Lead Through Volatility With Adaptive Strategy

Traditional strategy approaches were not designed for a rapidly changing world, and leading enterprises are responding by adopting an adaptive strategy approach.

“An adaptive approach to long-term strategy is more fitting for a world in which business models are transforming more frequently, and often more radically,” says Ian Cox, Senior Director, Analyst, Gartner. “The faster the rate of change, the more adaptability becomes a key imperative.”

Gartner research has shown that a truly adaptive strategy approach is consistent with four core practices designed to move the enterprise from a rigid, top-down, calendar-based process to a more adaptive, event-driven strategy approach. 

“Enterprises that can spot new opportunities earlier and respond more quickly than their competitors are the ones most likely to succeed in the dynamic digital world,” says Cox.

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4 core practices

The practices outlined below aren't intended to replace the enterprise’s existing strategy approach. They are meant to provide guidance on how to tailor or modify it for the digital world — and encourage the organization to view strategy as a continuous learning activity instead of a one-off planning exercise.

While a truly adaptive approach will be based on all four core practices, enterprises can initially focus on the practices that address their immediate strategy challenges. Most traditional enterprises will initially focus on just one or two of the core practices when starting their journey to a more adaptive approach to strategy.

No. 1: Start execution as early as possible

Strategy defines the long-term choices and actions the enterprise must take to create, deliver and capture value as envisaged in the business model. But the more time spent creating a plan, the less time there is to execute it, increasing the risk that the world has moved on and the plan is out of date.

Implementing promptly also helps to surface the plan’s flaws and identify where to improve. Adaptive strategy doesn’t require perfect or complete information to execute; it uses available information to identify the most immediate actions required to be successful. 

No. 2: Respond to changes as they happen

Given today’s highly disrupted conditions, few enterprises can afford to wait a year to review strategy as was typical when business context moved slowly, and disruption happened infrequently, if at all. Some now review their strategy on a quarterly or even a monthly basis, but a truly adaptive enterprise monitors its business context on an ongoing basis, initiating a strategy review whenever new information is available to reframe the context. 

The vision that guides an adaptive strategy can still be long-term and bold — but should be continually extended (not changed completely once every few years) to push the boundaries of what the enterprise must do to succeed.

No. 3: Embrace and explore uncertainty

Uncertainty creates opportunity, so although it inevitably involves accepting a level of risk in some areas, enterprises that embrace risk and respond quickly to events as they happen are more likely to succeed in an uncertain world. Adaptive strategy in business helps them accomplish this and mitigate risk. 

No. 4: Involve everyone in strategy

A top-down strategy process involves a select few individuals, while an adaptive process is inclusive, engaging and collaborative, with ideas and insights contributed from anyone within or outside the organization. This approach increases the enterprise’s ability to create, update and implement strategy and improves the quality of the output. 

9 building blocks

Our research has surfaced nine building blocks that help establish the four practices, but more are likely to emerge over time.

Most traditional enterprises will initially focus on the subset of building blocks that will help them establish the two or so core practices on which they're focusing first. They use these building blocks in response to specific issues and alongside a more traditional strategy process to add elements of an adaptive approach. Companies that were born digital often use many more building blocks.

Building blocks cover:

• Inputs: How ideas, insights and information relevant to strategy are generated, obtained or captured. The blocks are real-time insights, crowdsourcing and continual scanning.
• Process: The way in which strategy is created, reviewed, maintained and updated. Blocks: Distributed decisions, strategy sprints, continual process. 
• Outputs: The format, content or structure of strategy. Blocks: Option-based strategies, experiment-based strategies and minimum viable strategy.

3 implementation steps

Because rapidly changing conditions affect each enterprise in a unique way, organizations will select the most appropriate blocks to address their immediate strategy challenges. 

1. Define your strategy challenges. Ask whether your strategy approach takes too long to craft or implement. Is it slow to respond to change, or does it perhaps lack commitment?
2. Map those challenges to the practices you need to establish. For example, if you take too long to implement strategy, focus on the practice that you need to start execution as soon as possible.
3. Select the appropriate building blocks. You don’t have to use all three building blocks. You may, for example, focus on strategy sprints to create a minimum viable strategy.

Enterprises will only realize the benefits of an adaptive approach if they can respond quickly to changing strategic priorities. For example, operational plans, budgets, roles and team structures may all need to be revised if there is a change in business strategy. Adaptive strategy, therefore, has implications for the wider organization, which is why enterprises will also need an adaptive operating model.

This article has been updated from the July 2020 original to reflect new events, conditions and research.