JIT Strategy
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Excellent article on changing corporate strategy on McKinsey Quarterly titled Just-in-time strategy for a turbulent world. Article states that the classic approach to corporate strategy starts with a presumption: that with sufficient analytical rigor and an adequate assessment of the probabilities, strategists can pave a predictable path to the future from the matter of the past. Well, the downside of this approach as you guessed it, is the inability of the organization to quickly adapt to changing environment. This approach used to work out well in the past because the global macro economic conditions changed slowly. This ensured that the industry and the competitors changed slowly giving the organization a long lead time adapt to the changing environment. In this environment a business strategist could be compared to the captain of a large ship peering through the binoculars on a clear day. Anticipating change far ahead, business strategist would be able to change the direction of the ship well ahead of time.
Well, business strategist in today’s hypercompetitive globalized economy does not have the luxury to use the ‘classical’ method. In this new environment, the business strategist can be compared to a race car driver moving through the winding lanes on a foggy day with the competitors following closely behind. The article proposes JIT (Just in time) strategy to adapt to this new reality. In this new JIT approach Strategy today the corporation has to align itself to the fluid nature of this external environment. It must be flexible enough to change constantly and to adapt to outside and internal conditions even as the aspiration to deliver favorable outcomes for shareholders remains constant.
The process requires the CEO and the management team to keep an open mind about where the company might be headed. Inherent in this approach is the understanding that future decisions and future outcomes are likely to vary enormously from initial hypotheses. The whole process resembles art more than science. Most of the critical decisions involve subjective judgments that, unlike those generated by more deterministic strategies, will be informed by not just the highest-quality staff work but also the knowledge gained as time passes.
The article concludes by stating that the traditional deterministic approaches to strategy aren’t likely to be up to the task of helping companies negotiate these dangerous waters, but executives need not put the fate of their businesses entirely in the hands of chance. As the global environment continually changes and risk levels rise, a portfolio-of-initiatives approach holds out the opportunity for corporations to be as flexible and adaptive as the markets themselves.
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Tuesday, September 16th, 2008 at 9:11 am and is filed under Globalization, Business Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
