Better a consistent and mediocre strategy THAN poorly executed brilliant ad hoc strategies

Introduction

 This post aims to address the dilemma confronted by most corporate strategy professionals across the business world which can be stated as: “Better a consistently applied mediocre strategy, than a series of ad hoc brilliant strategies”. This statement basically points towards the decision taken by the company to be proactive in responding to the ever changing macro environmental landscape around the company or stick to what it does best and follow its conviction in its core competencies. 

 This is tough choice given that there are pitfalls in both the paths and success is not only unsure but chances of failure being high. This is because decision to stick to one’s core competencies or to change according to the changing situations depends on so many other variables like kind of industry, size of industry, number of players in the industry, capital intensiveness and expected time for returns. 

The Duck and the Lemonade Stand

 The analogy drawn from duck and the lemonade stand keeps the question open for the business leaders. The story depicts a lemonade seller who is regularly visited by a duck looking for grapes but since lemonade seller only sells lemonade and has no intention to change his offerings based on the demand of one odd visitor, he ignores his demand for grapes. But the duck keeps on visiting him asking for grapes and then eventually, the lemonade seller takes him to a store where he buys him the grapes. In the end, duck seems to dislike the grapes and demands lemonade instead. 

 This tale is a hilarious account of the demands and wants of the consumers. Apple’s former CEO Steve Jobs used to tell his team of innovators that consumers do not know what they want and corporations can decide and drive their wishes and wants. If companies innovate and sell the idea effectively, that becomes the demand and then eventually, the need of the consumers. Most consumers do not have the insight or the exposure to visualise or conceptualise what exactly is their need and which product will be able to fulfil that need. Only businesses that deal in the innovative products can actually identify that need and sometimes even create it, like how Apple did with its iPod and iPhone. 

 This school of thought was even supported by Henry Ford, founder of Ford Motors. He has an interesting saying to sum up the consumer insights which was “If I ask my consumer what he wants, he will say: A faster horse”. This shows the limitations of an average consumer’s mind and how innovators can actually be ahead of times and need not be mere responders to the changing environment. This means that they predict the changes in the dynamic forces of environment and proactively prepare for them rather than strategizing depending upon what consumers might come up with today. But, this is not an easy approach to follow and thus majority of competitors in any given industry cannot be ahead of consumers. This means that either they stick to what they are doing or closely monitor what others are doing and respond to it. 

Theoretical concepts

Abell’s Framework for Defining the Business: This concept makes the company to gauge its potential with the perspective of three parameters:

 1.Target customer: The target group needs to be defined on the basis of demographic, psychographic, lifestyle and geographic variables. This gives an idea about how to approach the customer and how often should the strategy be changed to fulfil their renewed needs.

 2.Customer Needs: What exactly does the customer want in the product? If the need is customised and innovative product then company cannot follow consistent strategies. 

 3.Distinctive competencies: Among the distinctive capabilities, innovative technology and vertical integration can become threshold capabilities as more and more companies are trying to imitate these two qualities over the period of time. 

External Analysis

 External analysis of the company comprises of opportunities and threats which are governed by various changes in macro and micro environment resulting from varied variables from economic, social, political, technological, legal and environmental fields. These variables do not act in tandem and hence it becomes very difficult to actually predict or keep up with everything going on around in the industry. Hence, it is imperative to keep track of external environment but this also varies depending upon the kind of industry the company operates in.

Internal Analysis: Internal analysis of the company comprises of strengths and weaknesses and most companies focus on their strengths and limit the weaknesses to face the external environment. The internal resources and capabilities can be threshold or distinctive. Threshold capabilities are those that are needed by the company in order to meet the most basic requirements of the competitive environment in order to sustain long term competition. These capabilities are known as qualifiers. Distinctive capabilities of the company are those which cannot be imitated by the competitors. 

Five Forces MODEL: According to Michael E Porter's five forces of competitive position model, following are the five factors which affect the competition landscape of a company.

1.Existing competitive rivalry: Because of increased rivalry, the overall growth of the industry gets hampered and the profits get divided. 

