On average the business environment has become more dynamic and uncertain.Corporate strategy must cultivate capabilities to apply and balance these diverse frameworks/strategies, picking the right approach to strategy to each business and creating a common platform for operationalizing them.

The Right Approach

Corporations now need to demonstrate purpose, social contribution, trustworthiness, and ecological responsibility. This involves not only matters of intent, measurement, compliance and communication, but also increasingly issues of competitive advantage. A corporate strategy must now create credibility, social contribution, and generate advantage by dealing creatively with new social and ecological constraints, as well as deliver on the traditional variables.

Contextuality

The list of the world’s largest companies today is dominated by <a href="https://www.bcg.com/en-us/publications/2022/what-is-your-business-ecosystem-strategy">digital ecosystem orchestrators</a> like Amazon, which create an offering in collaboration with hundreds or thousands of other enterprises. This profoundly changes the role of corporate strategy since the diversity of offerings and capabilities that contribute to a firm’s value creation can now reside beyond the boundaries of the firm. The goal of corporate strategy becomes to create an advantaged position within an advantaged ecosystem, blurring the boundary between corporate and business strategy

Connectedness

As a product of the technology revolution and other factors, business plans have become less predictable. This is expected to continue with further waves of technological disruption like AI washing through the corporate economy. The consequence for corporate strategy is an entirely new logic for scale advantage.  These capabilities combine to create a new dynamic type of advantage: resilience, which delivers <a href="https://bcghendersoninstitute.com/becoming-an-all-weather-company-35d819aa99fe">long-term performance through uncertain periods</a>.

Uncertainty

Strategy is a competitive game, which always evolves in response to competition. But the magnitude of the changes in the technological, social, and natural environment are such that corporate strategy will need to be qualitatively reinvented again for new circumstances. Six factors are driving these changes: 1) dynamism, 2) uncertainty, 3) contingency, 4) connectedness, 5) contextuality, and 6) cognition.

Corporate Strategy: The Evolution

Until recently business strategy was largely about human analysis and decision making. But machine learning has now reached a level of sophistication that rivals or exceeds human expert capabilities for an increasing scope of tasks. This has profound implications for corporate strategy. To begin with, the cognitive advantage of corporations becomes a potential axis of competition. This is determined not only by its ability to deploy AI in each business effectively, but also to shift the focus of human minds to more uniquely advantaged areas like ethics, empathy, and creativity.

Cognition

Strategy is a competitive game, which always evolves in response to competition. But the magnitude of the changes in the technological, social, and natural environment are such that corporate strategy will need to be qualitatively reinvented again for new circumstances.

The Bottom Line

Competitive advantages do not last as long as they used to, as reflected in the acceleration of the <a href="https://sloanreview.mit.edu/article/fighting-the-gravity-of-average-performance/">competitive fade rate</a>, which measures how quickly market and operational returns regress to the mean, has accelerated markedly in recently years.In practical terms, the result is that the churn rate of companies on lists like the Fortune 500 has increased remarkably.

Dynamism In The Market

<ul><li>Active management of the business portfolio is again important: companies need to ensure that their business portfolios are continually rebalanced in order to maintain growth expectations. </li><li>New businesses need to be seeded at a higher rate, requiring large companies to behave more like entrepreneurs in part of their business, and to build the requisite skills and structures to ensure this. </li><li>Turnaround or transformation has become a prevalent and strategic capability for fixing or renewing businesses which have experienced competitive disruption, reached maturity, or fallen into decline.</li></ul>

The Three Consequences Of Dynami

Depending on the uncertainty, malleability or harshness of each, corporations have to adopt very different approaches to strategy-making, each with its distinct processes and tools. These approaches include: classical strategy (in which firms compete on scale and position), adaptive strategy (they compete on their ability to learn), vision-driven strategy (they compete on imagination, creativity, and innovation), shaping strategy (they compete on their ability to collaborate with partners), or turnaround (they compete on their ability to renew a business).

Contingency

Strategy is a competitive game, which always evolves in response to competition. But the magnitude of the changes in the technological, social, and natural environment are such that corporate strategy will need to be qualitatively reinvented again for new circumstances. This article discusses six factors are driving these changes: 1) dynamism, 2) uncertainty, 3) contingency, 4) connectedness, 5) contextuality, and 6) cognition.

The Bottom Line

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