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The critical ‘when?’ question in strategy

The timing of a big strategic move has never been more important, says George Tovstiga, Professor of Strategy at EDHEC Business School, based in Paris and Zurich.

Why are there no clear rules when it comes to the timing of big moves?

We need to remember that strategic decision-making takes place in real business setting. This is where ‘the rubber hits the road’. Real business contexts are characteristically ambiguous and complex. Additionally, key actors may introduce irrationality to the equation.

The ambiguity and complexity in any particular business context derive from inextricably linked and multiple factors (e.g. technological, socio-economic, political, etc.) that are continually changing. No theory in strategic management covers all the relevant angles in a way that allows any clear set rules as such to guide strategic timing decisions.

Why is it becoming increasingly difficult for firms to get their timing ‘right’?

Strategy is about making decisions that affect how a firm will be positioned competitively in the future. That future is becoming less and less certain. Why? Change is happening faster than ever before; ever more industries are experiencing disruption, even traditionally established industries.

Many traditional industry boundaries are disappearing altogether; traditional industry-bound rules of thumb (‘industry logic’) that were useful in the past in guiding strategic decision-making are thereby no longer valid. At the same time, future time horizons are shortening.

These changing circumstances carry two important implications for decision-making regarding timing of strategic action: (1) shortening time horizons mean that firms don’t have a lot of time to experiment, they need to get it ‘right’ from the start, and (2) new, emerging industry landscapes introduce entirely new competitive variables, fuzzier contours (identity of markets, competitors, etc.) and new rules of competition. These are making it increasingly difficult for firms to time their strategic actions.

The problem of timing being linked to practical considerations

Opportunities (or threats) demanding a timely response on the part of the firm are inevitably triggered by events and circumstances beyond the temporal control of the firm. Depending on the dynamic nature of the competitive environment, these might range from foreseeable (as in the case of relatively stable environments) to entirely unexpected and sudden (‘black swan’-type occurrence).

The formulation and execution of an appropriate response on the part of the firm, on the other hand, is quite a different matter. A firm’s response to an occurrence typically runs through a three-stage process consisting of: (1) sense-making; (2) formulation of an appropriate response; and (3) execution of that response.  Each stage of the process consumes time; cumulatively, they comprise the overall response time of a firm.

Several factors determine a firm’s overall response time. Clearly, the nature of occurrence is an important determining factor; radical occurrences demand more time in each of the stages than, say, less radical ones. Organizational inertia effects may lead to further response-time delays in any of the three stages.

Organisational inertia refers to the resistance of a firm to alter its current strategic direction and reflects its inability to react quickly and effectively to changing competitive environments. The inertia may derive from various sources such as resource constraints (e.g. lack of capabilities), routine (e.g. deeply embedded, rigid practices), organisational cultural dysfunctionalities (e.g. organisational cultural dissonance, risk aversion). In extreme cases, it may lead to a breakdown and failure of the firm’s response altogether.

What firms can do to give themselves the best chance of getting their timing right?

Clearly, strategic decision-making of any kind is entirely within the realm of a firm’s remit. A firm cannot influence or control external environmental factors. However, whether or not it chooses to react to these – and when – is entirely within its sphere of control.

What can firms do to give themselves the best chance of getting their timing right? The wave surfing analogy is appropriate here. Successful firms time their strategic moves much like the surfer times that next wave. Firms can give themselves the best chance for ‘catching that next wave’ by continually nurturing agile mechanisms that enable them to respond quickly to changing competitive circumstances.

Agile mechanisms enable firms in two important ways: (1) They enable the firm to play close to their competitive markets. This not only allows them to anticipate changing conditions, but it also helps them gauge the most appropriate for making their move.  (2) Agile mechanisms also enable the firm to minimize any organisational inertia effects that might hamper the firm’s action when it makes its move.

Agile mechanisms are powered by dynamic capabilities that support each of the three stages of the firm’s response process: (1) sensing capabilities help the firm detect, make sense of, and anticipate changing market conditions; (2) configuring capabilities help the firm shape, calibrate and align their resource base and organisation accordingly; and (3) seizing capabilities that help the firm prioritise and orchestrate appropriate responsive action swiftly. These, in turn, are supported by continual and rapid iterations of thinking, doing and learning.

While serendipity will sometimes play a role, the most successful firms approach their strategic timing intelligently

Indeed, serendipity and chance can never be ruled out entirely; they relate to the unpredictability and complexity typical of real business environments. These defy precise specification and leave open the possibility of unexpected occurrences that might lead to favourable or unfavourable circumstances for a firm.

Competitive firms, however, leave little to chance. They approach the timing of their strategic moves by playing close to their markets and nurturing agile mechanisms and capabilities that enable them to respond faster, more intelligently – and, at the right time to new, emerging competitive challenges.

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