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Chapter 1

Introduction
Your Strategy Needs a Strategy

How to Select and Execute theRight Approach to Strategy
Strategy is a means to an end: favorable business outcomes. When we think
about strategy, we tend to think about planning: study your situation, define
a goal, and draw up a step-by-step path to get there. For a long time, planning was the dominant approach in business strategy—in both the boardroom and the classroom. But effective business strategy has never reallyconsisted of just this one approach. The multidecade plans that oil companies make would feel inappropriate to the CEO of a software firm that faces
new products and competitors every day and that therefore adopts a more
fluid and opportunistic approach to strategy. Neither would such long-termplans feel natural to an entrepreneur creating and bringing a new product orbusiness model to market. What is this broader set of ways in which we canapproach strategy, and which approach is the most effective in which situation? That is the central question of this book, and we will show that getting
the answer right can deliver demonstrable, significant value.
Today, we face a business environment that is faster changing and more
uncertain than ever because of, among other factors, globalization, rapid technological change, and economic interconnectedness. Perhaps less well known
is that the diversity and range of business environments that we face have also

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increased. Large corporations, in particular, are stretched across an increasing
number of environments that change more rapidly over time (figure 1-1), requiring businesses not only to choose the right approach to strategy or even the rightcombination of approaches, but also to adjust the mix as environments shift.
One size doesn’t fit all.
Prompted by the increased uncertainty and dynamism of business environments, some academics and business leaders have asserted or implied thatcompetitive advantage and even strategy more broadly is less relevant.1 In
fact, strategy has never been more important. The frequency and speed withwhich incumbents are being overthrown and the performance gap between
winners and losers have never been greater (figure 1-2). Many CEOs arelooking over their shoulders for the upstart competitor that may undermine
their company’s position, and many upstart companies are aspiring to dojust that. It has never been more important, therefore, to choose the rightapproach to strategy for the right business situation.
Figure 1-1

Increasing diversity of environments
Heat map of range of strategic environments faced by companies
1960s

1980s

2000s

MCap volatility *MCap volatility *MCap volatility *Revenue growth †Revenue growth †Revenue growth †Many companies

Few companies

Source: Compustat (US public companies); Martin Reeves, Claire Love, and Philipp Tillmanns,“Your Strategy Needs a Strategy,” Harvard Business Review, September 2012.
Note: MCap, market cap.
* Standard deviation over ten years of annual growth in market capitalization (MCap) (log scale).
† Absolute percent revenue growth averaged over the decade (log scale).

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Introduction 3
Figure 1-2

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Increasing gap between winners and losers for US companies
Average EBIT margin across industries
0.35

Top quartile

0.30
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0.05
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1955

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–0.10
–0.15
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Bottom quartile

Source: BCG analysis (August 2014), Compustat.
Note: EBIT: earnings before interest and taxes. EBIT margin across industries is based on an analysis ofapproximately 34,000 publicly listed, mainly US companies in years when net sales were greater than
$50 million; computing quartile average within six-digit GICS industry (unweighted), then averaged
across industries (weighted by number of companies per industry per year); excluding outliers (higher
than 100 percent margin or lower than minus 300 percent margin) and industries in years withinsufficient data points.

Unfortunately, it has also never been more difficult to choose the rightapproach. The number of strategy tools and frameworks that leaders can choose
from has grown massively since the birth of business strategy in the early 1960s(figure 1-3). And far from obvious are the answers to how these approaches
relate to one another or when they should and shouldn’t be deployed.
It’s not that we lack powerful ways to approach strategy; it’s that we lacka robust way to select the right ones for the right circumstances. The fiveforces framework for strategy may be valid in one arena, blue ocean or open
innovation in another, but each approach to strategy tends to be presented or
perceived as a panacea. Managers and other business leaders face a dilemma:with increasingly diverse environments to manage and rising stakes to get it
right, how do they identify the most effective approach to business strategy
and marshal the right thinking and behaviors to conceive and execute it,supported by the appropriate frameworks and tools?

