Has Strategy Changed?

What shapes strategy today and how has it changed?

While many executives were focused on the implications of the Internet, a more powerful force was at work, contends Stanford University professor Kathleen M. Eisenhardt: globalization. Globalization has quietly transformed the economic playing field.

The traditional strategic paradigms (positioning, core competence and the like) are not dead, but they are less germane than they were. Schumpeter’s “creative destruction” and similar economic views are coming into their own. The new economics is more entrepreneurial. It centers on disequilibrium, fleeting opportunities to capture competitive advantage, and the creation and destruction of wealth.

Successful strategy in today’s world is simple; it uses a few clear guidelines and allows for flexibility. It is supported by organizational design; it is not handed down from on high. And timing is everything.

Eisenhardt cites Colgate’s use of simplicity in a key strategic process, global product management. Colgate has found success through allowing product managers considerable freedom within a couple of simple guidelines (Maintain the Brand; Keep Relative Product Positioning Stable). That thinking also has been a boon to Ispat International, which uses uncomplicated rules for choosing and integrating acquisitions and has thus become one of the world’s fastest-growing steel companies.

In contrast, Intel and SAP stumbled with their joint venture for e-commerce services, Pandesic. Although the companies had ample resources and a clear vision of their desired strategic position, their plan’s complexity kept them from adjusting as the market unfolded.

Eisenhardt explains how managers can refocus their strategy on key processes and simple rules, mapping their individual businesses to market opportunities and employing an evolutionary form of timing to move from one competitive advantage to the next.