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AI is transforming business and giving leaders new options for low-friction change
AI is transforming business and giving leaders new options for low-friction change

Fast Company

timea day ago

  • Business
  • Fast Company

AI is transforming business and giving leaders new options for low-friction change

AI stubbornly persists at the extremes: One extreme is limiting, treating AI as a fast-commoditizing tool that boosts performance by 5%-10%. The other is expansive, portraying AI as a disruptive force that is reshaping jobs, the nature of work, and what's fundamentally possible. Both are critical, but compelling outcomes live between those extremes. Ironically, AI, which promises disruption, may also enable transformation without massive organizational change. We often treat AI like a moonshot—a high-risk, high-reward bet requiring bold, expensive, and dramatic changes. But moonshots can have higher failure rates and cause disruption; they should be used strategically. Like an investment portfolio, diversity and balance yield the right gains at the appropriate risk levels. A smart investment strategy should include roof shots (measured upside, steady growth with scalable change) and chip shots (incremental and reliable, but limited structural change at scale). If a business chases extremes, it misses the value found between them. One middle-ground benefit is what I call low-friction transformation. The goal isn't for teams to overhaul how they work to accommodate AI; it's for AI to absorb as much change as possible. AI agents can flex around new or non-standard processes, so humans adapt only where it's required. Agents handle complex data and variability in processes, and give humans the outputs they need. AI works as an extension of humans by navigating complex systems and processes, and driving performance benefits and productivity gains without massive disruptions. This is where AI's precision matters most. Its strength isn't just what it can do, but how intentionally it's applied. AI can enhance the operating model in targeted ways that use agents to manage the differences where practical. It becomes part of the system and a lever for innovation—quietly powerful, deeply effective, and built for long-term impact. THE 'GOOD ENOUGH' AI REVOLUTION For years, executives have sought standardized processes, as standardization drives consistency and optimization. Variability was the enemy of quality. AI evolves that thinking. A marketing team once followed a content production process; AI now generates tailored drafts in seconds. A support team escalated tickets through multiple layers, but AI can interpret and triage instantaneously. Rigid processes become less valuable when AI can consistently produce high-quality results. The goal is no longer blanket standardization. Instead, standardize where it creates value and let agents manage process variability or non-standard data. Standards still matter, but AI can bridge gaps where standards don't exist. AI's promise lies not just in its upside, but in raising the baseline. 'Good enough' becomes 'better.' With quality outcomes from AI, executives can loosen their grip on standardization. AI doesn't need to be perfect to be powerful. The right framework makes outputs consistently valuable. CHANGE LESS, TRANSFORM MORE Transformation once meant sweeping change: reorgs, retraining, and disruption. But today's AI strategy changes that—change less, transform more. That's why 66% of executives reported increased productivity and 57% reported cost savings from adopting AI agents, according to PwC's AI Agent Survey. Value is being captured early and often from these agents. Transformational outcomes come from minimizing human behavior change. Machines can now work like humans. We should rethink an employee's daily habits to leverage AI agents, or reshape customer value with greater intelligence and personalization. Deeper change may still be needed for business model shifts, and the value will justify a greater degree of change. But change only where it counts. Think of a busy hospital. Doctors have limited time with patients and deal with a wide range of complex symptoms. AI can help analyze these symptoms and give the doctor a more accurate diagnosis to work with. The result: faster, more personalized, and precise medical care. The only change is using the input from an AI agent instead of consulting a physician. With any new technology, the less people need to change, the less organizational friction you'll see. That's the essence of low-friction transformation. TOMORROW'S BUSINESS MOATS Why does it matter? Traditional strategies are shifting, new threats are emerging, and we need to accelerate innovation to be ready. AI may still be emerging in enterprises, but upstarts are already using it to disrupt. We have seen startups with small teams—using AI to write their code—take market share from industry heavyweights. AI-native competitors are designed for change and are therefore fast, nimble, and threatening. Competitive advantage often comes from brand power, capital, high barriers of entry, economies of scale, and so on. These traditional moats are blunted by AI if scale and specialization can be achieved with AI agents via low-cost models. The question becomes: How do companies stay great when 'good enough' is cheap and instant? There will be tremendous pressure on big companies to maintain their growth and defend their positioning. Not enough companies are thinking about AI's business impact. Only 44% are developing new agentic products and services, and just 42% are redesigning processes around AI agents, according to our AI Agent Survey. That's a problem. Tomorrow's advantages won't come from size and staying power. They'll come from speed, creativity, and human-led innovation, amplified by AI agents. Enterprises need small, independent teams—innovation labs—tasked with reimagining their business with AI. These teams need to be well-resourced and free to experiment. This work can feel ambiguous to executives. It can take up budget or pull your star players from other resources. The payoff isn't always immediate, but if you don't do it, someone else will. THE PRAGMATIC PATH AHEAD AI has changed the game, but too many executives still treat it like past technology implementations. They assume it will disrupt teams and require major changes. The power of AI lies in its adaptability. It integrates into existing workflows, supports human output, and creates profound impact without huge change management. When deployed thoughtfully, AI strengthens teams and reduces friction. Tomorrow's leaders won't chase perfection. They'll pursue pragmatic, low-friction transformation on the path to reinvention.

