Last version published: 24/05/2022 13:50
Publication number: ELQ-42397-4
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BCG's Strategy Palette (or Strategic Style) Matrix Template
A hands-on PPT template version of Martin Reeves' (BCG) Strategy Palette Framework to discover the appropriate strategic style for your company/ business unit.
In his 2014 Ted Talk Institute "Your Strategy Needs a Strategy" (https://www.ted.com/talks/martin_reeves_your_strategy_needs_a_strategy ), Martin Reeves, Managing Director of BCG's Henderson Institute defined STRATEGY in the following words: "it's getting a job done, it's a tool, and the job is winning competitively in a particular situation".
In the context of increased business environment unpredictability, and accelerated Business Cycles in this first half of the 21st century, traditional strategy frameworks (such as Bruce Henderson's Rule of Three and Four: https://www.eloquens.com/tool/A38MUj4q/strategy/market-analysis/bcg-s-rule-of-three-and-four-strategy-framework-template ), can give limited insights into what Strategy to implement. Moreover, Strategies need to be increasingly tailored to the specific problem or competitive game the target organisation is playing at. As an illustration he opposes the strategic style needed to be successful, for example, in the Oil & Gas Industry vs Software; one being highly predictable and the other far less, and also more malleable by the strategic moves of one major player.
As a consequence, there is a need to adapt the "strategy making-processes" to the business environment each company or business unit is playing in. Or as REEVES puts it... "a strategy to make strategy".
REEVES' solution was to come up with a 2x2 matrix (+1 dimension), enabling strategists to appropriately position the industries their company or business unit is playing in, and thus discover the corresponding strategic style(s): the now world famous "Strategy Palette". 🎨♟
The "Strategy Palette" originally stems from a September 2012 Competitive Strategy paper by Martin Reeves, Claire Love, and Philipp Tillmanns on HBR (Harvard Business Review) - see original paper here: https://hbr.org/2012/09/your-strategy-needs-a-strategy . The paper quickly became popular leading Martin Reeves, his team and BCG to dig deeper in explaining the framework (book, dedicated pages on BCG Blog, Videos, Courses, TED Talks etc.).
The Framework has 3 dimensions: Industry Predictability (X-Axis), Industry Malleability (Y-Axis) and Harshness (Z-Axis):
✅-> Y-Axis - Industry Predictability (IP): the degree to which the future can be correctly forecasted in terms of market demand, organizational performance, competitive moves and market changes.✅-> X-Axis - Industry Malleability (IM): the degree to which competitors in a given market/industry can influence the above factors. "industry youthfulness, concentration, growth rate, innovation rate, and rate of technology change—all of which increase malleability."
✅-> Z-Axis - Harshness: the degree to which the current way the organisation is conducting business can be continued profitably over time.
The combination of the Y and X axis leads to the following four quadrant matrix, defining potential strategic styles for an organisation or business unit.
- 🎻CLASSICAL - BE BIG (Low IM, High IP) : the strategic style to adopt here is the one often linked to "classical business strategy frameworks" (five forces, blue ocean, growth-share, PESTL, McKinsey's three strategic horizons etc.). To put it simply, an organisation generally sets itself a goal (analyse), aims for a position on market (plan) and then uses its particular and unique ressources, skills and capabilities to exactly attain the position (execute). The objective then changes to strengthening the position over several years (generally using Strategic Planning and Financial Forecasting models, with very low uncertainty on the value and nature of market drivers). The naturally slow evolution of markets in the "CLASSICAL" category, enable strategic information to be distilled down the organisation to each department, in a structured and coherent way.
Examples: Oil Industry, Beverages, Tobacco.
🛠 Bundle of "Classical Strategy Frameworks" that can be used when a BU is in this CLASSICAL strategic style: https://www.eloquens.com/tool/a7rgt4Bb/strategy/management-consulting-templates-and-frameworks/classic-business-strategy-frameworks-template-slides-bundle
- 🦎ADAPTIVE - BE FAST (Low IM, Low IP): When the strategies implemented today are highly unlikely to work tomorrow, strategists have to adopt a more "reactive" or ADAPTIVE strategic style. As analysed by Martin Reeves and Mike Deimler (HBR 2011), in "Adaptability: The New Competitive Advantage", many industries (especially the most technological) have rarely ever been (yet) in the CLASSICAL categories. With the increase of velocity in innovation, distribution networks, global markets, accelerated customer feedback loops, coupled with higher levels of economic interdependency and thus uncertainty, the business environment is becoming more unpredictable. As a consequence, drafting a strategy in the CLASSICAL style may mean the output will most likely be obsolete in less than a year (even less in specific cases). Thus, organisations playing in such markets/industries need to adopt a "ADAPTIVE" strategic style, constantly looking to refine, adjust and re-caliber their strategy to a carefully monitored business environment. The organisation must hence be designed to be flexible rather than absolutely aim for operational efficiency. Plans are released regularly during the year, and even at uneven intervals. To minimise information tag lags, strategy teams need to create ways to capture market and organisation data (quantitative and qualitative), by working much closer to operational teams.
