The Boston Consulting Group has introduced The Strategy Palette which outlines five distinct approaches to business strategy, helping CEOs and top executives match their approach to their business environment and execute effectively. It’s a fascinating concept explained in the new book, Your Strategy Needs a Strategy.
Martin Reeves explains the framework on LinkedIn: “Each environment corresponds to a distinct archetypal approach to strategy, or color in the strategy palette, as follows: predictable classical environments lend themselves to strategies of position, which are based on advantage achieved through scale or differentiation or capabilities and are realized through analysis and planning. Adaptive environments require continuous experimentation because planning does not work under conditions of rapid change and unpredictability. In a visionary setting, firms win by being the first to create a new market or to disrupt an existing one. In a shaping environment, firms can collaboratively (re)shape an industry to their advantage by orchestrating the activities of other stakeholders. Finally, under the harsh conditions of a renewal environment, a firm needs to first free up resources to ensure its viability and then go on to choose one of the other four approaches to return to growth and competitiveness.”
The resulting overriding imperatives vary starkly for each approach:
- Classical: Be big.
- Adaptive: Be fast.
- Visionary: Be first.
- Shaping: Be the orchestrator.
- Renewal: Be viable.
Reeves notes that “using the right approach pays off. In our research, firms that successfully match their strategy to their environment realized significantly better returns—4 to 8 percent of total shareholder return—over firms that didn’t.”
The following video does a really nice job explaining the Strategy Palette: