InsightaaS: In July, we highlighted a post by John Hagel, who has been shaping perspectives of the IT/business figure since he released the seminal Net Gain in the late 1990s. Today, we’re featuring another post from Hagel’s Edge Perspectives blog, looking at strategy. In it, Hagel contends that in recent years, the basis of strategy has shifted from position – “where you were located and whether there were barriers to entry” – to core competencies and agility. Today, though, Hagel sees a return to strategy focused on positioning, as a result of a broad movement towards “fragmentation and concentration in the economy.” Executives looking for growth in the parts of the economy that are fragmenting, he argues, will face a daunting task, faced with “eroding economics.” Those who are in a segment that is consolidating will find that “growth can be amplified and sustained” by these broader trends.
Hagel notes that there is an interrelationship between the fragmenting and consolidating sectors. He uses the examples of Google and Amazon as firms in consolidating areas who benefit from – and provide benefit to – many smaller firms. This, he believes, highlights another strategic consideration: the ability to position your firm as a hub with “a growing cluster of relationships.” In this context, growth via alliances, ecosystem participation and complementary capabilities becomes a surer path to success than focus on either organic growth or acquisitions. This, Hagel maintains, has dramatic implications for development (and evolution) of core competencies, leading to the four issues that Hagel believes should be on every CEO’s agenda – ensuring that they are focused on concentrating areas of the business landscape, participating in ecosystems that amplify value, core competency focus, and scalable learning.
We’re all trying our best to remain standing, but the ground beneath us is shifting at an accelerating rate. The implications for strategy are profound, but few have explored this terrain.
Strategies of position are back
Strategy was once all about position — all that mattered was where you were located and whether there were barriers to entry. As structural advantages eroded, this view of strategy fell out of vogue. In its place, we heard all about strategies of movement and capability — it was all about your “core competencies” and how quickly you could move across a changing landscape. Now, it looks like strategies of position will reassert themselves with a vengeance…
Position shapes growth potential
If you’re an executive in a large company under pressure to achieve more growth or if you’re an executive in a smaller company seeking to achieve high rates of growth, where you stand matters hugely. If you’re in a part of the economy that’s fragmenting, growth will become increasingly challenging. Ultimately you’ll find yourself trapped in a spiral of shrinking share and eroding economics. On the other hand, if you’re in a part of the economy that’s concentrating, growth can be amplified and sustained by riding the waves that are driving concentration. Position suddenly matters big time.
So, the choice of ground that you’re standing on matters. But there’s a second way that position is becoming more important…