2.Threat of new market entrants: The threat of entry puts a restriction on the pro?tability of an industry. When the threat is more, existing players must squeeze their prices or boost investment to deter new competitors. 

3.Bargaining power of buyers: A customer group has negotiating leverage if: There are few buyers, or each one purchases in volumes that are large relative to the size of a single vendor. 

4.Power of suppliers: Suppliers in the industry can capture the control if the prices are lower, limited quality service providers, and differentiated products. 

5. Threat of substitute products (including technology change): A substitute performs the same function and fulfils similar need of customers by a different means. 

Blue Ocean Strategy 

The blue ocean strategy is followed by organisations that thrive on innovations rather than fierce competitive rivalry. According to blue ocean strategy, a firm can make sure that it does not react to its competitors and focus on the products and consumers. This ensures that competitors do not matter but only customers matter. This strategy leads to a blue ocean as opposed to red ocean strategy wherein the firm focussed on competitive forces and rivalry in order to attain market share. Red Ocean theory is followed by the companies when they feel that competitors are fierce and it is almost impossible to ignore them (Mintzberg, 2008).

Game Theory 

The Decision Makers: This pertains to players in the competitive environment. The steps of the game depend on how players will react or formulate their own steps. Most game steps are predictive which are based on the forecasting of the steps that would be taken by the other players. When a decision maker understands the difference between what he can estimate and what he cannot, then there is a less chance of over predicting or under predicting the future.

The Feasible Actions: These are the various strategies which can be followed by the decision makers. These strategies can be differentiation, cost leadership or niche targeting. All information and data that can be extracted relating to the factors in consideration is taken for the planning of the future. The decision to follow a certain strategy depends on the company’s value proposition and the mission and vision for long term (Porter, 1985).

(1) The Objectives: The objectives to be attained can be classified as increased market share, consumer loyalty or increased value of sales. These three objectives can be followed with respect to what competitors are following and monitoring their objectives. Finally, the firm must strain its focus on objectives which are relevant to it. The relevant objectives generated are used for analysis, generating new ideas and testing different strategies (Thomas, 2001).

Scenario Planning

Scenario planning pertains to chalking out a framework for different scenarios by tweaking the variable that causes the market environment to change. This can be done by using software meant for scenario planning like Microsoft Excel Solver or Goal Seek. These provide near to accurate analysis of the impact of a certain mix of variable and how that particular scenario will be impacting the objectives like sales, profits, revenue, employee turnover or even ROI (Wheelen2012).

 Also, if the industry is a volatile one i.e. prone to change frequently then even if there is no change anticipated, scenario planning can help cater to the unanticipated changes that might or might not occur in the future. This concept as an analytic tool is also appreciative when under an uncertain future, the suggestions of different leaders of a firm vary from each other and yet each holds some credibility or relevance. In such case, scenario planning will help each of the suggestion to be considered as a scenario or an amalgam of suggestions as one scenario and then scenario can be considered while future decision making (Wheelen2012).

Application

 Following a consistent and mediocre strategy with a well-executed plan is a risk-averse strategy to follow but it surely depends on number of other factors. In industries which depend on efficiency, security and regulations like banking, manufacturing, healthcare, it is imperative for the organisation to follow a strategy and execute it with utmost honesty. The resources of the company should be selected such that they identify with the core competencies and know their job very well. This is important because if the strategy is consistent with no variance with respect to the changing variables, only the best and top will survive. This means providing utmost value for money and customer delight. This also means reduced risk because long term planning can be done and resource allocation is not disrupted time and again. The drawbacks of this strategy are that it puts a lot of pressure on the company to perform and to be always on top. This also means that any small and innovative player can disrupt its space and make in obsolete within weeks. 

 Planning a series of ad hoc strategies in response to the dynamic environment can have its own ups and down. The cost of changing strategies and time lost in realising the returns can take a toll on company’s resources and even put it to a precipitous situation of extinction. Also, it is not a sensible decision to change the strategy depending upon the fickle nature of a particular set of consumers. Most of the changes take a long time even before their effect can be realised and thus it becomes difficult to decide whether they should be carried on or abandoned. 

