Strategy and Change

White Paper

Changing the Way We Strategise

Strategy in the Age of Temporary Advantage
George Tovstiga, Professor of Strategy and Innovation Management,
Henley Business School

Changing the Way We Strategise: George Tovstiga

The future aint what it used to be 1

Boxing legend Mike Tyson, when asked about his strategy when entering the
boxing ring to fight, replied that he didnt have one.
Asked about his opponents, he replied that everyone has a strategy that
is, until they get hit.
Looking around us, we find more and more firms getting hit and being left
without a strategy. No doubt, the ongoing economic crisis has been a major
contributing factor, as risk and uncertainty have become the new business
norms. Success in todays business environment has become more volatile
and transient than ever before.
And new worries triggered by the Euro crisis have driven business confidence
levels to unprecedented depths. Indeed, with no end to the recession in sight
and the possibility of a triple dip recession in the foreseeable future 2 many
business leaders are at loss when it comes to their strategy.
Its not that business strategists have not coped with demanding competitive
environments in the past. Nonetheless, the current economic climate has at
least in part contributed to the formation of entirely new game changing rules.
For business leaders and their organisations, the future is less certain than it
has ever been.

The changing nature of competition

On one hand, companies are competing in an increasingly borderless world.
This applies to geographic as well as to industry boundaries.
What began as a subprime mortgage crisis in the U.S. quickly led to a financial
contagion that has since left no country or region in the world untouched.
Similarly, industry boundaries are quickly disappearing. Once distinct
boundaries between industry sectors such as telecommunications, computing,
and media are blurring into new spheres of opportunities for some players
and formidable threats to others. A case in point is the smartphone sector:
the speed with which once strong players in the smartphone sector have been
pushed aside by new competitors is indicative of the dynamics at play in
this sector.
On the other hand, at no point in time in recent business history have firms
sat on more cash reserves. According to Moodys Investor Service, non-financial
companies in America had amassed a record $1.45 trillion in cash reserves at the
end of 2012 despite the ongoing economic crisis.
In the past, swelling company coffers were viewed as a sign of economic
recovery that went hand in hand with renewed investment and hiring. This is
no longer a given; very few firms are hiring, and unemployment is on the rise. If
anything, firms reluctance to spend reflects the wariness with which they view
the future.

Strategy at a critical crossroads

Against this austere reality, firms are struggling more than ever to find a viable
strategy if not to achieve strategic growth, then at the very least to counter
threats with more effective defensive strategies. Strategy, the way we know it,
has arrived at an evolutionary crossroads.
Quotation attributed to former American Major League Baseball player Lawrence Peter Yogi
Berra
1

Keohane, D. and Jones, C. (2013). Spectre of stagflation haunts UK, Financial Times, March 12, 2013

Changing the Way We Strategise: George Tovstiga

The new rules of the game are forcing business leaders to think differently
about competition, and in particular, about their organisations strategy. There
are several important changes:
The first has to do with our fundamental understanding of the notion of
competitiveness. In the past, this has been viewed in terms of the firms right to
win. Defined as the ability of the firm to engage in its competitive markets
with a better-than-average chance of achieving success, firms right to win is
being challenged as never before3. Playing by the conventional rules of the game
no longer suffices because the game has changed.
To understand what that means, consider the second important change to our
thinking on strategy: the notion of sustainable competitive advantage. While
still conceptually intriguing, this notion is being seriously challenged in practice.
Traditionally, the achievement of sustainable advantage has been the Holy
Grail in strategy. Increasingly, however, firms are finding themselves pursuing
not sustainable competitive advantage, rather punctuated situations of
unsustainable temporary advantage. Once achieved, these position the firm
favourably only until the competition has caught up or markets have moved
on, at which point, the battle for a new advantage resumes 4 .
With cycle times becoming ever shorter, the search for new positions of
competitive advantage becomes a relentless and continual pursuit. The new
underlying business mantra resonates with Kellys5 prescient assertion of
firms need to engage in ever more frequent cycles of find, nurture, destroy.
Consequently, firms are being forced to engage in ever more frequent cycles of
sense making, rapid experimentation and evolutionary learning6 in complex
and rapidly changing competitive contexts.

