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Disruptive innovative technologies like Artificial Intelligence and advanced automation are complicating the development and implementation of competitive strategy. They are disrupting business models, altering customer expectations and changing market boundaries. Businesses are having to adapt faster than traditional strategy development and implementation allow. These developments have raised questions about competitive strategy’s relevance in the digital age.
Unfortunately, the record of company innovation and adaptation in the absence of an effective competitive strategy has been poor. Businesses that lack strategic guidance frequently struggle coordinating decisions, resources and activities in response to disruptive technological innovations. The best performing ones usually leverage their competitive strategy to adapt and develop more compelling, innovative value propositions. This process can fail in environments where recurrent waves of disruptive technological innovations make timely strategy evolution difficult. That’s the challenge facing established companies competing in the dynamic competitive markets of our digital age. It’s a seemingly intractable problem: companies need effective strategic guidance to cope with change, but the rate of change undermines efforts to sustain an effective competitive strategy.
What’s needed are more responsive, agile strategic practices that support long-term objectives, mid-term performance and short-term adaptability. Ideally, they should provide effective strategic guidance and discipline as the business updates its business models and compelling value propositions. We’ve developed several solutions based on a framework introduced by Gary Hammel and C.K. Prahalad in the late 1980s. Strategic Intent[i] emerged from the practices used by Japanese companies like Komatsu and Honda to outperform larger American and European competitors. We adapted its principles and practices by incorporating lessons learned during previous technologically disruptive periods, including the 1998-2005 dot-com boom and bust.
Describing the framework
Strategic intent defines an approach and competitive commitment above the strategy level. It pushes organizations beyond comfortable strategic and operational boundaries in pursuit of greater competitive advantage. In this context, strategies and business models may evolve or get replaced, while strategic intent remains largely intact. Its central purpose is to deliver consistency in the long term, focus in the medium term, and inventiveness and involvement in the short term.[ii] To achieve it, strategic intent calls on companies to discard competitive imitation in favor of competitive innovation. In the modern context, competitive innovation is about exploiting disruptive technological innovations to change the company’s approach to competition.
It’s a simple concept that faces significant implementation challenges, particularly in established companies. Hammel and Prahalad recognized that successful companies are often wedded to their recipe for success and strongly believe in accepted practices. These serve to anchor them to the past by creating barriers to timely, agile adaptation. Disruptive innovative technologies frequently render once reliable recipes and practices obsolete and doom market leaders that are slow to respond. Strategic intent overcomes these limitations by consistently pressuring business leaders and managers to reach beyond comfortable recipes and practices. It demands commitment to understanding and exploiting emerging innovative technologies and methods. Strategic intent, when expertly translated to modern contexts, promotes the innovative, entrepreneurial cultures indispensable to success in the digital age.
Summary and implications
Strategic intent was formulated before the Internet changed the rules of business. We concluded that its foundational principles remain valid and can deliver strategic guidance in the long, mid and short terms. It can also help companies bridge periods of rapid technological innovations when disruptions are too frequent for traditional competitive strategy development and implementation.
Strategic intent’s flexibility is reflected in its goal, which is to “fold the future back into the present.” The key question, according to Hamel and Prahalad, “is not ‘How will next year be different from this year?, but ‘What must we do differently next year to get closer to our strategic intent?’[iii]” We believe that this question is more relevant today than when it was first published in 1989. How it is answered will largely determine how effectively companies cope, adapt and thrive in dynamic operational-competitive markets.
[i] Gary Hamel, C.K. Prahalad, Strategic Intent, Harvard Business Review, May 1989.