Rapid, volatile, discontinuous change is an inherent component of today’s business environment resulting from the emergence of the global economy, rapid technological change and diffusion. These forces have resulted in “Hypercompetition” which assumes uncertainty, instability and constant change along with an increasing focus by firms on advancing their competitive position and achieving above average returns – the primary objective of most businesses.
As a result of this the strategic management process is more important than ever, involving the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above average returns. This involves strategic planning, implementation and constant evaluation. Due to high levels of uncertainty in the external environment managers must ensure a focus on strategic management and adopt strategic flexibility – that is the development of capabilities which can be used to respond to specific threats and capitalise on opportunities that arise.
In order to establish strategic competitiveness firms must understand both their internal and the external environment. A firms external environment is divided into three main areas; the general, industry and competitive environments. Careful analysis of data relevant to the particular dimensions allows an organisation to develop capabilities that can buffer them from environmental turbulence ensuring greater likelihood of strategic competitiveness and above average returns.
Most firms face an external environment that is characterised by rapid, volatile, and discontinuous change and therefore must engage in external environmental analysis in order to understand potential opportunities and threats. This process involves four primary activities; Scanning, Monitoring, Forecasting and Assessing.
Understanding the competitive forces at play, and their underlying causes reveals the roots of an industry’s current profitability whilst providing a framework for anticipating and influencing competition over time which provides business leaders insight into the role, impacts and the implications of rapid, volatile, discontinuous change for an organisation.
Strategic leaders such as CEO’s are focused on achieving strategic competitiveness and earning above average returns for shareholders. Effective strategic management must assume rapid, volatile, discontinuous change requiring strategic flexibility and continuous issues-focused strategic planning which involves constant strategy reviews as opposed to an annual process and the establishment of clear links between decision making and planning. That is, CEO’s must improve and make more significant and faster strategic decisions as a result of this change whilst still ensuring rigorous and relevant debate, careful analysis and any required modification of the long term business plans of the firm.
When challenged with discontinuous change CEO’s who do not respond appropriately fail to recognise or simply miss the strategic significance of the threat or opportunity. Perhaps they have failed to continuously analysis the internal and external environments and do not realise that the job of the strategist never ends and that the CEO must watch over and guide the course of the firm, bringing it back to centre time and time again even as the centre evolves. The vigil the CEO keeps must be constant!
The only thing that is constant is change, and today’s business leaders faced with a business environment which is characterised by rapid, volatile, discontinuous change must ensure strategic flexibility in order to chart their firms correct course and ensure the achievement of strategic competitiveness and above average returns.
Importantly we must also remember that effective strategic management is more about living with and effectively adapting strategy over time as a result of this constant change rather than getting it right at the outset. Companies now don’t have the luxury of time, especially online players and to stay ahead of their competitors in the future they must be constantly starting new strategic initiatives and building and exploiting many transient competitive advantages simultaneously. Firms would also be well placed to think more about what they want to “be” rather than “have” in the future in effort to become more resilient and to balance the demands of stakeholders.