Getting the strategic questions right

However, while strategic business contexts may be complex, our approach to
strategy neednt be. Good strategy demands a structured approach to strategic
thinking and sense making and begins with asking the right questions. These
are the questions that address strategic issues that are at the core of the firms
competitive predicament that if resolved, will really make a difference.
Too many business leaders get side-tracked with their strategy. They quickly
lose sight of the wood for the trees. Good strategic questions represent the
critical starting point of the strategic thinking process. Questions of strategic
relevance are triggered by trends, events or changes in the organisations
competitive situation. They arise from the challenges (which may relate as much
to threats as they do to opportunities) that these changing conditions trigger
in the organisations ability to compete which, in turn, reflects their ability to
create and deliver a uniquely superior and differentiated value offering. It is this
competitive mandate that endows these questions with strategic relevance.
Truly strategic questions, ones that have a potentially disproportionate
business impact on the organisation, are relatively few in number. Getting these
few wrong, however, can have devastating implications for the organisations
competitive position.
Assumptions underpinning the prevailing business logic and paradigm must
be challenged at this stage of the strategic thinking process; this requires
intellectual curiosity and willingness to abandon legacy recipes for success.
Mainardi, C. and Kleiner, A. (2010). The Right to Win, Strategy + Business (Booz&Co), Issue 61 (Winter 2010)
Stern, S. (2010). Get your strategy right now before the dust settles, Financial Times (July 21st 2009)
5
Kelly, K. (1997). The New Rules of the New Economy: Twelve Dependable Principles for Thriving in a Turbulent
World, Wired, September 1997.
6
McGrath, R.G. (2010). Business Models: A Discovery Driven Approach, Long Range Planning. Vol. 43, pp. 247 261
3

Changing the Way We Strategise: George Tovstiga

The articulation of good strategic questions is central to the strategic thinking

process. Reflection on questions underlying the five building blocks of strategy 7
represents a good starting point:
1 What is our external competitive environment and how is it changing?
2 What is our own basis of competitiveness and how is it changing?
3 W
ho are our customers (or in a broader sense, stakeholders) what are their
needs and how are these changing?
4 How do we get our organisational act together to pull it off?
5 W
hat is our unique window of opportunity for creating and delivering a
uniquely superior and differentiated value - our unique competing space
and how is it changing?
Strategy is as simple and as complex - as these five basic questions. Strategy
is simple, because there are relatively few questions; complex, because in reality
they are interlinked and not only constantly changing, but changing at varying
rates. These questions form the basis of the strategic thinking process that
probes the organisations big picture competitive situation; its unique window
of opportunity for creating or delivering value.

Strategy and the unique competing space

Firms that succeed in gaining competitive advantage continually strive
to understand the factors and determinants of their unique window of
opportunity for creating value their unique competing space.
The firms unique competing space (see Figure 1) represents that competitive
space in which the organisation has the unique ability to fulfill its customers
needs in ways that the competition cannot. Given the spatial character of this
competitive territory, it features 3 boundaries: boundary 1, which represents a
line of demarcation to the competition; boundary 2, which represents the firms
interface to its markets which include customers and relevant stakeholders at
large; and (3) a third boundary representing an internal threshold.
Figure 1: Unique competing space and strategic boundaries

Tovstiga, G. (2013). Strategy in Practice, 2nd Edition. Chichester: John Wiley & Sons

Changing the Way We Strategise: George Tovstiga

This third boundary is the most subtle of the three and typically the
most critical. It represents that internal organisational threshold over which
the firm must mobilise its resources and capabilities in order to make them
competitively relevant. A firm may be sitting on a stockpile of resources
(visualise these as situated in the lower circle representing the firms basis
of competitiveness), but these are competitively relevant only when the firm
succeeds in bringing these across the third interface representing the internal
threshold and into its unique competing space.
How does a firm do this?
A firm succeeds in mobilising its resources through purposeful alignment of
its organisational structure, capabilities, processes, practices, culture, and
ultimately leadership with its competitive mandate. Only when the firm gets
its act together does it succeed in differentiating itself competitively (cf. the
fourth strategy building block).
Competitive firms continually monitor the boundaries of their unique
competing space as their business contexts change and evolve. This enables
them to pre-emptively take strategic action when this is called for.

