In today’s rapidly changing business world, the importance of aligning strategy with reality cannot be overstated. Successful businesses continuously assess their strategies, making adjustments to stay aligned with market dynamics, and ensuring their capabilities match the needs of the time. Companies that stay rigidly attached to a single approach often risk becoming obsolete, as evidenced by Kodak’s failure to adapt to the digital age. In this article, we’ll explore why strategy flexibility is crucial, examine how capabilities align with strategic goals, and highlight examples from Kodak to modern tech giants like Google, Microsoft, and Apple
1. Strategy Alignment with Reality: An Ongoing Necessity
Strategic planning shouldn’t be a static, annual exercise. Instead, it should be an ongoing evaluation to ensure that strategy aligns with the market’s unfolding realities. When businesses hold onto outdated strategies, they risk missing key signals that indicate a need for change. Staying flexible means regularly assessing whether strategic goals match up with the current business environment, allowing companies to pivot before it’s too late.
2. Building and Leveraging Capabilities for Strategic Success
Developing capabilities is a critical component of successful strategy implementation. No company possesses every capability it needs, so prioritizing which capabilities to cultivate is essential. Companies should assess where they can create unique value in their target segment, directing investments into capabilities that offer competitive advantages.
For example, a business looking to innovate within its industry must not only strategize but also ensure it has the resources, skills, and infrastructure needed to execute the plan effectively. Balancing investments across essential capabilities – whether through in-house development or partnerships – can position a company to adapt more readily to change.
The reality is that successful strategies often necessitate external inputs. Recent industry trends highlight this shift, with numerous corporations opting for acquisitions and investments in startups. These strategic moves not only showcase an openness to external capabilities but also reveal a recognition that the market response hinges on staying agile and responsive.
3. Lessons from Kodak: The Danger of Strategic Myopia
Kodak’s journey from innovation leader to bankruptcy is a cautionary tale for any business that clings too tightly to a single business model. Founded in 1888, Kodak led the photography industry for decades, with iconic products like the Kodak Brownie camera making photography accessible to the masses. However, Kodak’s success in traditional film blinded it to the rise of digital technology, even though it invented the first digital camera in its own labs.
The company was hesitant to fully embrace digital photography, continuing to focus on film even as digital camera sales began to surge. When Kodak finally recognized the shift, it was too late. By then, competitors had established themselves in the digital market, and Kodak’s market share eroded. In 2012, Kodak filed for bankruptcy, a stark reminder of how rigid strategy can result in business decline.
Kodak’s leadership faced several barriers:
- Risk Aversion: A reluctance to invest in new technology due to comfort with existing profit models.
- Focus on Legacy Products: A narrow focus on film products, despite clear consumer preference for digital.
- Lack of Vision: Failing to foresee and act on the digital shift within the industry.
4. Embracing External Innovation: Strategies of Leading Tech Giants
To avoid the pitfalls of Kodak, companies today are increasingly turning to acquisitions and partnerships to fuel innovation. Rather than relying solely on internal capabilities, they are looking outside for agile, cutting-edge solutions.
Examples of Adaptive Strategies:
Google’s Investment in DeepMind (2014): Google’s acquisition of DeepMind enabled it to incorporate advanced AI into its products, including Google Search and Google Assistant. DeepMind’s capabilities have allowed Google to maintain a competitive edge in AI and machine learning.
Microsoft’s Acquisition of GitHub (2018): Acquiring GitHub gave Microsoft direct access to a community of developers and open-source software. This move aligned Microsoft’s strategy with the rapid rise of collaborative software development.
Apple’s Acquisition of NextVR (2020): Apple acquired NextVR to deepen its foothold in VR and AR markets. This strategic move is in line with Apple’s long-term focus on immersive technology, positioning it for future growth in VR and AR.
These acquisitions are more than transactions; they’re strategic adaptations to ensure these companies remain competitive. By integrating external capabilities, companies like Google, Microsoft, and Apple position themselves for sustained innovation and agility in a fast-paced market.
5. Balancing Innovation with Core Business Operations
One key takeaway for businesses is the need to build innovation into their strategic planning without disrupting core operations. This could mean creating a separate department focused on disruptive innovation or strategically investing in startups. The flexibility to engage in disruptive markets while maintaining existing revenue streams is often what separates companies that thrive from those that falter.
Conclusion:
In an era of constant change, businesses must commit to ongoing strategy assessment, align capabilities with strategic goals, and remain open to external innovation. The story of Kodak reminds us that sticking with outdated models can lead to decline. Meanwhile, modern companies like Google and Apple demonstrate how adaptability and strategic flexibility drive long-term success. Embracing a flexible approach is essential for any business aiming to stay competitive in today’s market landscape.
Written by Shadi Ashour
Business Development consultant