Wednesday, November 4, 2015

The Adaptable Strategy in Practice: 
What We Can Learn from Today’s Tech Giants - (Ben Peters)

According to a survey mentioned in the article “Your Strategy Needs a Strategy”, by Reeves, Love, and Tillmanns, 75% of the executives in the poll indicated that they understood that different strategic styles needed to be employed in different circumstances. However, from that same group, 75% of executives were employing a strategy best suited for predictable environments, leaving only 25% who are prepared to adapt to unpredictable events. Adaptive and shaping strategy styles may be difficult to successfully develop and implement, but there are some great examples we can analyze and learn from in the technology industry today.

An article from the Boston Consulting Group, entitled The Evolvable Enterprise: Lessonsfrom the New Technology Giants”, talks about how today’s modern tech giants, such as Google, Amazon, Netflix, and Facebook, have taken the evolvable algorithms that have made their products highly successful and applied the same principles to their organizational strategy. Quoted directly from the article, evolvable algorithms possess the following capabilities:


·         Defining a very broad option space
·         Modeling expected payoffs from options leveraging all available information
·         Testing promising options quickly and cheaply
·         Rapidly updating option assessments in light of new information and reallocating resources by scaling up, stopping, or repurposing investments
·         Quickly iterating the above steps in a self-tuning manner, thereby overcoming the information complexity and speed constraints of “managerial” decision making
·         Measuring outcomes and optimizing the algorithm itself in response to changing circumstances


These companies’ potential for future sustainability isn’t dependent on any piece of software or algorithm they have developed, because those things can eventually be replicated by their competitors. No, these companies’ core competency lies in their ability to apply the ideas behind their algorithms into their core strategy. Google’s ability to explore a wide range of business options quickly and cheaply and their practice of eliminating projects that aren’t profitable systematically through quantitative analysis have made them a highly adaptable organization.

These kinds of evolvable strategies are not limited to companies in the high-tech industry. Traditional organizations can utilize the same principles in their strategies. It is not simply the matter of shoveling more money into your company’s R+D endeavors, it’s the ability to know where to invest, how much, and how much time should I invest before I can determine whether it will lead to profitability. These decisions need to be calculated intelligently through quantitative analysis rather than through pure intuition.

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