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Chapter_01.indd 4

Classical approach

1960
Adaptive approach

1970

Renewal approach

1980

7S

3Cs
TQM
4 Phasesof Strategy

1990

Sustainability
Strategy

2000
Visionary approachCore
Competencies
Six Sigma
Diamond
Model
Value Chain

ReturnCapabilities on Quality
Bowman's
Competition
Strategy ClockCommitment

Adaptive
Advantage
Business
Model
Innovation
Competitive
Strategy: Optionsand Games
Algorithmic
Strategy

TransientCompetitive
Advantage

Shaping approach

2010

Note: 3Cs, Customer, Competitors, Corporation; 5Ps, Plan, Ploy, Pattern, Position, Perspective; 7Ss, Strategy, Structure, Systems, Shared Values, Skills, Staff,
Style; PEST, Political, Economic, Social, ­Technological; SWOT, Strengths, Weaknesses, Opportunities, Threats; TQM, total quality management.

2014

Strategic Intent
Bottom of the Pyramid
HardballStrategy Without Design
Strategy Maps
Profit Patterns
Customer-Centric Strategy
Value Chain Deconstruction
Distinctive Capabilities

Strategy as
Simple Rules
Serial Temporal
Advantage
New Economics
of Information

Tipping
Point

Open Innovation
Blue Ocean
Strategy

Shared Value

Number of salient strategic frameworks

Source: Pankaj Ghemawat, “Competition and Business Strategy in Historical Perspective,” Business H­ istory Review 76 (Spring 2002): 37–74; Lawrence Freedman, Strategy: A History (New York: Oxford University Press, 2013); research by The Boston Consulting Group Strategy Institute.

1950

Continuous Strategy Process
Dynamic Strategies
Temporary Advantage

Co-opetition
Value Innovation
Competing for the Future
Dynamic Capabilities
Change Management
Disruptive Innovation
Strategic Inflection Points
Value Migration
Ecosystem Strategy
Hypercompetition
Mass Customization
Re-engineering
Transformational Change
Time-based Competition
First Mover Advantage
S-curve

Mintzberg's 5Ps
Resource-based View
(Dis)continuous Innovation
Diversification Stra tegy and Profitability
Niche Strategy(BCG) Advantage Matrix
3 Generic Strategies
Benchmarking
Red Queen Effect
Emergent Strategy
Deliberate Corporate Strategy
Logical Incrementalism
Experience Curve
PIMS (Profit Impact of
Fishbone Diagram
Market Strategies)
BCG Portfolio Matrix
5 Forces
PEST
Scenario Planning
Real Options
SWOTAnalysis
Gap Analysis
Rule of Three and Four
Innovation Adoption Curves
Strategy and Structure
Barriers to Entry
Ansoff Matrix
Product Lifecycle

Proliferation of strategy frameworks

Figure 1-3

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Introduction 5

In researching and writing this book, we spoke with many businessleaders, and our conversations confirmed their dilemma. Some opined thatstrategy as a discipline had been made less relevant by changing circumstances. Others explained how traditional approaches to strategy needed tobe replaced by new and more effective ones. One executive even warned
that the word strategy had been banished from use in his company. Many told
us that in businesses as large and diverse as theirs, they couldn’t conceive ofusing a single approach to developing and executing effective s­ trategy.
To address the combined challenge of increased dynamism and diversityof business environments as well as the proliferation of approaches, this bookproposes a unifying choice framework: the strategy palette. This framework was
created to help leaders match their approach to strategy to the circumstancesat hand and execute it effectively, to combine different approaches to copewith multiple or changing environments, and, as leaders, to animate theresulting collage of approaches.
The strategy palette consists of five archetypal approaches to strategy—
basic colors, if you will—which can be applied to different parts of your business: from geographies to industries to functions to stages in a firm’s life cycle,
tailored to the particular environment that each part of the business faces.

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Evidence on Which This Book Is Based
This book is built on a broad body of evidence. Your Strategy Needs
a Strategy is the result of half a decade of research within The Boston
Consulting Group (BCG) Strategy Institute, numerous conversations
with our clients, and a detailed survey of 150 firms from industries asdiverse as banking, pharmaceuticals, high tech, and agri-food acrossmajor industrial nations in 2012. We also analyzed the conditions indifferent industries across a sixty-year period to understand how business environments have changed over time.
To supplement these observations, we conducted more than twenty
in-depth interviews with CEOs about their experiences and perspectives

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Your Strategy Needs a Strategy

on developing and realizing winning strategies. We also leveraged
joint research with our academic collaborators, especially Simon Levinof Princeton University, with whom we explored insights from biological and evolutionary strategies, which are often associated with complex, diverse, dynamic, and uncertain environments.
Finally, we have explored the strategy palette mathematically, bydeveloping a computer model that simulates business strategies andtheir performance in different business environments. The resulting
model is at the heart of a companion iPad app, which will enable readers to experience and develop a more intuitive understanding of eachapproach. To download the iPad app, visit Apple’s App Store and searchfor “Your Strategy Needs a Strategy.” You can also find it by visiting our
website: www.bcgperspectives.com/yourstrategyneedsastrategy.

