Organizations that develop dynamic strategies are those that identify emerging opportunities quickly, and then bring together the people and resources necessary to seize the opportunities. Change is continuous and inevitable as businesses consistently review and move on to new opportunities when competition drives down profits.
Firms that adopt dynamic strategies are much more likely to thrive. Think Apple. Think Infosys. Think General Electric. Think Johnson & Johnson.
So how do firms create dynamic strategies for dynamic markets?
A High Aspiration Vision
With a dynamic strategy, it is important for businesses to adopt a high aspiration vision - one that is clear and focused in bringing results today, not tomorrow. This vision - and its underlying objectives - needs to be articulated throughout the organization so that there is a deep commitment to the current direction and activities. At the same time, while working toward achieving this current vision, the organization must also look towards to the next opportunity and ways to shape the next vision. Naturally, people throughout such organizations must be both committed and willing to make changes.
Supple Business Definitions
To make themselves more efficient and effective, dynamic strategy organizations use supple business definitions. This requires focused, yet flexible business units within the organization - units that are clear about their current role and function within an organization, yet flexible enough to adapt to the changes that make it competitive in the market.
With supple definitions, effective communication between and across business units necessarily becomes key to the organization's success. Much of this communication is channeled by active career paths, in which people grow and move as their units evolve.
One of the ways that these firms create supple business definitions is to outsource selectively, while actively managing their out-sourcing partnerships. By managing sourcing channels as alliances, organizations can both increase their efficiency and decrease costs. In turn, with ongoing changes in the dynamic business strategy, the organization is able to change and adapt quickly by activating the necessary sourcing channels.
At the same time, out-sourcing does not substitute for internal expertise. Indeed a dynamic strategy business must retain and build sufficient internal expertise to be able to identify strong suppliers and build high performance relationships with them.
Low-Risk Experimentation
Dynamic strategy firms undertake constant low-risk experimentation to allow them to identify emerging opportunities. They do so by building on existing skills internally, engaging in focused expansion with strategic partners, and through exploratory acquisitions. Through these experiments, firms will be able to better judge their next move in response to the equally dynamic environment.
Create open markets
Successful organizations in a dynamic market create open markets inside and outside the firm to use capital, ideas, and talented people in their best applications, rather than simply optimizing their use in their current locations. Forward-looking firms plan their capital budgets and their human resource strategies based on forecasts of opportunities, rather than on trajectories of past practice.
To generate ideas and talent, dynamic strategists tap on their alliance partners and acquisition targets, while moving people who are successful in their current positions to new tasks. They keep their firms dynamic by rewarding people who share ideas, rather than hoard knowledge, thereby creating a long-run corporate value rather than isolated pockets of performance.
Seek resources
Rather than be contented with using their existing resources, firms with a dynamic business strategy are on a constant lookout for new resources that they need to take advantage of opportunities.
In the words of Gerard Kleisterlee, CEO of Philips, "We used to start by identifying our core competences and then looking for market opportunities. Now we ask what is required to capture an opportunity and then either try to get those skills via alliances [or acquisitions] or develop them internally." (The Economist, 9 February 2002).
Dynamic strategy firms constantly scan emerging markets and are diligently aware of emerging market trends and of opportunities to create new market trends. They seek people who are excited about adaptation and growth, while encouraging existing personnel to develop opportunities.
Making it real?
Against a real world backdrop where deadlines are tight and people have conflicts, it is difficult to lead an organization that constantly reviews and recreates its vision while being agile enough to take advantage of emerging opportunities. But unless your firm has the luxury of having sustainable market power in a protected competitive environment, failing to create a dynamic strategy will render you obsolete in the near future.
Visiting Professor Will Mitchell is a Lim Kim San Distinguished Visitor at NUS Business School and J. Rex Fuqua Professor of International Management, at Duke University's Fuqua School of Business.
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"Unless your firm has the luxury of having sustainable market power in a protected competitive environment, failing to create a dynamic strategy will render you obsolete in the near future."
~ Professor Will Mitchell, Lim Kim San Distinguished Visitor at NUS Business School |