How Strategic Management Has Evolved Over Time: A Comparison of Traditional and Contemporary Approaches

Strategic management is the process of defining and implementing procedures and objectives that set a company apart from its competition. It is a vital skill for any organization that wants to achieve its long-term goals and adapt to the changing business environment. But how has strategic management evolved over time? What are the main differences between traditional and contemporary approaches? And what are the advantages and disadvantages of each? If you want to read this article in Spanish click here .

Traditional Approaches to Strategic Management

Traditional approaches to strategic management are based on a prescriptive model, which means that strategies are developed in advance and then implemented according to a plan. The most common tool for this approach is the SWOT analysis, which identifies the strengths, weaknesses, opportunities, and threats of an organization and its competitors. Based on this analysis, the organization can formulate its vision, mission, objectives, and strategies, and then allocate resources and assign responsibilities accordingly.

The main benefit of traditional approaches is that they provide a clear and systematic direction for the organization, based on a thorough analysis of the internal and external factors. They also help to align the organization’s activities with its goals and ensure consistency and coherence across different levels and units. However, traditional approaches also have some limitations, such as:

• They can be rigid and inflexible, making it difficult to respond to unexpected changes or emerging opportunities in the market.
• They can be time-consuming and costly, requiring a lot of data collection and analysis, and involving multiple stakeholders and processes.
• They can be based on assumptions and predictions that may not be accurate or realistic, leading to poor or outdated decisions.
• They can create a gap between strategy formulation and implementation, resulting in a lack of feedback and evaluation.

Contemporary Approaches to Strategic Management

Contemporary approaches to strategic management are based on a descriptive model, which means that strategies are developed and implemented through experimentation and learning. The most common tool for this approach is the agile methodology, which involves breaking down a project into smaller and iterative cycles, called sprints, and delivering value to customers in a fast and flexible way. Based on this methodology, the organization can define its vision, mission, objectives, and strategies, and then test, evaluate, and improve them continuously.

The main benefit of contemporary approaches is that they allow the organization to be more adaptive and responsive to the dynamic and complex business environment. They also help to foster innovation and creativity, by encouraging collaboration and feedback among different teams and stakeholders. However, contemporary approaches also have some challenges, such as:

• They can be chaotic and unpredictable, making it difficult to control and coordinate the organization’s activities and outcomes.
• They can be risky and uncertain, requiring a lot of trial and error, and involving a lot of changes and adjustments.
• They can be dependent on technology and data, which may not be reliable or available or may pose ethical and security issues.
• They can create a conflict between strategy formulation and implementation, resulting in a lack of clarity and direction.

Success Stories of Strategic Management

To illustrate how strategic management can lead to successful outcomes, let us look at some examples of companies that have applied traditional or contemporary approaches, or a combination of both, to achieve their goals.

Tesla: Tesla is a company that plays the long game, using a traditional approach of setting a clear and ambitious vision, and then executing it through a series of strategic steps. Tesla’s vision is to accelerate the world’s transition to sustainable energy, and its strategy is to create a range of electric vehicles, from luxury cars to mass-market models, as well as solar panels, batteries, and charging stations. Tesla has faced many challenges and risks along the way, such as production delays, quality issues, and financial losses, but it has also achieved remarkable results, such as becoming the most valuable car company in the world and creating a loyal and passionate customer base.

Airbnb: Airbnb is a company that forgot all about scalability, using a contemporary approach of experimenting and learning from its customers, and then adapting its strategy accordingly. Airbnb’s vision is to create a world where anyone can belong anywhere, and its strategy is to offer a platform where people can rent out their spare rooms or homes to travelers, and where travelers can find unique and affordable accommodations. Airbnb started as a simple idea of renting out air mattresses in the founders’ apartments, but it soon grew into a global phenomenon, disrupting the hotel industry and creating a new category of travel. Airbnb has faced many challenges and opportunities along the way, such as regulatory issues, competitive threats, and market expansion, but it has also achieved remarkable results, such as becoming one of the most valuable private companies in the world and creating a community of millions of hosts and guests.

Toyota: Toyota is a company that shows humility can be the best business strategy, using a combination of traditional and contemporary approaches to balance stability and flexibility. Toyota’s vision is to lead the way to the future of mobility, and its strategy is to produce high-quality and reliable vehicles, as well as innovative and sustainable solutions, for a diverse range of customers. Toyota has a strong culture of continuous improvement, based on the principles of the Toyota Production System, which involves setting clear objectives, empowering employees, eliminating waste, and solving problems. Toyota has faced many crises and changes along the way, such as recalls, natural disasters, and technological shifts, but it has also achieved remarkable results, such as becoming one of the largest and most profitable car companies in the world and creating a reputation for excellence and customer satisfaction.

Food for Thought

To help you reflect on the evolution of strategic management and how it applies to your own organization, here are some questions that you can ask yourself:

What is your organization’s vision, mission, objectives, and strategies? How are they aligned with the needs and expectations of your customers, stakeholders, and competitors?

What approach do you use to formulate and implement your strategies? Do you follow a traditional or a contemporary model, or a combination of both? What are the benefits and challenges of your approach?

How do you measure and evaluate the performance and impact of your strategies? Do you use quantitative or qualitative indicators or both? How do you use feedback and learning to improve your strategies?

How do you cope with uncertainty and complexity in the business environment? How do you respond to changes and opportunities in the market? How do you foster innovation and creativity in your organization?

How do you communicate and collaborate with your team and other stakeholders? How do you involve them in the strategic management process? How do you create a culture of shared vision and purpose?

Conclusion

Strategic management is a crucial process for any organization that wants to succeed in the competitive world. However, there is no one-size-fits-all approach to strategic management, as different approaches have different benefits and challenges. Therefore, it is important for organizations to choose the approach that best suits their needs, goals, and context, and to combine the best practices of both traditional and contemporary approaches. By doing so, they can achieve a balance between stability and flexibility, and between planning and action.

If you want to learn more about strategic management, or if you need help choosing the right approach for your strategic management, and someone who guide you through the process of planning, executing, and evaluating your strategies, you should contact today Hi-Performance Coaching, the leading company that offers professional consulting services for businesses of all sizes and industries.

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About the Author

Francisco G. Maga?a is a passionate and dedicated business strategy coach who has helped countless companies and individuals achieve their goals and dreams. He has a wealth of experience and knowledge in Strategic Planning and Management Consulting, and he specializes in Business Model Innovation, Strategic Management, and Organizational Transformation. He believes that every business has the potential to be successful, and he enjoys guiding them through the process of creating and implementing effective and innovative strategies.