Essence of Strategy is Now How to Change”. Posted December 17, 2020. https://sloanreview.mit.edu/article/the-essence-of-strategy-is-now-how-to-change/
McDonald, Rory, and Eisenhardt, Kathleen, M. “The New-Market Conundrum: In Emerging Industries the Usual Rules of Strategy Don’t Apply”. Harvard Business Review. Accessed October 1, 2021. https://hbr.org/2020/05/the-new-market-conundrum