The Definitive HBR Strategy Glossary
The Definitive HBR Strategy Glossary

Harvard Business Review

timea day ago

  • Business
  • Harvard Business Review

The Definitive HBR Strategy Glossary

What is strategy? This question may be familiar if you're a seasoned HBR reader: It's the title of a classic 1996 Michael Porter article on the topic. Famously, he argued that too many companies were conflating strategy and operational effectiveness: The quest for productivity, quality, and speed has spawned a remarkable number of management tools and techniques…Although the resulting operational improvements have often been dramatic, many companies have been frustrated by their inability to translate those gains into sustainable profitability. And bit by bit, almost imperceptibly, management tools have taken the place of strategy. As managers push to improve on all fronts, they move farther away from viable competitive positions. So what are these competitive positions? In a smart analysis, former HBR senior editor Andrea Ovans suggests that Porter's idea of strategy can be boiled down to two broad options: 'Do what everyone else is doing (but spend less money doing it), or do something no one else can do.' While succinct, these aren't the only approaches to successful business competition. Ovans notes that, when surveying the vast array of strategy topics that HBR has covered, there's quite a lot to say about how to do something new, how to build on what you already do, and how to react opportunistically to emerging possibilities. Indeed—and we decided to collect it all in one place. This is our attempt at a 'strategy glossary,' a place where 40-some classic strategic concepts introduced in the pages of HBR can be found. They're in alphabetical order, with some caveats: We only included ideas discussed in depth in HBR feature articles that exist in some form on our website. Some concepts don't have 'official' names, but they are labeled as accurately as possible. All were collected based on recommendations from current HBR editors across our digital, magazine, and press divisions. Each concept also names the article in which it originated and includes the authors who came up with the idea. [ A ] Adjacency expansion: Sustained, profitable growth when a company expands the boundaries of its core business into an adjacent space. Companies that are repeatedly successful at adjacency expansion share two common characteristics. First, they are extraordinarily disciplined, applying rigorous screens before they make an adjacency move. This discipline pays off in the form of learning curve benefits, increased speed, and lower complexity. Second, in almost all cases, these companies develop their repeatable formulas by studying their customers and their customers' economics very carefully. Go deeper: ' Growth Outside the Core,' by Chris Zook and James Allen (2003) [ B ] Balanced scorecard: A set of measures that gives top managers a fast but comprehensive view of the business. The scorecard includes four perspectives and corresponding questions, allowing managers to view performance in several areas simultaneously: Customer perspective: How do customers see us? Internal perspective: What must we excel at? Innovation and learning perspective: Can we continue to improve and create value? Financial perspective: How do we look to shareholders? Go deeper: ' The Balanced Scorecard: Measures that Drive Performance, ' by Robert S. Kaplan and David P. Norton (1992), and ' Using the Balanced Scorecard as a Strategic Management System,' by Kaplan and Norton (2007) . . . Big-Bang disruption: When an innovation beats incumbents on both price and quality right from the start and quickly sweeps through every customer segment. Big-bang disruptions often come out of the blue from people who aren't traditional competitors, and the disruptions are frequently developed by inventors doing low-cost experiments with existing technologies to see what new products they can dream up. Once launched, these innovations don't adhere to conventional strategic paths or normal patterns of market adoption. That makes them incredibly hard to combat, and they can devastate entire product lines virtually overnight. Examples include free navigation apps preloaded on smartphones, such as those made by TomTom, Garmin, and Magellan. Learn more: ' Big-Bang Disruption,' by Larry Downes and Paul Nunes (2013) . . . Blue ocean strategy: Blue oceans are previously unknown market spaces. Demand is created rather than fought over, and there is ample opportunity for growth that is both profitable and rapid. There are two ways to create blue oceans. One is to launch completely new industries, as eBay did with online auctions. But it's much more common for a blue ocean to be created when a company expands the boundaries of an existing industry. For example, Cirque du Soleil reinvented the circus and developed uncontested market space that made the competition irrelevant. Go deeper: ' Blue Ocean Strategy,' by W. Chan Kim and Renée Mauborgne (2004) [ C ] Consumption chain: Customers' entire experience with a product or service, from the moment they realize that they need it to the time they no longer want it and decide to dispose of it. By mapping and analyzing a company's consumption chain and understanding customers' pain points, businesses can uncover opportunities to position their offerings in ways that they, and their competitors, would never have thought possible. To do this, start by mapping your customers' entire experience with a product, asking questions such as, 'How do people become aware of their need for your product or service?' 