Minding the boundaries

Competitive environments are dynamic; they are continually changing.
Changes in the competitive environment inevitably manifest themselves as
perturbations at the boundaries of the firms unique competing space which
represent its strategic boundaries. Changes might harbour opportunities as
much as they might represent threats to the firms competitive position.
A firms unique competing space can shrink, move or disappear completely.
In a given competitive context, it might be primarily the boundary to the
competition that experiences most turbulence. In other contexts and points in
time it might be the interface to the market (customers and stakeholders) that
undergoes significant change. In yet other situations, the greatest challenge
facing a firm may relate to its ability to mobilize its internal
resources competitively.
Changing conditions carry very different implications at each of the three
boundaries; moreover, change at one boundary is often inextricably linked
to change at one or two of the other boundaries. For example, a competitors
pre-emptive new offering may be in response to changing consumer
preferences in the market; this, in turn, may prompt the firm to examine its own
portfolio of capabilities for a suitable response. This introduces complexity to
the challenge of managing change at the firms boundaries. In practice, firms can
cope quite well with turbulence at one of the boundaries. Simultaneous and
pronounced change at two boundaries is significantly more challenging.
And it is when firms experience change at all three of their strategic boundaries
that they often go into a tailspin from which few recover. Nokia and Research in
Motion (RIM) are two companies in this latter category that come to mind.

Pulling it all together strategy in the age of temporary

advantage
A firms strategy must therefore reflect the dynamics at the boundaries of its
unique competing space. Particularly in times of rapid change and uncertainty,
any competitive advantage gained is, at best, temporary. Business leaders must

Changing the Way We Strategise: George Tovstiga

continually challenge their unique competing space by probing the strategic

relevance of their value offering with a few simple questions:
1 Whats the uniquely differentiated value at the core of our offering?
2 What makes it superior and attractive and to whom?
3 What makes it most vulnerable and why?
Equally, they must relentlessly scrutinize the boundaries of their organisations
unique competing space by asking:
1 Which of the boundaries is most critical to my organisations position of
competitive advantage at a given point in time and why?
2 What are the critical issues arising at this particular boundary?
3 How are changes at this boundary intertwined with changes at any of
the other boundaries and what do these changes imply for our
competitiveness?

In Summary
If strategy is ultimately about winning on the basis of a uniquely differentiated
and superior value offering in the face of ever more short-lived positions of
competitive advantage, good strategy begins with asking the right questions
questions that really stand to make a difference if and when resolved.
The right strategic questions focus on matters concerning the firms ability
and disposition to create and deliver that value offering. The unique competing
space framework provides a structured approach to making sense of those
factors that are critical to understanding the firms current state of competitive
advantage.
Strategic insight derived on this basis provides the basis for appropriate
strategic decision-making - even if the competitive advantage derived from
these is temporary.
George Tovstiga
is Professor of Strategy and Innovation Management at Henley Business School.
A Canadian and German national, he has extensive international experience as a
management educator, author and consultant with over 15 years experience as a
management practitioner, notably in the areas of R&D and strategic innovation
management with Xerox Research (Canada) and Bayer AG (Germany) and ABB
(Switzerland) AG. Prior to joining Henley, George consulted for Arthur D. Little
(Switzerland) Ltds Strategic Growth and Innovation Practice. George is a consultant
to a number of multinationals and on the Advisory Board of the TechnoPark Zurich
(Switzerland), one of Europes leading science innovation parks. His most recent book
entitled Strategy in Practice (2nd Edition) was published by John Wiley & Sons in 2013.

Changing the Way We Strategise

For more information, please contact:
Executive Education
Henley Business School
Greenlands
Henley-on-Thames
Oxfordshire, RG9 3AU
exec@henley.com
Tel +44 (0)1491 418 767
www.henley.com

B07575 04/13