Five Strategy Environments
The Strategy PaletteStrategy is, in essence, problem solving, and the best approach depends upon
the specific problem at hand. Your environment dictates your approach tostrategy. You need to assess the environment and then match and apply theappropriate approach. But how do you characterize the business environment, and how do you choose which approach to strategy is best suited tothe job of defining a winning course of action?
Business environments differ along three easily discernible dimensions:
Predictability (can you forecast it?), malleability (can you, either alone or in collaboration with others, shape it?), and harshness (can you survive it?). Combining
these dimensions into a matrix reveals five distinct environments, each ofwhich requires a distinct approach to strategy and execution (figure 1-4).
• Classical: I can predict it, but I can’t change it.
• Adaptive: I can’t predict it, and I can’t change it.

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Introduction 7
Figure 1-4

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The strategy palette: five environments and approaches to strategy
RenewalUnpredictability

Hi

Adaptive

Shaping

Classical

Visionary

Lo
Lo
Lo

Malleability

essHarshn

Hi

Hi• Visionary: I can predict it, and I can change it.
• Shaping: I can’t predict it, but I can change it.
• Renewal: My resources are severely constrained.

Five Strategy Archetypes
Each environment corresponds to a distinct archetypal approach to strategy, or
color in the strategy palette, as follows: predictable classical environments lendthemselves to strategies of position, which are based on advantage achieved
through scale or differentiation or capabilities and are achieved through comprehensive analysis and planning. Adaptive environments require continuous
experimentation because planning does not work under conditions of rapidchange and unpredictability. In a visionary setting, firms win by being the firstto create a new market or to disrupt an existing one. In a shaping environment,
firms can collaboratively shape an industry to their advantage by orchestrating the activities of other stakeholders. Finally, under the harsh conditions ofa renewal environment, a firm needs to first conserve and free up resources toensure its viability and then go on to choose one of the other four approaches
to rejuvenate growth and ensure long-term prosperity. The resulting overriding imperatives, at the simplest level, vary starkly for each approach:• Classical: Be big.
• Adaptive: Be fast.

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8

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Your Strategy Needs a Strategy• Visionary: Be first.
• Shaping: Be the orchestrator.
• Renewal: Be viable.
Using the right approach pays off. In our research, firms that successfully match their strategy to their environment realized significantly better
returns—4 to 8 percent of total shareholder return—over firms that didn’t.2
Yet around half of all companies we looked at mismatch their approach tostrategy to their environment in some way.
Let’s delve a little deeper to see how to win using each of the basic colorsof strategy and why each works best under specific circumstances.

Classical
Leaders taking a classical approach to strategy believe that the world is predictable, that the basis of competition is stable, and that advantage, once
obtained, is sustainable. Given that they cannot change their environment,such firms seek to position themselves optimally within it. Such positioning
can be based on superior size, differentiation, or capabilities.
Positional advantage is sustainable in a classical environment: the environment is predictable and develops gradually without major disruptions.
To achieve winning positions, classical leaders employ the following
thought flow: they analyze the basis of competitive advantage and the fit
between their firm’s capabilities and the market and forecast how these willdevelop over time. Then, they construct a plan to build and sustain advantaged
positions, and, finally, they execute it rigorously and efficiently (figure 1-5).
Figure 1-5

The classical approach to strategy
Classical
Analyze
Plan
Execute

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Introduction 9

We will see how Mars, the global manufacturer of confectionery and pet
food, successfully executes a classical approach to strategy. Mars focuses on
categories and brands where it can lead and obtain a scale advantage, and it
creates value by growing those categories. This approach has helped Marsbuild itself into a profitable $35 billion company and multicategory leader
over the course of a century.3
Classical strategy is probably the approach with which you are the mostfamiliar. In fact, for many managers, it may be the approach that defines
strategy. Classical strategy is what is taught in business schools and practiced
in some form in the majority of strategy functions in major enterprises.