'How is your product installed?' and 'How is your product repaired or serviced?' Then, analyze your customer's experience by considering how a series of simple questions— what, where, who, when, and how —apply at each link in the consumption chain. For example, 'What are customers doing at each point in the consumption chain?' or 'How are your customers' needs being addressed?' Go deeper: ' Discovering New Points of Differentiation,' by Ian MacMillan and Rita McGrath (1997) . . . Core competencies: Core competencies are the collective learning in an organization. If you consider the corporation as a large tree, the trunk and major limbs are core products; the smaller branches are business units; the leaves, flowers, and fruit are end products. The root system that provides nourishment, sustenance, and stability is the core competence. A company's competitiveness derives from its core competencies and core products (the tangible results of core competencies). A company's core competencies must provide potential access to a wide variety of markets, make a contribution to the customer benefits of the product, and are difficult for competitors to imitate. Management should ask, 'How long could we preserve our competitiveness if we did not control this core competence? How central is this core competence to customer benefits? What opportunities would be foreclosed if we lost this competence?' Internally, supporting core competencies requires harmonizing streams of technology and working across boundaries. This requires a radical change in corporate organization. Go deeper: ' The Core Competence of the Corporation,' by C.K. Prahalad and Gary Hamel (1990) . . . Counterrevolutionary strategies: Industry leaders worry that new technologies and business models, or 'revolutions,' will render their firm's competencies and products obsolete. However, organizations that are able to restrain or modify these threats typically use five strategies: Containment strategies: Used when a thread is spotted early, these might include locking in customers, raising switching costs, or swamping distribution channels. Shaping strategies: Used when the revolution can no longer be contained, these strategies include co-opting the revolutionaries, influencing the revolution through venture capital, or supplying and molding the revolutionaries. Absorption strategies: Used when a revolution is likely to succeed but can be modified to complement your business, these can mean bringing the revolution inside to enhance your existing business or creating polarized blocs to pave the way to acquire the revolutionaries. Neutralization strategies: Used when a revolution has been detected too late; has spread too widely; or can't be contained, shaped, or absorbed. Companies can, among other things, quash revolutions through legal means or continuously improve existing products or technology. Annulment strategies: Used when a revolution is likely to succeed but can be modified to complement your business; examples include leapfrogging the threat or sidestepping the revolution altogether. Go deeper: ' The Empire Strikes Back: Counterrevolutionary Strategies for Industry Leaders,' by Richard A. D'Aveni (2002) . . . Curveball: Strategic curveball is about outfoxing your competitors: getting them to do something dumb that they otherwise wouldn't (that is, swing at a pitch that appears to be in the strike zone but isn't) or to not do something smart that they otherwise would (that is, fail to swing at a pitch that's in the strike zone but appears not to be). There are four types of curveball strategies: Drawing your rival out of the profit zone Borrowing techniques from unexpected places Disguising how you attain your success Letting rivals misinterpret the reasons for your success Go deeper: ' Curveball: Strategies to Fool the Competition,' by George Stalk, Jr. (2006) [ D ] Decision-focused strategic planning: A way of reaching decisions through the continuous identification and systematic resolution of strategic issues. This helps companies produce more, better, and faster decisions using the following guidelines: Separate—but integrate—decision-making and plan making. Take decisions out of the traditional planning process and create a different, parallel process for developing strategy that helps executives identify the decisions they need to make to create more shareholder value over time. Focus on a few key themes instead of a business-by-business planning model. Make strategy development continuous, spreading strategy reviews throughout the year rather than squeezing them into a two- or three-month window. Structure strategy reviews to produce real decisions, aiming to overcome disagreements among executives over past decisions, current alternatives, and even the facts presented to support strategic plans. Go deeper: ' Stop Making Plans; Start Making Decisions,' by Michael Mankins and Richard Steele (2006) . . . Diamond of national advantage: Why are certain companies based in certain nations capable of consistent innovation? Why do they ruthlessly pursue improvements, seeking an ever-more-sophisticated source of competitive advantage? And why are they able to overcome the substantial barriers to change and innovation that so often accompany success? The answer lies in four broad attributes of a nation, attributes that individually and as a system constitute the diamond of national advantage—the playing field that each nation establishes and operates for its industries. These attributes are: Factor conditions: the nation's position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry Demand conditions: the nature of home-market demand for the industry's product or service Related and supporting industries: the presence or absence in the nation of supplier industries and other related industries that are internationally competitive Firm strategy, structure, and rivalry: the conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry Go deeper: ' The Competitive Advantage of Nations,' by Michael E. Porter (1990) . . . Differentiation: The sharper a company's differentiation, the greater its competitive advantage. But differentiation can wear with age: The growth it generates creates complexity, and complex companies tend to forget what they're good at. Often they respond by trying to reimagine their entire business models quickly and dramatically. That's rarely the answer. Instead, successful companies relentlessly build on their fundamental differentiation, going from strength to strength. They learn to deliver it to the front line, creating an organization that lives and breathes its strategic advantages day in and day out. They learn to sustain it through constant adaptation to changes in the market. And they learn to resist the siren song of today's hot