In his seminal guide to combat strategy, “The Art of War,” Chinese military general Sun Tzu wrote, “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” Great advice, except many companies tend to confuse tactics with strategy. They know strategy is important, but they consider it an exercise — something performed quickly, sometimes even haphazardly, without assembling the baseline information necessary to develop an effective growth strategy. In the end, they end up with a series of vague goals without a concrete plan of how to achieve them.
So how do you go about developing a sound strategy? First, understand the potential impact of the trends that will shape the business world over the next several years. Second, determine what kind of strategist you are — passive, proactive, or innovative. Finally, evaluate your capabilities and core competencies and determine where you are versus where you want to be. Then it’s onward and upward toward victory.
Five megatrends that are shaping the world
- Over the next 30–50 years, we see five megatrends that will affect the world in which we operate:
- Shifting population demographics By 2050, 21 percent of our global population will be over age 60 (up from 10 percent in 2000). People are living longer, and the cost of social programs to support that longevity is considerable. We’ll likely see a longer working life cycle for people and a scarcity of resources that will result in a 72 percent increase in the growth of cities around the world over the next 50 years.
- Changing economic power The economic dominance of the West will abate and spread across the world, not just in emerging markets like India and China but also in Africa and across the Middle East. This will create disruption as these markets will be very attractive for investors, including U.S. investors.
- Environmental resource challenges Climate change is a key factor. In addition, the growing population and energy costs in regions like China will drive the need for increased fuel, water, and food.
- Accelerating technology From 3D printing to wearable technology to driverless automobiles, the proliferation of technology is staggering. And the impact of technology is huge — the number of connected devices today exceeds the number of human beings in the world. By 2020, it’s estimated we’ll have 50 billion devices for the world’s seven billion people.
- The explosion of big data The volume, variety, and velocity of data are increasing at exponential speeds. In 2014, we reached 5 zettabytes (one zettabyte equals 1 trillion gigabytes); in 2008, we had 1 zettabyte. By 2020, we’re expected to exceed 40 zettabytes as companies continue to use big data to make better decisions and drive value in their organizations.
We can’t change these trends, but we can change hw we position our organizations to respond to them. It’s important to understand how these megatrends will affect your business in the short and long term and to adjust business plans accordingly.
Three different approaches to strategy
We've identified three distinct approaches to strategy often adopted by businesses. First, there are the “passive reactives.” These organizations tend to follow the industry leaders. They focus on operations and efficiency, and while they may be sound organizations, they’re not typically going to adopt innovations unless they’re proven or they’re pressured by customers or the marketplace.
Next, we have the “proactive actives.” These companies are also risk averse, but not to the same degree; they also attempt to be innovative and visionary. This group is sometimes called “fast followers.” They aren’t pioneering innovation, but they’re right there at the forefront of emerging technologies and embrace change quickly.
Finally, we have the “innovative visionaries.” As the name implies, these are the industry leaders, the companies that use technology and research to get that first-mover advantage. This can be a rewarding strategy, but it can also be a risky one. It requires companies to have the knowledge and data to drive their creative thinking and the introspection to reflect on the investments they’ve made and will make going forward.
The art of strategy
No matter what your approach is to strategy, here are a few best practices to keep in mind:
- Develop a clear and concise vision for where the company is going and how to get there (tactics + strategy = success).
- Identify the capabilities and required core competencies of your organization — whether existing or to be developed.
- Keep a constant understanding of the company’s position through reporting information to support management decision-making (market, competitors, operational performance, and finances).
- Develop action-oriented plans for management to guide the organization and measure progressive improvement.
Remember that strategy development is not a one-hour activity. It’s something that evolves over time and becomes the framework for what you want your business to become over the next year, three years, five years, and beyond. It’s the surest path to victory over time, quieting the tactical noise that precedes defeat.