Rising complexities!

Strategic landscape has changed; strategy formulation should follow suit! On any given day, AT&T might find Motorola as a competitor, customer or a supplier. Hyper-competition, co-opetition, strategic disruption and 'amazon'ed are some of the terms that are dominating business headlines today. Companies are fighting tooth and nail to preserve their markets while the competition is relentless. New players are causing havoc among the traditional players with their revolutionary and radical strategies, which often render their predecessors obsolete. The parameters and frameworks that worked till yesterday do not hold water anymore. For instance, in the pre-amazon.com days, retailers did not consider the net as a threat. Today, no retailing strategy is complete without taking Internet into consideration. In the emerging scenarios, it is logical to conclude that it is essential to redefine the strategic imperative and align it with the changing business environment. The following scenario emphasises the importance of such an exercise. A regional bank faces competition from foreign and private players. To remain competitive, it must not only exceed current service expectations but also uncover latent and unarticulated needs. It has to turn into a one-stop shop for financial services. In retrospect, the strategy and policies never gave the organisation a long-term perspective. How does it go about such an exercise? Traditional strategic framework is basically centred around the firm and its strengths, along with the influence of various industry participants on it. At the core, all traditional frameworks are formed with certain assumptions in place: 1. Strategic landscape or the Industrial structure 2. Advantage and value 3. Uncertainty levels I. Strategic landscape or the Industrial structure

Intel, a fiercely competitive company, manufactures microprocessors to power personal computers. Collaboration with other players like Microsoft, HP, Compaq and other manufacturers of PCs and videogames is vital for its success. It supports advances across the entire communications media and PC sector. Wintel, the alliance between Microsoft and Intel to create a common platform for PCs, has the PC industry by the hammerlock. This is not an isolated case. Players in most industries are forging complex partnerships and alliances to succeed in an increasingly cluttered marketplace. Traditionally, strategic planning rationalises the industrial structure, which assumes that all competitive activity is conducted at arm¶s-length. This does not hold ground anymore, competitors are using every weapon in the arsenal and what¶s more it comes from unpredictable quarters. The competition is not between companies but between the efficiencies of different partnerships/alliances. Today, the industrial structures are more complicated and convoluted resulting in companies blindly applying the traditional framework facing the risk of failure.

g. across industries. What seemed like an industry. (e. physical infrastructure and merchandising suddenly had an alternative dimension. uncertainty is hidden in a continuum. Now companies cannot hide behind the protectionist barriers of governments. Automobile) 2. companies have a set of scenarios. The uncertainty is limited to the applicability of each scenario. Today. . Kevin P & Subramaniam. Continuum: In industries where entry barriers are low and product innovation and obsolescence is high. the pharmaceutical sector will witness open competition. until recently. throwing up both opportunities and challenges. companies that have operated in closed conditions suddenly find themselves all at sea. Companies need to look beyond traditional frameworks for strategy formulation. usually divergent. these pharmaceutical companies are in a frenzy to develop their core competencies. Competition has a new advocate. The emerging business environment. which needed heavy capital investment because of the real estate.g. The marketplace was far more certain when Barnes and Noble opened shop. This is also the case with many traditional industries which have been µamazoned¶ by innovations on/due to the net. Emerging scenarios: In industries where the future is dependent on a policy decision or other such regulations.g. Companies that possess a knowledge base that is difficult to duplicate and/or consistently out-perform their competitors will succeed. The migration from the µproduct¶ patent regime to the µprocess¶ patent regime will see a lot of companies biting the dust. Coyne. 2000. when markets are opened to foreign participation and therefore exist in a state of complete uncertainty. The foundation of these frameworks is not on certain ground.com has shaken up the retailing industry. Telecommunications) 3. Uncertainty levels Pharmaceutical companies in some countries. before them. the uncertainty is limited and the future can be predicted with reasonable degree of confidence. (e. Related Reading : ³Bringing discipline to strategy´. Then came WTO with GATT and GATS.II. Advantage and Value Amazon. in fact revolutionary business models of new entrants are rendering the traditional sources of competitive advantage obsolete. Compared to few years back. III. the Web! Entry barriers are falling all over the world in almost all industries. The business environment has evolved. (e. enjoyed protectionist patronage from governments. has evolved into a µmore-complex-than-ever¶ phase where the past may offer little guidance. Knowledge that is either patented or cannot be duplicated has emerged as a potent source of competitive advantage. Somu. the industry participants face higher levels of ambiguity and uncertainty. Post-GATT. Traditional companies thwarted potential companies by erecting high entry barriers and other obstacles. Globalisation of trade and the Internet have changed the scenario. but Amazon. where any scenario can take shape. industries only differ in the level of uncertainty.com has changed that to an extent. Why? Come 2005. most industries still can¶t paint a clear picture of the future. McKinsey Quarterly. which means companies are not sure about where competition is going to come from. the Internet. However. True Ambiguity: In emerging economies. which follows four stages: 1. Structural advantage (which accrued due to the industry structure) is not the only source of competitive advantage. Software) 4. Evolutionary: In industries where the evolution is a gradual and predictable process.