 Designing ad-hoc strategies are a good choice for industries in which the technological and economic changes are faster and dynamic, for example telecommunications, fashion, entertainment and technology products. These industries cannot rely on one consistent strategy and they have to keep on changing their pricing, product line as well as core offerings around which they are built. This makes sure that they never lag behind and thus keep on experimenting without emphasizing much on the success or failure of the approach. This gives them an exposure and occasional first mover advantage to gather enough positive publicity for few years before they come up with another breakthrough product line. But, again execution is much tougher because of paucity of time and resources to be invested on regular basis and thus there is a chance that most strategic ideas are half baked and not executed properly putting pressure on capital and human resources. 

Illustrations

 Starbucks follows a consistent corporate strategy of focusing on core products along with enhancing its portfolio by investing in newer locations and offering new products according to the local taste without losing its core competencies like quality, quick service and unmatched ambience. Each of the Starbucks shop is designed to give excellent work environment to its staff which makes them satisfied with their job and thus the good vibes get brushed on the customers as well. Starbucks offers local variants according to the place and people but always keeps its core products intact with high brand recognition (Stanley, 2002).

 Walt Disney follows ad hoc strategies of marketing and communications in response to the changes in the entertainment world because the industry in which it operates is dynamic and the preferences changes very fast. The company even changes its product line every year to better suit its consumers changing taste. The product of Walt Disney Company comprises of a broad spectrum that falls into anything related to entertainment. The company follows a core principle of making sure that its products and service features are unique as well as well understood by its core customers who are children and young adults. It focuses on family products that can experienced together and thus markets them along with the appropriate slogans and merchandise.

 Apple follows a mix of consistent strategy with ad hoc strategies with all of them executed to perfection. The company can be treated as an exception in ways it has been able to define the world of technology and the needs of consumer. Its competitors take cues from its product line and define themselves around them. Apples’ strategy for innovation has transformed how world thinks about technology. Starting from iTunes it has been a long journey of aesthetics combining with technology. Moreover it developed into Apps store. Apple also showed the way for extensive outsourcing to the competitors that there is no need to build or invent but companies can even buy the parts and assemble rather than making. 

 Zara is fashion retailer that operates in a highly dynamic world of fashion where the taste and preferences of the consumer’s changes faster than what the minds of the designers can imagine on real time basis. The world of fashion is defined by the mercurial and ever changing trends which are hard to conceptualize and invest into for most of the apparel brands. Zara has understood this fact very clearly and thus the company has an exceptional strategy to respond to this problem. The company has vertically integrated its operations to the most possible extent and thus it can conceptualize, design, manufacture and distribute the new products all across its locations in a record low time of just two weeks which is unmatched by any of its competitors. This strategy has however exposed the company to the rising expectations and the raising the bar in terms of the fashion trends that are to be presented by the company.

 The example of companies that could not understand the changing forces around them before they became so evident that the failure was imminent are: Kodak, Nokia, Barnes and Nobel, Netflix, Blockbuster and even Sony. These companies operated in a dynamic world of entertainment, technology and communications and thus it was imperative for them to make sure that they predicted what consumers would need next or at least what their competitors were coming up with. 

 The companies that could not change the way they did business before competitors started eating into their market share were mostly number one player in their domain. For example: Barnes and Nobles was among the major players in the book selling business and enjoyed unchallenged growth throughout 1990s. However with the radical change in the technology of how books are sold and read, the company now faces a huge challenge to align itself along with the rapidly changing forces in these categories (Striphas, 2009).

Conclusion

 Most companies define themselves in the marketplace full of competitors depending upon their positioning and core competencies but these keep of changing depending upon how their micro and macro environmental forces are changing. A slight tweaking in the existing positioning and strategic choice is what keeps the companies stable and viable in log run along with making a clear statement to their consumers. Thus, any small or large business that aims to garner maximum amount of profits need to balance these variables with its outlook for the future. Thus a well-executed strategy that is consistent favours efficiency and regulations while ad hoc strategies favour innovation, creativity and dynamism.

References

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