market better than their less-focused competitors do. The result is a simple, repeatable business model that a company can apply to new products and markets over and over again to generate sustained growth. Go deeper: ' The Great Repeatable Business Model,' by Chris Zook and James Allen (2011) . . . Discovery-driven planning: A practical tool that acknowledges the difference between planning for a new venture and planning for a more conventional line of business. Conventional planning operates on the premise that managers can extrapolate future results from a well-understood and predictable platform of past experience. One expects predictions to be accurate because they are based on solid knowledge rather than on assumptions. In these cases, a venture's deviations from plan are a bad thing. Discovery-driven planning acknowledges that at the start of a new venture, little is known and much is assumed. This type of planning systematically converts assumptions into knowledge as a strategic venture unfolds. When new data is uncovered, it is incorporated into the evolving plan. The real potential of the venture is discovered as it develops. Go deeper: ' Discovery-Driven Planning, ' by Rita McGrath and Ian MacMillan (1995), and ' The Value Captor's Process: Getting the Most Out of Your New Business Ventures, ' by McGrath and Thomas Keil (2007) . . . Disruptive innovation: 'Disruption' describes a process whereby a company is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments. They gain a foothold by offering a product that is inferior to those of incumbents' products—and can't meet the needs of incumbents' mainstay customers—but that delivers the functionality needed by customers in the overlooked segments, frequently at a lower price. Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, improving their products so that they can deliver the performance that incumbents' mainstream customers require while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants' offerings in volume, disruption has occurred. See more HBR charts in Data & Visuals Go deeper: ' Disruptive Technologies: Catching the Wave,' by Clayton M. Christensen and Joseph L. Bower (1995), and ' What Is Disruptive Innovation?' by Christensen, Michael E. Raynor, and Rory McDonald (2015) [ F ] Finding your next core business: To determine if a company's core business needs to change, first ask five diagnostic questions: What is the state of our core customers? What is the state of our core differentiation? What is the state of our industry's profit pools? What is the state of our core capabilities? What is the state of our culture and organization? If the answers reveal that large shifts are about to take place in two or more of these five areas, your company is heading into turbulence—you need to reexamine the fundamentals of your core strategy and even the core itself. The next step is strategic regeneration, which usually involves identifying a hidden asset that can be the centerpiece of your new strategy. These assets typically fall under three categories: undervalued business platforms, untapped insights into customers, and underexploited capabilities. . . . Five competitive forces: The state of competition in an industry depends on five basic forces. These forces govern the profit structure of the industry by determining how the economic value it creates is apportioned. That value may be drained away through the rivalry among existing competitors. It can also be bargained away through the power of suppliers or the power of customers, or it can be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. See more HBR charts in Data & Visuals Go deeper: ' How Competitive Forces Shape Strategy,' by Michael E. Porter (1979), and ' The Five Competitive Forces That Shape Strategy,' by Porter (2008) [ H ] Hardball: The single-minded pursuit of competitive advantage and the benefits it offers: a leading market share, great margins, and rapid growth. This involves picking your shots, seeking out competitive encounters, setting the pace of innovation, and testing the edges of the possible. While there are countless ways to play hardball, a handful of classic strategies are effective in generating competitive advantage. Best employed in bursts of ruthless intensity, these strategies are: Devastate rivals' profit sanctuaries, plagiarize with pride, deceive the competition, unleash massive and overwhelming force, and raise competitors' costs. Go deeper: ' Hardball: Five Killer Strategies for Trouncing the Competition,' by George Stalk, Jr., and Rob Lachenauer (2004) [ J ] Jobs to be done: To create offerings that people truly want to buy, firms need to home in on the job the customer is trying to get done. When we buy a product, we essentially 'hire' it to help us do a job. If it does the job well, we hire it again. If it does a crummy job, we 'fire' it and look for something else to solve the problem. Jobs are multifaceted. Some jobs are little (pass the time); some are big (find a more fulfilling career). They're never simply about function; they have powerful social and emotional dimensions. And the circumstances in which customers try to do them are more critical than any buyer characteristics. The key to successful innovation is identifying jobs that are poorly performed in customers' lives and then designing products, experiences, and processes around those jobs. Go deeper: ' Know Your Customers' 'Jobs to Be Done,'' by Clayton M. Christensen, Taddy Hall, Karen Dillon, and David S. Duncan (2016) . . . Judo strategy: In the martial art of judo, a combatant uses the weight and strength of their opponent to their own advantage rather than opposing blow directly to blow. Similarly, smart internet startups aim to turn their opponents' resources, strength, and size against them. Judo strategy is based on three elements—rapid movement, flexibility, and leverage—each of which translates into a competitive principle. The first principle requires judo players to move rapidly to new markets and uncontested ground, thus avoiding head-to-head combat. The second principle demands that players give way to superior force when squarely attacked. Finally—and most important—the third principle calls for players