SHAISTA
BANU HARRIS
ASST
PROFESSOR, DEPARTMENT: MBA
STRATEGIC
DECAY
The success or failures of companies depend on the
strategies planned by them. The management of strategies can thus be explained
as an ongoing process that evaluates the business and the industry in which a
company is involved so as to assess its competitors and sets goals and long
term plans to meet all existing and potential demands of consumer. It is
ongoing because companies need to be reassessing its strategies regularly.
Although Strategic Management has a wide range of concepts that are used by
companies and taught in business schools, “Strategic Decay” is a comparatively
new concept introduced by Gary Hamel. Strategic Decay is the understanding that
the value of every strategy, no matter how brilliant, decays over time. Thus no
company can have a fixed strategy for extended periods of time, no matter how successful
the strategy, because with the passage of time, new challenges and market
changes will ensure that the selected strategy will lose its competitive
advantage.
The problem with most companies that have ruled the market earlier but end
up losing their hold later is that they miss the signs when business strategies start to decay. A good
example is Mircrosoft, who were the world leaders in PC software. Its Windows
operating system was the OS of almost every computer on the planet. The company
held the strong belief that its strategy of selling software and getting
revenue from computing hardware manufacturers was the best way to do business.
The company never realised the small changes in the market where underdogs like
Apple changed the game would result in disastrous consequences. The visionary
Steve Jobs
turned Apple into a fashionable, innovative, trendsetting designer of a series
of new computing products that began leading the whole PC industry. Microsoft
was too late to react to its strategic decay. Today Apple dominates the tech industry with its iphones and ipads
and Microsoft is slowly trying to correct its strategic mistakes by introducing
hardware and software integrated products such as the ‘Surface’ designed to do
what Apple is doing. But unfortunately, the company has not yet seen any
success as it is a late entrant in the industry, with Google’s Android and
Apple’s iOS dominating the market.
According to Gary Hamel a business needs to
answer some questions honestly to recognize strategic decay in the business
while there's still time to do correct the situation. These questions include:
·
Does the company strategy defy industry norms and provide
competitive advantages and high profits?
The company cannot lie
back and relax on its success. The industry keeps changing depending on the
changes in consumer tastes and trends, new technological breakthroughs and
branding of competitors. A strategy selected by a company that worked last year
may be a failure this year. Thus the firm needs to keep monitoring the industry
conditions to maintain its competitive advantage.
·
Are changes in the political, social or business markets affecting the
company strategy to make it less powerful or less relevant in the market?
When Gaddafi lost power
in Libya, all the major businesses that ruled the market shattered. The
transition was absolutely upsetting to their plans as they were not ready for
such a political change. Thus companies need to always have a contingency plan
in the markets in which it operates.
·
Is the pace of improvement in key performance criteria slowing down?
Apple may still be the number one
desirable smart phone maker in the world. But recent studies show that
consumers are losing their interest in Apple iphones as the product seems to
have nothing new or exciting to offer. Apple’s key advantage is its branding and
easy user-interface but with powerful competitors like Samsung already flooding
the market with similar or in some cases even better devices, the company may
need to make sure that it is not facing strategic decay.
·
Is increasing customer power reducing profits?
This is one of the key
questions that affect social media sites like Facebook. When the company went
public, its share value fell down drastically because of lack in investor
confidence about the ability for the company to generate revenue. One of the
reasons for this lack of confidence is the fact that Facebook does not have
much power over its consumers. If the users feel any threat or discomfort in
Facebook user policies, like advertisements that seem too in-your-face or
stealing of their personal information to be sold to third-party companies,
Facebook is in danger of losing its customer base who would simply migrate to
another networking website. Thus it is a tricky play for Facebook to avoid
strategic decay.
In a world where the usual 4P’s of classic marketing strategy (product,
price, promotions and place) are facing strategic decay, companies are looking
at doing something that can create true differentiation and gain commitment
from its stakeholders. This is where a new set of Ps come into play.
Companies need to focus more on how the brand can be humanized to
a make a ‘real’ difference, using the below 4 new Ps to create the differentiation.
1) People: This is most important in service-related categories,
whether a retail outlet, restaurant, banking, or airline – the People who are
basically the “customer facing employees” represent the brand to customers.
These people must be trained to bridge the gap between brand promise and brand
delivery. Eg. KFC, Eureka Forbes
2) Personality: In cases where the “front liner people” are invisible
to the end consumer, brands need to create a strong and attractive Personality
that can help their consumers feel connected to the company and express their
own self identities. Examples: Coke, Apple, BMW
3) Participate: Brands must try to allow consumers to Participate
in creating meanings for the brand that are symbolic in representing themselves
– Examples: Apple, Google, Facebook are companies that are defined by what the
user wants it to be.
4) Purpose driven: Brands
can become more Purpose driven and focus on a set of values, beyond simple
material benefits, that consumers care deeply about, that can build deeper
meaning into their company brand names and create a more caring important
relationship with consumers. Examples: Being Human, Nike (Livestrong).
References:
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