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What You Might Know It As
Most readers will be familiar with at least a handful of strategy concepts. So that you can relate your existing knowledge of strategy
with the five colors of the strategy palette, we will highlight themain related schools of strategy and their associated frameworks
and tools in sidebars like this one in the chapters detailing eachapproach.
For example, we will show how the classical approach is exemplified by Bruce Henderson’s experience curve and growth-share matrix
or by Michael Porter’s celebrated five forces model. For the adaptive
approach, we will describe Kathleen Eisenhardt’s simple rules-based
approach to strategy or Rita McGrath’s work on strategies of agility.
Similarly, we will discuss how the visionary approach underpins Gary
Hamel and C. K. Prahalad’s book Competing for the Future, and how
the shaping approach is connected with the growing body of work on
platform businesses and business ecosystems.
The aim is not to be comprehensive but rather to show how wellknown approaches relate to each other and to the strategy palette,
to clarify which should be used when, and to give readers somepoints of departure for further investigation.

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Your Strategy Needs a Strategy

Adaptive
Firms employ an adaptive approach when the business environment is neither predictable nor malleable. When prediction is hard and advantage isshort-lived, the only shield against continuous disruption is a readiness andan ability to repeatedly change oneself. In an adaptive environment, winning comes from adapting to change by continuously experimenting andidentifying new options more quickly and economically than others. The
classical strategist’s mantra of sustainable competitive advantage becomes
one of serial temporary advantage.
To be successful at strategy through experimentation, adaptive firms master three essential thinking steps: they continuously vary their approach,generating a range of strategic options to test. They carefully select the mostsuccessful ones to scale up and exploit (figure 1-6). And as the environmentchanges, the firms rapidly iterate on this evolutionary loop to ensure that they
continuously renew their advantage. An adaptive approach is less cerebral
than a classical one—advantage arises through the company’s continuously
trying new things and not through its analyzing, predicting, and optimizing.
Tata Consultancy Services, the India-based information technology (IT) services and solutions company, operates in an environment it can neither predict
nor change. It continuously adapts to repeated shifts in technology—from client
servers to cloud computing—and the resulting changes that these shifts cause in
their customers’ businesses and in the basis of competition. By taking an adaptive
approach that focuses on monitoring the environment, strategic experimentation, and organizational flexibility, Tata Consultancy Services has grown from
Figure 1-6

The adaptive approach to strategy
Adaptive

Vary
Scale up

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Introduction 11$155 million in revenue in 1996 to $1 billion in 2003 and more than $13 billion
in 2013 to become the second-largest pure IT services company in the world.4

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Visionary
Leaders taking a visionary approach believe that they can reliably create or
re-create an environment largely by themselves. Visionary firms win bybeing the first to introduce a revolutionary new product or business model.
Though the environment may look uncertain to others, visionary leaders see
a clear opportunity for the creation of a new market segment or the disruption of an existing one, and they act to realize this possibility.
This approach works when the visionary firm can single-handedly build anew, attractive market reality. A firm can be the first to apply a new technology or to identify and address a major source of customer dissatisfaction or alatent need. The firm can innovate to address a tired industry business modelor can recognize a megatrend before others see and act on it.
Firms deploying a visionary approach also follow a distinct thought flow.
First, visionary leaders envisage a valuable possibility that can be realized.
Then they work single-mindedly to be the first to build it. Finally, they persist
in executing and scaling the vision until its full potential has been realized(figure 1-7). In contrast to the analysis and planning of classical strategy andthe iterative experimentation of adaptive strategy, the visionary approach isabout imagination and realization and is essentially creative.
Quintiles, which pioneered the clinical research organization (CRO)industry for outsourced pharmaceutical drug development services, is aprime example of a company employing a visionary approach to strategy.
Figure 1-7

The visionary approach to strategy
VisionaryEnvisage
Build
Persist

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12 Your Strategy Needs a Strategy

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Though the industry model may have looked stable to others, its founder andchairman, Dennis Gillings, saw a clear opportunity to improve drug development by creating an entirely new business model and, in 1982, moved firstto capitalize on the inevitabilities he saw. By ensuring that Quintiles moved
fast and boldly, it maintained its lead and leapt well ahead of potential competition. It is today the largest player in the CRO industry which it createdand has been associated with the development or commercialization of the
top fifty best-selling drugs currently on the market.5

