Degree of Strategic Change Factors

Spread the love

The degree of strategic change is dictated by a number of factors. As
discussed in the next chapter, manufacturing technology, huge comput-
ing power and the Internet are leading many companies into dramatic
change. ‘Paradigm shift’ is not too powerful a description of what is
occurring. This will lead many companies into making an industry-
transforming change.
Understanding the strategic cycle helps leadership teams decide the
type of strategy session that is appropriate each year.

The Sigmoid curve
When companies start on a new strategic direction they follow a path
that is similar to a sinusoidal curve. This phenomenon is called the
sigmoid curve. It demonstrates the process of change, renewal or
development of a new vision and strategy through to its abandonment.
All life goes through this cycle. Effective change means starting a new
course of action while the existing cycle is still strong. It is part of the
axiom that ‘whatever made you successful in the past won’t in the
future’. Companies, organizations and institutions that do not renew
will die. The leadership skill is to start the renewal process before
peaking on the existing business cycle.
At point A on Figure  the leadership team would think the
company was doing well and there is little need to change tack. Only
ever with hindsight can we know this is absolutely wrong. And
hindsight we only have about yesterday. And yesterday is too late
tomorrow. With hindsight we can see that the strategy or market was
just about to decline.
Whilst no one knows in advance where the peak is, to start too early
and be ready for the change is a small sin; to start too late can be fatal.
When growth is plateauing, margin vanishing or the instincts of the
leadership team are that something new needs to be planned: this is
the time to start considering a new and probably radical strategy. In
Figure the leadership team have started on a new strategy at A1.
For a period of time this new strategy will probably depress results and
there will be a period of worry and uncertainty while it is being proved.
At point B1 the strategy shows signs of being successful and the strategic
business plan will be about refining and developing the master strategy.
At point C1 it will be concerned with maximizing the impact and
benefits of the strategy. The main impact will be on the types of
performance target that are developed and the action program the
company will invest in for the next year or more. At point A2 the cycle
repeats itself. The total cycle could last ten or twenty years, though with
the rapidly accelerating rate of change it is likely to be shorter and
become shorter still.
This thinking leads directly to the idea that strategy is not an annual
repeat of the same process. There is a strategic cycle that varies with
the change in the industry, the market it serves and the position of the
company. The type of strategic planning needed each year is different,
and leadership teams need to think through the type of strategy they
need. This does not radically change the strategic framework or the
process the first year SBP is used but it does change the type of strategy
that is produced.

Leave a Reply

Your email address will not be published. Required fields are marked *