In their article “Your Strategy Needs a Strategy,” Martin Reeves, Claire Love, and Philipp Tillmanns detail a two-pronged matrix which company leaders should use to determine their strategic style.[i] The concept as they present it is that the strategy employed by management should be determined by the industry’s predictability and malleability. Below, I would like to briefly demonstrate an instance where this strategy could have served a company well to have been implemented, and how a lack of self-awareness drove the executives to turn their greatest asset against themselves.
In 2006, I was serving in the role of Assistant Controller for a small plywood company (PFP). The company had long served as a successful supply chain management firm for a global cabinet manufacturer: procuring product, facilitating transportation and warehousing, performing quality control, and assuring inventory levels. As the cabinet manufacturing business was directly correlated to the then-booming housing market, PFP was enjoying great success and accompanying profits. PFP was led by two very strong personalities: an idealistic CEO, and an aggressive President. The two men were very dissimilar in demeanor and attitude – the CEO being an elderly Southern gentleman, the President being a loud and burly brawler – but shared much common ground in their motivation to constantly expand the company to something larger than its current state. To this end, company profits were invested towards the opening of a manufacturing plant.
In Reeves, Love, and Tillmanns’ terms, the business of wholesaling product to a global manufacturer whose business is tied solely to the strength of the American housing market should fall under the heading of “High predictability, low malleability.” This would have called for the Classical strategy style. PFP performed a needed function, and performed it very well. A sound strategy would have been to constantly analyze our own performance, set measurable and achievable goals (ie, product quality, sales margins), and applied earned profits towards assuring corporate health and sustainability.
As was the case, in 2007 the bottom fell out of the housing market, and what was once a highly predictable market suffered a drastic shockwave. In this scenario, an Adaptive strategy would have been beneficial to the company: focusing on the most profitable aspects of our business, shedding excess costs which were no longer serviceable, perhaps seeking customers outside of the housing market. Furthermore, it is my belief that the company’s unique leadership blend would have excelled under this strategy. Unfortunately, the decisions made by the company during the “predictable” market period tied its assets to expansion – leases signed, capital equipment purchased – and no longer had the nimble maneuverability of what was once a small wholesaler.
It is my opinion that the Reeves, Love, and Tillmann model of choosing a strategy compatible with your company’s place in a particular market phase is a sound one, but requisite of the assumption that executives have the capability of understanding their place in the market. In my example, the executives of a profitable company turned its assets against itself by not being aware of their market niche – or, if aware of it, aspiring for something they perceived to be greater. It is my belief that this is not an unusual circumstance and could serve well as a cautionary tale for company executives, regardless of their strategic style.