Businesses have had 10 years to conclude that the 21st century is different from the 20th – with its global focus, variety of business models, rapidly evolving technology, higher transparency, greater innovation, demographic shortages, higher speed, and shorter product lifecycles. In this new environment, traditional approaches to strategic planning are futile because the key variables are constantly shifting and difficult to forecast. Clearly, this changes how leaders must lead, but some companies are still standing firmly in the 20th century. What’s needed is a more dynamic approach to strategy, one with an adaptive advantage – the ability to achieve superior outcomes in a turbulent environment by continuously reshaping the business through a process of managed evolution.
Adaptive advantage involves not only different ways of operating but different ways of thinking about strategy.
The first step is to be aware of the challenges and opportunities of an unpredictable environment. Leaders can begin this journey by asking their management teams these questions:
To balance what’s possible with current capabilities, most companies do a gap analysis, beginning with the senior team. They consider whether the leadership group has the right composition for growing this strategy, how
(and how well) the leaders interact, and leaders’ level
of openness and passion for the business.
A solid leadership team is more important in the 21st century where leadership is less about one heroic leader and more about a distributed leadership team. Companies that successfully align and deploy new strategies are committed to experimentation and intelligent risk-taking. When they know they need to change but don’t know how, they try some pilots and observe. These companies are also very externally oriented. They talk to company leaders at all levels. They’re curious about what’s going on, and they ask questions.
To effectively create and maintain adaptive advantage, leaders must embrace the mindset represented by four elements of adaptive leadership.
When a team of adaptive leaders is aligned on the vision and value creation, the next step is a fact-based discussion about specific changes. This can be a challenge. The way companies adapt their strategies defines the winners and losers. Moving the organization in a different direction requires the development of new muscles. Leadership teams of the 21st century have a mandate to think and act differently, and adaptation is the key word when creating and aligning on a new strategy.
BCG is a global management consulting firm and the world’s leading advisor on business strategy. BCG partners with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses.
For more information on the Boston Consulting Group, visit www.BCG.com.