Shaping
When the environment is unpredictable but malleable, a firm has the extraordinary opportunity to lead the shaping or reshaping of a whole industry at an
early point of its development, before the rules have been written or rewritten.
Such an opportunity requires you to collaborate with others because you
cannot shape the industry alone—and you need others to share the risk,
contribute complementary capabilities, and build the new market quickly
before competitors mobilize. A shaping firm therefore operates under a highdegree of unpredictability, given the nascent stage of industry evolution it
faces and the participation of multiple stakeholders that it must influence but
cannot fully control.
In the shaping approach, firms engage other stakeholders to create a sharedvision of the future at the right point in time. They build a platform throughwhich they can orchestrate collaboration and then evolve that platform and its
associated stakeholder ecosystem by scaling it and maintaining its flexibility
and diversity (figure 1-8). Shaping strategies are very different from classical,
Figure 1-8

The shaping approach to strategy
ShapingEngageEvolveChapter_01.indd 12

Orchestrate

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Introduction 13

adaptive, or visionary strategies—they concern ecosystems rather than individual enterprises and rely as much on collaboration as on competition.
Novo Nordisk employed a shaping strategy to win in the Chinese diabetes care market since the 1990s. Novo couldn’t predict the exact path of market development, since the diabetes challenge was just beginning to emerge in
China, but by collaborating with patients, regulators, and doctors, the company
could influence the rules of the game. Now, Novo is the uncontested market
leader in diabetes care in China, with over 60 percent insulin market share.6

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RenewalThe renewal approach to strategy aims to restore the vitality and competitivenessof a firm when it is operating in a harsh environment. Such difficult circumstances can be caused by a protracted mismatch between the firm’s approach tostrategy and its environment or by an acute external or internal shock.
When the external circumstances are so challenging that your current way
of doing business cannot be sustained, decisively changing course is the only
way to not only survive, but also to secure another chance to thrive. A company must first recognize and react to the deteriorating environment as earlyas possible. Then, it needs to act decisively to restore its viability—economizing
by refocusing the business, cutting costs, and preserving capital, while also
freeing up resources to fund the next part of the renewal journey. Finally, thefirm must pivot to one of the four other approaches to strategy to ensure that it
can grow and thrive again (figure 1-9). The renewal approach differs markedly
from the other four approaches to strategy: it is usually initially defensive, it
involves two distinct phases, and it is a prelude to adopting one of the otherFigure 1-9

The renewal approach to strategy
RenewalReact(or anticipate)
Economize
Grow

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approaches to strategy. Renewal has become increasingly common because of
the number of companies getting out of step with their environments.
American Express’s response to the financial crisis exemplifies the renewal
approach. As the credit crisis hit in 2008, Amex faced the triple punch of rising default rates, slipping consumer demand, and decreasing access to capital. To survive, the company cut approximately 10 percent of its workforce,shed noncore activities, and cut ancillary investment. By 2009, Amex had
saved almost $2 billion in costs and pivoted toward growth and innovation
by engaging new partners, investing in its loyalty program, entering thedeposit raising business, and embracing digital technology. As of 2014, its
stock was up 800 percent from recession lows.7

Applying the Strategy Palette
The strategy palette can be applied on three levels: to match and correctly
execute the right approach to strategy for a specific part of the business, toeffectively manage multiple approaches to strategy in different parts of thebusiness or over time, and to help leaders to animate the resulting collage ofapproaches (figure 1-10).
Figure 1-10

Three levels of application for the strategy palette

Lead

CombineSelect and match

Chapter_01.indd 14

Leadership
Animate the strategy collage

Ambidexterity
Multiple approaches

Five archetypal approaches
Classical, adaptive, visionary,
shaping, renewal

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Introduction 15

The strategy palette provides leaders with a new language for describing andchoosing the right approach to strategy in a particular part of their business.
It also provides a logical thread to connect strategizing and execution for eachapproach. In most companies, strategizing and execution have become artificially separated, both organizationally and temporally. Each approach entails
not only a very different way of conceiving strategy but also a distinct approachto implementation, creating very different requirements for information management, innovation, organization, leadership, and culture. The strategy palette can therefore guide not only the strategic intentions but also the operational
setup of a company. Table 1-1 summarizes the key elements of the strategy palette and includes specific examples of companies using the five approaches.

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Table 1-1

The five approaches of the strategy paletteApproaches
Key elements Classical

Adaptive

Visionary

ShapingRenewalCore idea, orwhat it takes• Be big• Be fast• Be first• Be theorchestrator• Be viable

Type of environment• Unpre• Predictdictable,
able, nonnonmalmalleable
leable• Predictable, malleable• Unpredict- • Harshable, malleable

Industries
where
approach ismost visibly
applicable• Utility

Indicators of
the approach• Low
growth• Semicon- • Not industry • Some soft- • Financial
institutions
ware
specific
ductors
in the(create new,
• Smartphone• Textile
2008–2009
disrupt
apps
retailcrisisexisting)• Oil and gas• Automobile• Volatile
growth• High
growthpotential• High con- • Limited
concen- • White
centration
space,
tration• Mature
no direct• Young
industry
competiindustry
tion• Stableregulation • High tech• Limited
nological
regulation
change• Fragmentation• Low
growth,decline,crisis• No dominant player,• Restricted
platformfinancing• Shapable
regulation • Negative
cash flows(Continued)

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16 Your Strategy Needs a Strategy

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Table 1-1

(Continued)

The five approaches of the strategy paletteApproaches
Key elements Classical

Adaptive

Visionary

ShapingRenewalHow• Analyze,
plan, execute• Vary,select,scale up

• Envisage,build, persist• Engage,orchestrate,
evolve• React(or anticipate),
economize, growMeasures ofsuccess• Scale• Ecosystem • Cost sav• Cycle time • First to
ings
growth andmarket• New prodprofitability• Cash flow
uct vitality • New user
customer • NPVI
index
satisfaction(NPVI)

Relatedapproaches• Blue ocean • Networks• Time• Experibased
ence curve• Innovator’s • Ecosyscompetidilemma
tems
• BCG
tion
Matrix• Platforms• Temporary• Five Forces
advantage• Capabili• Adaptiveties
advantage

Key examples• Marketshare• Transformation• Turnaround• Amex• Apple• P&G under • Tata Con- • Amazon.
under
under Jobs
com under
sultancy
LafleyChenault
Bezos
Services• Novo Nor• Mars
under
disk under • AIG under• Quintiles
under
ChanBenSørensen
under
Michaels
drasemosche
Gillings
karan• 3M under
McKnight

Key traps• Overappli- • Planningcationtheunplan­nable• Wrongvision• Overmanaged ecosystem• No second
phase

The palette can also help leaders to “de-average” their business (decompose it into its component parts, each requiring a characteristic approach tostrategy) and effectively combine multiple approaches to strategy across different business units, geographies, and stages of a firm’s life cycle. Large corporations are now stretched across a more diverse and faster-changing rangeof business contexts. Almost all large firms comprise multiple businesses
and geographies, each with a distinct strategic character, and thus require

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Introduction 17

the simultaneous execution of different approaches to strategy. The rightapproach for a fast-evolving technology unit is unlikely to be the same as for amore mature one. And the approach in a rapidly developing economy is likely
to be very different for the same business operating in a more mature one.

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Unpredictability, Malleability, and­Harshness as Axes in the Strategy Palette
Why are unpredictability, malleability, and harshness the right dimensions for characterizing the business environment and choosing theright approach to strategy? By considering the fundamental underlying assumptions of the most familiar and historically appropriate
approach, the classical one, and examining what has changed in the circumstances of business, we can demonstrate that these are indeed theright axes to inform the choice of the appropriate approach to strategy.
Leaders taking a classical perspective assume that the world isessentially predictable. Here, it makes sense to draw up long-termplans and invest in analysis and prediction. Additionally, classicalleaders don’t believe that they can markedly change the rules of
their game, since they consider their environment a given: it is stable and therefore not malleable. Instead, they make the best of thegiven conditions by positioning themselves optimally.
However, in a rapidly evolving world, these assumptions are challenged in three fundamental ways. First, because of the increased
unpredictability in today’s business environment, long-term planning isoften no longer viable. Second, because of technological change, globalization, and other drivers, existing industry structures are constantly
being disrupted. Consequently, industry structure and the basis of competition have become increasingly malleable, and individual firms havemore opportunities to shape market development. Finally, mismatches
between strategy and environment, because of either protracted strategic drift or sudden crises, are increasingly severe and frequent. We
therefore need to consider the harshness of the environment, which
can require companies to economize and focus on short-term survival.

