The Turnaround Management Society conducted a study on why companies fail. The study concluded that the top three reasons for corporate business failure are —
- companies continued with a strategy that was no longer working for the company.
- companies could not adapt fast enough to changes in the business environment.
- somewhere along the way companies lost their entrepreneurial vision and became disconnected from customers. These results have important implications for strategic planning professionals.
There has been an ongoing debate since the 1980’s about the effectiveness of strategic planning. The critics say that the business environment is too dynamic for planning to work well; that companies need to be agile and entrepreneurial to respond quickly to opportunities and threats as they unfold and that strategic plans are too slow to keep up. They advocate for strategic agility.
On their side of the debate, strategic planning professionals maintain that without a strategic plan, a company has no way to effectively implement its strategy. And it is strategy that enables a company to go from where it is today to where it wants to be in the future. We believe that there are valid points on both sides of this argument.
It is widely held that strategic planning and strategic agility are mutually exclusive. However, we suggest that these two positions can be synergistic if used in tandem. In order to prosper in today’s complex and fast-moving business environment companies need strategic plans, but they also need to be agile and entrepreneurial at the same time.
We recognize that there has been a fundamental shift in the nature of business. Globalization, the Internet and other technologies, hypercompetition, business model sophistication, the shift in economic power from firms to customers, the dissolution of industry boundaries, and other factors have had a profound effect on how companies compete and prosper. Because of this shift, some of the basic premises of traditional strategic management are no longer in alignment with the current business reality.
Over the last five years we have conducted extensive research with academics, consultants, and companies in pursuit of answering a single question — how can companies achieve sustainable double-digit growth in today’s complex and fast-moving business environment?
The answer is that companies must now manage for dynamic business growth — proactively improving and innovating business models, offerings and strategies in timely response to changes in the business environment with the aim of generating superior value for customers and profitable revenue for the provider.
Dynamic business growth is a strategic management discipline that enables companies (profit and non-profit) to sustain double-digit growth by continually identifying and exploiting the best opportunities and effectively responding to rolling threats.
The concept of dynamic business growth is not new. Dynamic business growth incorporates and converges upon many concepts, ideas and methods that have been proposed by various influential management thinkers over the years — Igor Ansoff, Kenneth Andrews, Henry Mintzberg, Peter Drucker, Michael Porter, Edith Penrose, Joseph Schumpeter, and others. The contribution we make is proposing a system that can make dynamic growth a reality rather than a prescription.
The Demand Creation System Enables Dynamic Business Growth
The Demand Creation System is an effective means by which companies can generate dynamic business growth via successful innovations. The Demand Creation System is an integrated set of concepts, methods, tools and techniques for maximizing the profitable revenue potential of existing products and services through successive value enhancements; and creating new offerings that customers want through value innovation.
The Demand Creation System consists of three working components — an opportunity radar (the Entrepreneurial Insight Generator), a value enhancement engine (VLIFT methodology), and a value innovation engine (AVID methodology). These three components are informed by a navigator (the Customer Demand Model) that ensures that innovation efforts actually create customer demand.
Origins of the Dynamic Growth Concept
Dynamic business growth builds on Henry Mintzberg’s emergent strategy framework where successful strategy is the result of both intended strategy and emergent strategy. Intended strategies are formulated by senior management and implemented via a strategic plan — the traditional top-down approach. Strategy also emerges from bottom up activities as people acting individually and collectively recognize opportunities to create profitable value from internal and external circumstances as they are presented. Strategic learning occurs as the workforce engages in strategic conversations and experimentation regarding the exploitation of these opportunities. As a result, existing offerings are improved and new offerings are created generating lucrative revenue streams.
Dynamic business growth incorporates a stream of research called “strategy as practice,” an activity-based view of strategy that describes how to facilitate the formation of emergent strategies. In this view, the workforce engages in micro strategizing which results in the formation of micro strategies. Micro strategies can then inform macro strategies so that a company’s strategic plan can be revised to reflect changing circumstances. Igor Ansoff, considered by many to be the father of strategic planning, calls this idea “succession of comparisons.” Ansoff argues that under conditions of high uncertainty it is better to create strategy through a succession of incremental changes that originate within operations rather than big strategic jumps based on assumptions (macro strategies).
Dynamic business growth also builds on the strategic agility framework suggested by Doz and Kosonen. There are three dimensions of strategic agility — strategic sensitivity, resource fluidity, and leadership unity. Where change is fast, complex, and systemic, and stable sources of strategic advantage short-lived, strategic foresight needs to be strongly complimented by strategic insight — an ability to perceive, analyze and make sense of complex strategic situations as they develop, and to be ready to take advantage of them.
Converging on the concept of dynamic business growth, Ansoff suggests that in turbulent times companies need to do more “discovery on opportunities.” Ansoff further argues that companies need to promote more entrepreneurial behavior within the firm and balance these opportunistic activities with strategic planning. Kenneth Andrews, another major contributor to the field of strategic management, suggests that in turbulent times firms need to have a “opportunity-finding mechanism” operating all the time; formalize it and use it to generate ideas and viable proposals on an ongoing basis.
Lymbersky, C. (2014). Why do companies fail — 2014 survey results from the Turnaround Management Society. Retrieved from http://www.corporate-failure.com
Mintzberg, Henry., Ahlstrand, Bruce W., Lampel, Joseph. (1998). Strategy safari: a guided tour through the wilds of strategic management. New York: Free Press.
Johnson, G., Melin, L., & Whittington, R. (2003). Micro Strategy and Strategizing: Towards an Activity-Based View. Journal of Management Studies Journal of Management Studies, 40(1), 3–22. doi:Article
Ansoff, H. Igor. (1969). Business strategy: selected readings; Harmondsworth: Penguin.
Doz, Yves L., Kosonen, Mikko. (2008). Fast strategy: how strategic agility will help you stay ahead of the game. Harlow, England; New York: Pearson/Longman.
Andrews, Kenneth R. (1971). The concept of corporate strategy. Homewood, Ill.: Dow Jones-Irwin.