In a fast-evolving competitive environment, businesses can be tempted to routinely update their strategy. This is a mistake. Strategy setting should occur once a decade. Despite management folklore, they’re not “constantly reinventing themselves.” Yes, they’ve been vigilant. True, there’s plenty of work to occupy managers and advisors taking stock, and calibrating new initiatives, as opportunities arise. But they tend to avoid frequent changes in direction. Instead, they set a long-term horizon — usually a decade or more — to pursue growth while staying true to the kind of business they set out to be.
How often should you reset corporate strategy? Some say annually. Others say dynamic times call for more frequent, even radical, changes. The right answer is that results of consequence require a long-term mindset; setting fresh corporate strategy should be a rare event.
First, let’s define what we mean by corporate strategy. If a mission describes an organization’s purpose, and a vision paints a picture of how we see the organization in the future, then a strategy is a plan of action to fulfill the mission and evolve into the vision. Business units, teams and even individuals can all develop and prosecute strategies. But corporate strategy tends to be much more involved given the complexity of marshaling an entire enterprise through unknowns, future shocks and competitive responses. It typically requires orchestrating an extensive system of programs and often takes many steps — and many years — to fully enact.
So, if you find yourself revisiting your corporate strategy frequently, you should ask yourself if you ever really had one in the first place. Participating in a growing market, replicating a competitive offering or riding out a trend can all pay dividends for a while and often masquerade as strategies. But these are opportunistic placeholders unless accompanied by deliberate actions aimed at achieving a privileged market position. Real corporate strategy requires game theory. It also requires brainstorming a wide range of outcomes. And it certainly requires a great deal of rigor around how you’ll respond to, and build upon, varying scenarios.
How can you be sure that your corporate strategy has that right level of rigor, so you won’t fall foul to chasing trends? To start, you need to think through your plan, and then subsequently manage, across three separate domains: your core, your edge, and your options.
- Your core is what puts you in the game. For mature businesses, ruthless efficiency and careful customer centricity are table stakes to show up and play again tomorrow.
- Your edge is where you leverage your assets and capabilities to make yourself some real money. Edges are where planned adaptation happens by reframing the customer relationship or exploiting byproducts of your core.
- Your options are flexibilities you design with the future in mind. These can open doors to new opportunities when the world shifts (with or without your encouragement). Good strategy includes optionality explicitly in its design. Good management involves using it.
Take Alphabet. The company’s core is its search business. Its edge is in cloud services. And its options include making use of the data they’re collecting, perhaps in some AI-based business model that doesn’t even exist today. As the world around Alphabet has changed, it has layered on myriad initiatives (YouTube, Google Cloud, Waymo, etc.). But the company’s underlying strategy — fostering a resilient self-building system that creates and monetizes deep statistical insight on human interests and choices — remains constant.
Johnson & Johnson, JPMorgan and Lockheed Martin also all display (at least overtly) high-level corporate strategies that strongly resemble what we might have observed years ago. Yet these companies have gradually evolved, and enjoyed solid earnings growth — even as customer tastes, competitive movements and technology advancement seemingly change the game board with each passing year.
In my experience, this is typical of the greatest organizations with the most successful corporate strategies. Despite management folklore, they’re not “constantly reinventing themselves.” Yes, they’ve been vigilant. True, there’s been plenty of work to occupy managers and advisors taking stock and calibrating new initiatives as opportunities arise. But we shouldn’t conflate planned innovation with a lack of long-term commitment to a plan. Pathways to competitive advantage need to account for the unexpected; in this way, strategy is more about direction and principles than the specific tactical choices that emanate from it.
Granted, the very proposal of long-term thinking can invoke protests, often fretting the rigidity of thinking that led to the downfall of many once-great companies. Think Kodak and its dedication to the printed photograph, Compaq’s resistance to direct-to-consumer sales, or Blockbuster’s failure to evolve. But taking the long view on strategy isn’t at all the same as a “set it and forget it” proposition.
It’s more about thinking several chess moves ahead while avoiding distractions. It’s reasonable to make the occasional adjustment — much in the way an investor might, say, rebalance their portfolio, or do some thoughtful tax-loss harvesting. But the best investors will also tell you that the more you touch the money, the less you are likely to have. And the best strategists will set principles and thresholds that differentiate between calibration and true changes of direction.
Remember prognostications also just can’t be trusted; the only thing we can predict for sure is that most forecasts will prove wrong. Instead, we should stress test plans across varied outcomes. At its essence, a good corporate strategy forces debate on a range of scenarios in advance, so that you are better equipped to quickly take calculated risks, aligned with your corporate principles and long-term objectives, as the market changes.
One rule of thumb is that a great strategy is simple to articulate, hard to replicate, and glaringly obvious in retrospect. Implicitly, it also requires a process for identifying moments to impose adaptation through some combination of market intelligence and risk assessment. Opportunities surfaced through this process need continual evaluation, with some destined to join the portfolio while others are set aside. Regardless, the goal is situational awareness so you can calibrate the business along its planned evolutionary pathway. Critically, this is management of the strategy, not resetting it.
The popular management literature is filled with advice on self-disruption. In practice, that’s a very risky move — not all companies survive a reset of that nature. For most, a better approach is to recognize that it is rather the management of the plan is what needs to be dynamic. The corporate strategy, on the other hand, plans for varied eventualities and sets the rules by which choices are made in a deliberate and continuous process.