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18Inevitably, any business or business model goes through a life cycle, eachstage of which requires a different approach. Businesses are usually created in
the visionary or shaping quadrants of the strategy palette and tend to migrate
counterclockwise through adaptive and classical quadrants before being disrupted by further innovations and entering a new cycle, although the exact
path can vary (figure 1-11). Apple, for example, created its iPhone using avisionary approach, then used a shaping strategy to develop a collaborative
ecosystem with app developers, telecom firms, and content providers. And
as competitors jostle for position with increasingly convergent offerings, it
is likely that their strategies will become increasingly adaptive or classical.
As we will see, Quintiles also employed such a succession of approaches tostrategy as it developed.
Leaders themselves play a vital role in the application of the strategy palette by setting and adjusting the context for strategy. They read the environment to determine which approach to strategy to apply where and to put theright people in place to execute it. Moreover, business leaders play a critical role of selling the integrated strategy narrative externally and internally.
They continuously animate the strategy collage—the combination of multiple
approaches to strategy—keeping it dynamic and up-to-date by asking theright questions, by challenging assumptions to prevent a dominant logic

Figure 1-11

Different approaches to strategy required across the businesslife cycle
Adaptive

Shaping

Classical

Visionary

Unpredictability

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Your Strategy Needs a Strategy

Malleability

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Introduction 19

from clouding the perspective, and by putting their weight behind criticalchange initiatives.

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Traps: Where It Can Go Wrong
Most leaders we surveyed understand the need to differentiate their approachto strategy according to the environment: some 90 percent agreed that this isimportant. But at the same time, there are a number of challenges to doing
so effectively. Three types of traps were observed to derail good intentions.

Environmental Perception
Though some leaders correctly estimate the degree of malleability andunpredictability in their environments, we saw that many executives perceive their environments to be significantly more predictable or malleable
than they actually are. There is perhaps a human tendency to believe that wecan predict and control our environment—but in many cases we can’t, andas we have seen, this inability has important ramifications for our approachto strategy. In fact, in our survey, environments were most often perceived
as predictable and malleable (visionary), irrespective of their actual measured
characteristics. Consistent with this bias, environments were least often perceived as unpredictable and nonmalleable (adaptive), again irrespective of
the actual measured environment. Additionally, we have consistently foundthat firms delay recognition of when they are in a harsh environment that
requires a renewal approach. In principle, a renewal strategy could be preemptive, but in practice, most companies trigger transformations or turnarounds only when financial or competitive performance has already begun
to deteriorate.

Selecting the Right Approach
We also saw mismatches in the firms’ selection of their approach to strategy. While the declared approach was most commonly in line with the

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20

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Your Strategy Needs a Strategy

perceived environment for classical, visionary, and adaptive approaches,companies often declared styles that were logically incompatible with theirperceptions of the environment. The firms also tended to confuse adaptive
and shaping approaches when declaring their strategic approach, which is
not surprising given the relative unfamiliarity of the latter. The firms alsodeclared an intention to use an adaptive approach much more often thaneither their own assessment of the environment or an objective assessmentof its degree of unpredictability would seem to warrant. This discrepancy
may be the result of the recent prominence and popularity of the concepts ofagility, speed, and experimentation—an outlook biased toward an adaptive
approach, irrespective of the actual business conditions.

Applying an Approach Correctly
Finally, many leaders choose the right approach to strategy for their business environment, but their organizations often stumble in its application.
Our survey showed a strong tendency for organizations to hold on to thefamiliar and comfortable practices associated with the visionary and classicalapproaches even when the leaders have declared an intention to execute a
different approach. Take planning, for example. Most companies create astrategic plan. Furthermore, nearly 90 percent of companies surveyed said
they develop these plans on an annual basis, regardless of the actual pace ofchange in their business environments—or even what the companies perceive it to be.

How to Use This Book
This book begins by exploring the five core approaches to strategy—the
basic colors of the strategy palette. We then look at how to use these basic
colors in combination—applying different approaches simultaneously orsequentially in different parts of the business—and the role of leaders indynamically orchestrating the resulting strategy collage.

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Introduction 21

Case studies and interviews are used to illustrate each approach, andeach chapter begins with a major case study. Additionally, sidebars ineach chapter examine the strategy palette’s theoretical underpinnings andillustrate how each approach works, by showing the results of simulations of different environments and strategies. The book ends with a short
epilogue dealing with how to develop individual mastery of the strategy
palette.
Chapters 2 through 6 each deal with one approach to strategy in depth,­exploring