Examples: Biotechnology, Transportation Infrastructure, Building Products
- 🏗SHAPING - BE THE ORCHESTRATOR (High IM, Low IP): In young dynamic markets characterised by high uncertainty, high levels of innovation and unpredictable customer demand, competitive positions are constantly changing. Companies are often making bold moves to capture possible large untaped customer demand. Mature fragmented industries, not dominated by a couple of incumbents (as would Henderson's rule of Three and Four otherwise stipulate), are also malleable. Indeed, CLASSICAL and ADAPTIVE strategies make it hard to keep up with changing events and taking advantage of unpredicted business opportunities. Having the ability to voluntarily adjust the market structure to your company's position and value proposition, is indeed a unique opportunity needing flexibility & high risk taking capabilities. Conducting constant experiments to capture "weak signals" of big potential opportunities will increase the chances of being successful. To distribute the risk, companies in the SHAPING strategic style often have operational boundaries that go well beyond the official team on their payroll. For example, it encompasses quite a number of its stakeholders by creating partnerships, communities, eco-systems, influencers, consortiums with suppliers and even sometimes close complementary competitors.
Examples: Internet Software, Professional Services.
- 🚀VISIONARY - BE FIRST (High IM, High IP): In some cases, a company has at the same time the ability to: shape the future of its market, have a VISION of what it is going to be like, and predict the journey to realising this future. These are VISIONARY markets and their associated strategic styles. Bold strategies are often put into place by entrepreneurs capable of creating completely new markets from an intuition (e.g. Edison & Electricity, or Ratan TATA with affordable 1000 USD cars, Steve Jobs & the Iphone). Strategies here are often focused on building a great product that people will love to purchase and use (or as BCG's HRB article says: "build-it-and-they-will-come strategies".) The advantage is being able to, according to BCG; set industry standards, influence customer preferences, develop a superior cost position, and determine the direction the market is going towards. Curiously, the VISIONARY strategic style having a "fixed goal" objective has strong overlaps with the more CLASSICAL strategic style, enabling leadership teams to define a structured path to realising it (without having many options to explore). The key to making a great VISION happen is great execution: structure, follow-through and adapted resources. The challenge for most "Visionary strategists" or "visionary entrepreneurs" is to stay on course. Indeed, drawn towards novelty, many have the temptation to constantly explore and potentially create other new markets, leaving focus on execution on the sideline.
Examples: Media, Aerospace & Defense.
The Z-Axis in itself opens up the 5th and last possible strategic style:
♻️RENEWAL - BE VIABLE (Staying in Position): "Harshness" answers the question: how harsh is it to maintain a given strategic style over time? The way the position can be held over time can also be a key parameter in deciding to move or stay in a given strategic style. Renewal is often characterised by large transformation projects aiming at freeing up financial ressources to then subsequently re-invest into better, and more viable strategies. Harshness can determined both by external or internal factors (see Tim Demoures' EIP Pentagon Framework), and can pop-up by degrading KPIs and weak signals of the company.
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🎥This video on the BCG YouTube Channel sums up in 3 minutes the concept of the Strategy Palette: https://youtu.be/zwSq0nf5TtM
💡 Playing multiple strategic styles simultaneously or successively, can also be an option. It is called "AMBIDEXTERITY" according to BCG. You can read more about it here (What, How, When): https://www.bcg.com/publications/collections/your-strategy-needs-strategy/ambidexterity . Ambidexterity often applies to large organisations playing in multiple industries (diversity), or in industries with very short cycles (dynamism), constantly changing the environment in which the game is played.
Also, when choosing a strategic style, according to observations made by the BCG, the following traps have to be avoided (details in the original HBR Paper):
- Misplaced confidence
- Unexamined habits
- Culture mismatches
The positive impact of the adopting this kind of framework is clear: according to their analysis, companies whose strategic style matches their business environment could benefit from three-year shareholder returns 4 to 8% higher, on average, than companies who did not focus on getting the best association.
Other pertinent readings on BCG's Strategy Palette:
- Book "Your Strategy Needs a Strategy: How to Choose and Execute the Right Approach", which you can purchase on Amazon here: https://www.amazon.fr/Your-Strategy-Needs-Execute-Approach/dp/1625275862
- Martin Reeve's LinkedIn Pulse short blog post explanation on "The Strategy Palette" on LinkedIn Pulse: https://www.linkedin.com/pulse/strategy-palette-martin-reeves/
- Other BCG Source: https://www.bcg.com/capabilities/corporate-finance-strategy/strategy-palette
This Best Practice is my attempt at making BCG's Martin Reeves "Strategy Palette" more useable "on-the-job" for strategists looking to discover the strategic styles (Classical, Adaptive, Shaping, Visionary, Renewal) of their company or various business units. I also added an extra slide enabling to track the strategic style of a portfolio of business units over time.
The Best Practice is composed of:
- 3 editable Microsoft PowerPoint Template Slide
- associated underlying Excel Models to plot the Matrix graphs
- with an online & offline 22 step-by-step methodology, with pedagogical illustrations for each step.
Should you have any questions on using this top tier "BCG (The Boston Consulting Group) Strategy Palette / Strategic Style Matrix" slide, you're welcome to reach out to me via Private Message.
⭐️ Bundle of 14 Four-Quadrant (2x2) Matrix Framework Templates (including this one): https://www.eloquens.com/tool/wJa7FKkP/strategy/management-consulting-templates-and-frameworks/four-quadrant-matrix-frameworks-template-bundle
⭐️ Bundle of 5 BCG (The Boston Consulting Group) Strategy Frameworks & Models (including this one): https://www.eloquens.com/tool/Y38GuJVr/strategy/bcg-frameworks-best-practices/bcg-s-the-boston-consulting-group-models-and-frameworks-bundle
This Best Practice includes
3 PowerPoint Template Models + 2 Associated Excel Model + 1 Offline/Online 22 Step-by-Step Methodology
Tim Demoures offers you this Best Practice for free!
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