to use the weight and strength of opponents against them. Go deeper: ' Judo Strategy: The Competitive Dynamics of Internet Time,' by David B. Yoffie and Michael A. Cusumano (1999) [ L ] Lean startup: As a methodology for launching companies, lean startups begin by searching for a business model. They test, revise, and discard hypotheses, continually gathering customer feedback and rapidly iterating on and reengineering their products. This strategy greatly reduces the chances that startups will spend a lot of time and money launching products that no one will actually pay for. This is in contrast to the more traditional path, where a venture's founders would write a business plan (complete with a five-year forecast), use it to raise money, and then go into 'stealth mode' to develop their offerings—all without getting much feedback from the people they intended to sell to. Go deeper: ' Why the Lean Start-Up Changes Everything,' by Steve Blank (2013) . . . Lean strategy: The lean strategy process ensures that startups innovate in a disciplined fashion so that they make the most of their limited resources. This helps company builders choose viable opportunities, stay focused, and align the entire organization. The process begins with setting the venture's vision, or ultimate purpose—perhaps the only aspect of strategy that should be permanent. To deliver on it, senior executives agree on a deliberate strategy, defining the firm's objective (the near-term goal that describes success), scope (what the firm will and will not do), and competitive advantage (how it will win). The deliberate strategy sets the bounds within which experiments will take place and guides daily decisions, but the results of those experiments and decisions lead to learning that reshapes the strategy. Though priorities evolve, at each point in time it's clear to everyone in the firm which ones take precedence. Go deeper: ' Lean Strategy,' by David J. Collis (2016) [ M ] Multibusiness strategy: Enterprises that own multiple businesses often have a flawed approach to strategy: They focus too much on the makeup of their portfolios and too little on enhancing the businesses in them. To address this, start by recognizing that strategies for adding value to a corporation's businesses fall on a continuum. At one end the businesses in the portfolio are completely unrelated; at the other they have many similarities. Each location on the continuum requires a different kind of organizational structure and specific management processes to support it. To succeed at execution, you need to determine where on the spectrum your business falls and then align your portfolio selection, structure, and processes with your vision of how to add value. See more HBR charts in Data & Visuals Go deeper: ' Why Multibusiness Strategies Fail and How to Make Them Succeed,' by Bharat N. Anand and David J. Collis (2024) [ N ] Net promoter score: The best predictor of top-line growth can usually be captured in a single survey question: Would you recommend this company to a friend? Willingness to talk up a company or product to friends, family, and colleagues is one of the best indicators of loyalty because of the customer's sacrifice in making the recommendation. When customers act as references, they do more than indicate they've received good economic value from a company; they put their own reputations on the line. And they will risk their reputations only if they feel intense loyalty. By substituting a single question with a consistent scale—0 to 10, for example, where 0 means not at all likely, 5 means neutral, and 10 means extremely likely—for the complex black box of the customer satisfaction survey, companies can actually put consumer survey results to use and focus employees on the task of stimulating growth. Go deeper: ' The One Number You Need to Grow,' by Frederick F. Reichheld (2003) [ O ] Operational transparency: The deliberate design of windows into and out of the organization's operations to help customers understand and appreciate the value being added. Witnessing the hidden work performed on their behalf can make customers more satisfied, more willing to pay, and more loyal. It can also make employees more satisfied by demonstrating to them that they are serving their customers well. To create operational transparency, consider what to reveal, when to reveal it, and how to reveal it. Managers should be aware of certain conditions in which transparency can backfire, such as when it reveals things people genuinely don't want to see, engenders anxiety, or destroys the magic, among other examples. Go deeper: ' Operational Transparency,' by Ryan W. Buell (2019) [ P ] Platform strategy: Traditional 'pipeline' businesses succeed by optimizing the activities in their value chains—most of which they own or control. 'Platform' businesses that bring together consumers and producers, as companies Uber, Alibaba, and Airbnb do, require a different approach to strategy. The critical asset of a platform is external—the community of members. The focus therefore shifts from controlling resources to orchestrating them, and firms win by facilitating more external interactions and creating 'network effects' that increase the value provided to all participants. In this world, competition can emerge from seemingly unrelated industries and even from within the platform itself. Businesses that fail to learn the new rules of platform strategy will struggle—when a platform enters the marketplace of a pure pipeline business, the platform nearly always wins. That's exactly what happened when the iPhone came on the scene in 2007. By 2015, it accounted for 92% of global profits in mobile phones, while most of the giants that once ruled the industry, such as Nokia, Samsung, and Motorola, made no profit at all. Go deeper: ' Pipelines, Platforms, and the New Rules of Strategy,' by Marshall W. Van Alstyne, Geoffrey G. Parker, and Sangeet Paul Choudary (2016) . . . Playing to win: A scientific approach to strategy built on rigorous choice making and focusing on two key areas: Where you'll play and how you'll win. A team begins by formulating options, or possibilities, and asks what must be true for each to succeed. Once it has