The Covid-19 pandemic brought unprecedented change to all corners of the globe. As we (fingers crossed) emerge from two years of lockdowns, some of these changes will persist, not least the increase in home-working and an ongoing feeling of uncertainty. But what does this uncertainty mean for corporate strategies and how they are created?
In many organisations, strategic planning has traditionally been a regular, organised, top-down pursuit: the senior management team set a vision and goals for the next five years, middle managers develop detailed plans for their functional areas, and the plans are implemented. Five years later the whole thing gets revisited.
That approach to strategy – known as 'classical strategy' – no longer works. Because, when the world is changing so fast, you can't wait five years to adjust course. There's also a case to be made that senior management aren't necessarily the people most in touch with what is going on in the world. All this means that 'adaptive strategy' is now coming of age.
Don't plan, experiment
At its core, adaptive strategy is about continual experimentation and monitoring. It's an approach that allows organisations to scale up what's working well and scale back what's not. During the pandemic, Spanish clothing retailer Zara benefited from this strategic approach, since it enabled the company to be agile, rapidly changing direction in light of changing customer needs.
Zara was able to do this because the company already used experimentation and monitoring to deliver competitive success. What sets Zara apart from other clothing retailers is its 'instant fashion' process, a design, manufacturing and distribution model that involves monitoring social media trends and collecting customer feedback, designing and manufacturing small batches of clothes at speed, tracking how sales are going and using data to make rapid decisions about which designs to discontinue, adapt or create.
While other companies were left with unsold stock that would be outdated once their shops could reopen, Zara's adaptive approach meant it could adjust focus in the midst of the pandemic, producing pyjamas, tracksuit bottoms and other comfortable clothes that became popular during lockdown. The resultant sales soon made up for Zara's own lost revenue from closed stores.
In the current environment, Zara's ability to adapt is now something all organisations could benefit from. In a recent article published by MIT Sloan Management Review Olenka Kacperczyk of London Business School predicts that business strategy post-pandemic will increasingly be used, "to detect and to navigate unanticipated shifts in the market, such as shocks to the demand of products and services or disruption of established business models". For Kacpercyzk, that means reinventing operations so they become more resilient to "jolts" in the world around us.
Kacpercyzk isn't alone in her view that strategy is changing. In a survey of experts in the same article, over 55% said that the pandemic had permanently changed how companies should think about business strategy.
Use data and insight
So, what can you do to shift from a classical to an adaptive strategic approach? Here are three top tips, each inspired by Zara's agile business practices:
1. Set up systems to gather, analyse and disseminate data that tells you something about the external environment and how your customers and clients perceive you. Think about ways to pick up on current trends, to observe your customers' or clients' behaviour, and to solicit feedback from them. The quicker you can get data into the hands of decision-makers the better.
2. Set up systems to gather, analyse and disseminate data that tells you something about how your current strategy is panning out. Think about setting up a series of small goals that you can regularly evaluate progress against, so you don't have to wait to see whether a longer-term goal is achieved.
3. Systematise regular check-in points where you discuss the external and internal data and make hard decisions. Interrogate the data and what it is telling you. Decide whether to carry on with your current strategy, whether to stop what you're doing or whether to pivot to an alternative strategy (as Zara did, when it began making loungewear).
Adopt these three approaches and you'll be more ready for what the world throws at you. And even if we don't encounter another seismic event like the pandemic, you will – like Zara – have built yourself some valuable competitive advantage.
Anna Faherty is an author for accountingcpd. To see her courses, click here.