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• What defines and characterizes the approach• When to use it• How to apply it successfully, including both how to formulatea strategy and how to execute it, and the implications for
information management, innovation, culture, organization, andleadership• Tips and traps to guide the practical application of the approach
You will be able to observe each approach in action in case examples and
CEO discussions. A note of caution: our examples feature successful andrespected leaders and companies—but our intention is not to hold them up
as comprehensive or eternal examples of excellence. Conditions change,
competitive advantage fades, and the fortunes of companies rise and fall. In
fact, that is precisely why firms need to shift their approaches to strategy overtime. Rather, we intend to present the firms we feature as clear examplesof the applications of each approach to strategy in a particular business at aparticular point in time.
After we explore the five basic colors in the strategy palette, we look at
more sophisticated ways of using the palette. Chapter 7 shows how firms
can use multiple approaches to strategy successively or simultaneously, forinstance, across geographies, business units, or life-cycle stages. We refer tothis ability to take a multidimensional approach as ambidexterity. Four

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Your Strategy Needs a Strategy

techniques can be used to achieve ambidexterity and are optimal in different
situations:• Separation: firms deliberately manage which approach to strategy
belongs in each sub-unit (division, geography, or function) and run
those approaches independently of one another.
• Switching: firms manage a common pool of resources to switch between
approaches over time or to mix them at a given moment in time.
• Self-organization: each unit chooses the best approach to strategy
when it becomes too complex to select and manage this in a topdown manner.
• Ecosystems: firms rely on an external ecosystem of players that selfselect the appropriate approaches to strategy.

Mathematical Basis of the Strategy Palette
Why did we select these five approaches—classical, adaptive, visionary, shaping, and renewal—and what is the evidence that they are thebest ones for each environment? In fact, the different approaches tostrategy have sound mathematical underpinnings, which we demonstrate by simulating the environments of the strategy palette. These
environments range from highly predictable ones that resemble
classical environments, to highly unpredictable and malleable environments that resemble shaping ones. We then simulated different
approaches to strategy and allowed these to compete with each otheracross a range of environments, noting which approaches performed
best through many iterations (figure 1-12). The simulations fully validated the match between the five archetypal approaches to strategy
and the business environments that make up the strategy palette (ourmodel is described in more detail in appendix C). In separate sidebars
in each chapter, we use this model to show why a particular approachto strategy is the fit best for a specific environment.

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Introduction 23

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Figure 1-12

Best strategic approaches in different environments (simulation)
Unpredictability

Unpredictability

Malleability

Unpredictability

Malleability

Malleability

Simulated time
Classical

Adaptive

Visionary

ShapingRenewal

Source: BCG multi-armed bandit (MAB) simulation.

We used the same simulation model as the platform to develop
an iPad app, which is built around a business game in which you can
explore which approaches to strategy work well in which environments. You do this by operating the simplest of businesses—a lemonade stand. The app should enable readers not only to understandhow to choose and deploy different approaches to strategy but also
to experience and develop a more practical feel for each approach.

Chapter 8 shows what your role as a leader is in creating and animating
the collage of strategic approaches. We identify eight critical roles that leaders play in this respect.
• The diagnostician: Looks externally to assess the businessenvironment and then match it with the right strategic approach.

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24 Your Strategy Needs a Strategy

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• The segmenter: Matches the approach to the organization at theright level of granularity.
• The disrupter: Reviews the diagnosis and segmentation on an
ongoing basis, modulating or changing approaches when necessary.
• The team coach: Selects the right people to manage each cell of thecollage and develops them, both intellectually and experientially.
• The salesperson: Advocates and communicates the strategic
choices in a coherent, integrated narrative, both internally andexternally.
• The inquisitor: Sets and resets the correct context for each strategic
approach by asking the right questions.
• The antenna: Continuously looks outward and selectively amplifies
important change signals that might otherwise be overlooked orunderestimated.
• The accelerator: Puts weight behind select critical change initiatives
to speed up their implementation or to increase their traction to
overcome resistance or inertia.
Finally, the epilogue details the four steps by which individual managers
can develop their understanding and mastery of the strategy palette.
As you familiarize yourself with the different approaches, it can be helpful to
try to apply them to your own business: to assess the environment where you
do business, to decide the best approach to strategy, and to assess the actual
practices that your organization deploys. The short survey in appendix A
will provide a simplified but directional view; a more detailed version is alsoavailable online: bcgperspectives.com/yourstrategyneedsastrategy. Appendix
B lists further reading for those who wish to delve deeper into the different
approaches to strategy. Appendix C gives additional background and detailsof our simulations of different environments and approaches to strategy.
Let’s begin our exploration of the strategy palette.

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