listed all the conditions, it assesses their likelihood and thereby identifies the barriers to each choice. The team then tests the key barrier conditions to see which hold true. From here, choosing a strategy is simple: The group reviews the test results and chooses the possibility with the fewest serious barriers. This is the path P&G took in the late 1990s, when it was looking to become a major global player in skin care. After testing the barrier conditions for several possibilities, it opted for a bold strategy that might never have surfaced in the traditional process: reinventing Olay as a prestige-like product also sold to mass consumers. The new Olay succeeded beyond expectations—showing what can happen when teams shift from asking 'What is the right answer?' and focus instead on figuring out 'What are the right questions?' A Plan Is Not a Strategy Watch 'A Plan Is Not a Strategy' video Go deeper: ' Bringing Science to the Art of Strategy, ' by A.G. Lafley, Roger L. Martin, Jan W. Rivkin, and Nicolaj Siggelkow (2012), and Playing to Win: How Strategy Really Works, by Lafley and Martin (2013) Purpose at the core of strategy: Purpose is usually seen as an add-on—a way to create shared value, improve employee morale and commitment, give back to the community, and help the environment. But research on high-growth companies finds that many have moved purpose from the periphery of their strategy to its core—where, with committed leadership and financial investment, they use it to generate sustained profitable growth, stay relevant in a rapidly changing world, and deepen ties with their stakeholders. These companies use purpose in two strategic ways: to redefine the playing field and to reshape the value proposition. This enables them to overcome the challenges of slowing growth and declining profitability. Go deeper: ' Put Purpose at the Core of Your Strategy,' by Thomas W. Malnight, Ivy Buche, and Charles Dhanaraj (2019) [ R ] RAPID decision-making: Every success, every mishap, and every opportunity seized or missed in an organization is the result of a strategic decision that someone made or failed to make. Ambiguity over who is accountable for which decisions can cause entire decision-making processes to stall, usually at one of four bottlenecks: global versus local, center versus business unit, function versus function, and inside versus outside partners. To make better strategic decisions, use the RAPID framework to clarify roles and clear decision-making bottlenecks: Recommend. People in this role are responsible for making a proposal, gathering input, and providing the right data and analysis to make a sensible decision in a timely fashion. Agree. Individuals in this role have veto power—yes or no—over the recommendation. Input. These people are consulted on the decision and are typically involved in its implementation. Decide. The person with the D is the formal decision-maker. They are ultimately accountable for the decision, for better or worse, and have the authority to resolve any impasse in the decision-making process and to commit the organization to action. Perform: Once a decision is made, a person or group of people will be responsible for executing it. Go deeper: ' Who Has the D?: How Clear Decision Roles Enhance Organizational Performance,' by Paul Rogers and Marcia W. Blenko (2006) . . . Resource-based view of the firm (RVB): The resource-based view of the firm comprises a pragmatic and rigorous set of five market tests to determine whether a company's resources are truly valuable enough to serve as the basis for strategy, and it integrates that market view with earlier insights about competition and industry structure. A company will be positioned to succeed if it has the best and most appropriate stocks of resources for its business and strategy. These market tests are: The test of inimitability: Is the resource hard to copy? The test of durability: How quickly does this resource depreciate? The test of appropriability: Who captures the value that the resource creates? The test of substitutability: Can a unique resource be trumped by a different resource? The test of competitive superiority: Whose resource is really better? Go deeper: ' Competing on Resources,' by David J. Collis and Cynthia A. Montgomery (2008) [ S ] Shared value: Policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation shows that addressing societal needs is profitable, and it focuses on identifying and expanding the connections between those needs and economic progress. Firms can enact shared value in three distinct ways: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company's locations. Go deeper: ' Creating Shared Value,' by Michael E. Porter and Mark R. Kramer (2011) . . . Stakeholder strategy: A strategy that generates benefits for all of a company's constituents: customers, workers, suppliers, communities, and investors. To enact a stakeholder strategy, firms should start by exploring outside perspectives of the value they produce via the ratings of agencies like the Drucker Institute and Just Capital. Then, they must bolster this data with inside insights and gain an understanding of the interdependencies among their particular stakeholders. Armed with that, they can develop a clear description of their purpose, establish criteria for evaluating progress toward it, set priorities among stakeholders, and start measuring value creation for each group. The last step is to sustain the new strategy through cultural change and the development of supporting processes and organizational structure. Go deeper: ' How to Create a Stakeholder Strategy,' by Darrell Rigby, Zach First, and Dunigan O'Keeffe (2023), and ' The Power of Strategic Fit,' by Rigby and First (2025) . . . Strategic failure: Strategy demands more than classic competitive positioning. It requires making carefully coordinated choices about 1) the opportunities to pursue; 2) the business model with the highest potential to create value; 3) how to capture as much of that value as possible; and 4) the implementation processes that help a firm adapt activities and build capabilities that allow it to realize long-term value. Neglecting any of those imperatives can derail a strategy, but CEOs frequently zero in on just one. Entrepreneurs tend to focus on identifying a golden opportunity and don't think enough about how to monetize it; leaders of incumbents, on capturing value but not new ways to create it. By taking a holistic view and tackling all the elements of strategy and integrating them well, however, firms will greatly increase their odds of success. Go deeper: ' Why Do So Many Strategies Fail? ' by David J. Collis (2021) . . . Strategic principle: A memorable and actionable phrase that distills a company's corporate strategy into its unique essence and communicates it throughout the organization. The beauty of having a corporate strategic principle—a company should have only one—is that everyone in an organization, from the executives in the front office to the people in the operating units, can knowingly work toward the same strategic objective without being rigid about how they do so. Decisions don't always have to make the slow trip to and from the executive suite. When a strategic principle is well crafted and effectively communicated, managers at all levels can be trusted to make decisions that advance rather than undermine company strategy. Go deeper: ' Transforming Corner-Office Strategy into Frontline Action, ' by Orit Gadiesh and James L. Gilbert (2001) . . . Strategic risk management: When a company voluntarily accepts some risk in order to generate superior returns from its strategy. A bank assumes credit risk, for example, when it lends money; many companies take on risks through their research and development activities. A strategy with high expected returns generally requires the company to take on significant risks, and managing those risks is a key driver in capturing the potential gains. There are three distinct approaches to managing strategic risks; which model is appropriate for a given firm depends largely on the context in which an organization operates: Independent experts. Some organizations—particularly those that push the envelope of technological innovation—face high intrinsic risk as they pursue long, complex, and expensive product-development projects. But since much of the risk arises from coping with known laws of nature, the risk changes slowly over time. For these organizations, risk management can be handled at the project level by, for example, a review board. Facilitators. Many organizations, such as traditional energy and water utilities, operate in stable technological and market environments, with relatively predictable customer demand. In these situations, risks stem largely from seemingly unrelated operational choices across a complex organization that accumulate gradually and can remain hidden for a long time. Since no single staff group has the knowledge to perform operational-level risk management across diverse functions, firms may deploy a relatively small central risk-management group that collects information from operating managers. Embedded experts. The financial services industry poses a unique challenge because of the volatile dynamics of asset markets and the potential impact of decisions made by decentralized traders and investment managers. An investment bank's risk profile can change dramatically with a single deal or major market movement. For such companies, risk management requires embedded experts within the organization to continuously monitor and influence the business's risk profile, working side by side with the line managers whose activities are generating new ideas, innovation, and risks—and, if all goes well, profits. Go deeper: ' Managing Risks: A New Framework,' by Robert S. Kaplan and Anette Mikes (2012) . . . Strategy as a portfolio of real options: In financial terms, a strategy is much more like a series of options than a series of static cash flows. Executing that strategy almost always involves making a sequence of major decisions. Like a gardener deciding which tomatoes to pick, which to let ripen, and which to toss, companies make decisions based on what they know now, what might happen in the future, and which opportunities have already passed. Two important metrics can help guide decision-making here: 1) value-to-cost, or the value of the underlying assets you intend to build or acquire divided by the present value of the expenditure required to build or buy them; and 2) volatility, or how much things can change before an investment decision must finally be made. Mapping opportunities based on these two metrics can help leaders decide what actions to take and where to place their bets. Go deeper: ' Strategy as a Portfolio of Real Options,' by Timothy A. Luehrman (1998) . . . Strategy execution: Strategy execution is the result of thousands of decisions made every day by employees acting according to the information they have and their own self-interest. Executives can use four fundamental building blocks to influence those actions: clarifying decision rights, designing information flows, aligning motivators, and making changes to structure. Companies that execute strategy effectively share five common traits: Everyone has a good idea of the decisions and actions for which they are responsible. Important information about the competitive environment gets to headquarters quickly. Once made, decisions are rarely second-guessed. Information flows freely across organizational boundaries. Field and line employees usually have the information they need to understand the bottom-line impact of their day-to-day choices. Go deeper: ' The Secrets to Successful Strategy Execution,' by Gary L. Neilson, Karla L. Martin, and Elizabeth Powers (2008) . . . Strategy-to-performance gap: Most companies struggle to deliver the financial performance their strategies promise. Leaders might blame poor planning, poor execution, or both, but the strategy-to-performance gap is a common problem. While often opaque to management, there are a few regular problems related to this gap: Companies rarely track performance against long-term plans. When they do, multiyear results rarely meet projections. Instead, they show performance consistently falling short of ambitious projections year after year. Factors such as poorly formulated plans, misapplied resources, breakdowns in communication, and limited accountability for results all drag down performance. Performance bottlenecks are often invisible to top management. The persistence of the gap fosters a culture of underperformance. There are, however, companies that have figured out how to close this gap. They do so by: 1) making strategy simple and concrete; 2) debating assumptions, not forecasts; 3) using a rigorous framework with a common language; 4) discussing resource deployments early; 5) clearly identifying priorities; 6) continuously monitoring performance; and 7) rewarding and developing execution capabilities. Go deeper: ' Turning Great Strategy into Great Performance,' by Michael Mankins and Richard Steele (2005) . . . Strategy statement: A clear, concise articulation of your company's strategy, in 35 words or less. This statement should define: the objective that the strategy is designed to achieve the scope of the business the advantage by which the business will achieve its stated objective To develop a strategy and craft a statement, leaders should start by evaluating the industry landscape, which includes segmenting customers and identifying unique ways of delivering value to the ones the firm targets. They should also analyze competitors' current strategies and predict how they might change. The key is to find the sweet spot where the firm's capabilities and customers' needs align in a way that competitors cannot match. Go deeper: ' Can You Say What Your Strategy Is? ' by David J. Collis and Michael G. Rukstad (2008) . . . Surviving disruption: Disruption is less a single event than a process that plays out over time—sometimes quickly, other times slowly and incompletely. To survive these changes, companies need to develop a disruption of their own that allows them to reap the rewards of participation in new, high-growth markets. To do so, companies should look to the concept of the extendable core —the aspect of the disruptor's business model that allows it to maintain a performance advantage as it creeps upmarket in search of more and more customers. This helps companies facing disruption understand where a new competitor might challenge them, where their own advantages lie, and what barriers the competitor will have to overcome. In other words, it helps illuminate which parts of their business are vulnerable and which parts can be defended. Go deeper: ' Surviving Disruption,' by Maxwell Wessel and Clayton M. Christensen (2012) [ T ] Transient competitive advantage: In a turbulent environment, it can be hard to sustain a position that allows a company to best rivals over the long term. In this context, businesses can't afford to spend months crafting a single long-term strategy—they need a portfolio of multiple transient advantages that can be built quickly and abandoned just as rapidly. Though individually temporary, as a portfolio these advantages can keep companies in the lead over the long run. To compete in a transient-advantage economy, you must be willing to honestly assess whether your current advantages are at risk. Companies that want to create a portfolio of transient advantages need to make eight major shifts in the way that they operate: Think about arenas, not industries. Set broad themes, then let people experiment. Adopt metrics that support entrepreneurial growth. Focus on experiences and solutions to problems. Build strong relationships and networks. Avoid brutal restructuring and learn healthy disengagement. Get systematic about early-stage innovation. Experiment, iterate, and learn. Go deeper: ' Transient Advantage,' by Rita McGrath (2013) [ V ] Value stick: A value-based strategy follows a simple principle: Companies can achieve enduring financial success by creating substantial value for their customers, their employees, and their suppliers. This value can be measured in customers' willingness-to-pay (WTP) price for goods and employees' and suppliers' willingness-to-sell (WTS) price for their labor or goods. This idea is captured in a simple graph, called a value stick, which allows companies to map where and how they create value—and to create the opportunity to increase their own financial performance. See more HBR charts in Data & Visuals What Is Strategy? It's a Lot Simpler Than You Think Watch 'What Is Strategy? It's a Lot Simpler Than You Think' Go deeper: ' Eliminate Strategic Overload,' by Felix Oberholzer-Gee (2021) . . . Vision: Vision helps companies decide what to preserve and what future to pursue. The phrase, however, has become something of a Rorschach test: It can be taken to mean deeply held values, societal bonds, goals, motivating forces, or raisons d'être. A well-conceived vision has two major parts: core ideology and envisioned future. Core ideology describes an organization's foundational identity. It's what remains constant, providing the glue that holds an organization together as it grows, decentralizes, diversifies, and expands globally. The point of your core ideology is to guide and inspire, not to differentiate—two companies can articulate the same ideology. This ideology is the sum of core values and a core purpose. Envisioned future also consists of two parts: a 10-to-30-year audacious goal, plus vivid descriptions of what it will be like to achieve the goal. It is both concrete—describing something visible and vivid—and aspirational. Go deeper: ' Building Your Company's Vision,' by Jim Collins and Jerry I. Porras (1996)

A US Defense Strategy Is Coming, Just Not From the President
A US Defense Strategy Is Coming, Just Not From the President

Bloomberg

timea day ago

  • Politics
  • Bloomberg

A US Defense Strategy Is Coming, Just Not From the President

Does US President Donald Trump have a strategy in foreign affairs? I don't mean a slogan, such as 'peace through strength' or America First. Nor do I mean mere instinct, such as hitting weak adversaries (the Houthis, say, or Iran) while ducking from confrontations that look more dangerous (with Russia, say). I'm talking about strategy as the likes of Carl von Clausewitz thought about it: the definition of clear and big political goals, and the alignment of the available means with those ends.

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