The Importance of Emergent Strategy

Often we implicitly think about strategy as a secret formula that we must uncover to achieve business success. Strategy can often take on an almost mythical quality, where only a handful of individuals truly know the holy grail of the way to obtain sustainable competitive advantage.

Whilst in search for the optimal strategy for business, it is important not to concentrate too much on this theoretical viewpoint; we must also consider the practicalities of strategy. Evidence from Mintzberg and Waters (1985) and Quinn (1978) suggests that it is the ability to react to the outcomes of actions by the company, and tailor strategy accordingly, that makes the greatest impact on business success. Quinn (1978) presents the theory of logical Incrementalism, that nicely sums up this concept: “strategies do not come into existence based on a one time decision but rather, it exists through making small decisions that is evaluated periodically. These small decisions are not made randomly but logically through experimentation and learning.”

How can we apply this to a real life scenario? Take IKEA, the Swedish company that has revolutionised home furnishing through it’s flat-pack furniture (Bartelemy, 2006). From the outside, it appears a simple case of a brilliant strategy finding a niche in the market. IKEA was able to see that customers were willing to build their own furniture, and this allowed IKEA to undercut the market. Secondly, there was a desire for the Scandinavian designed furniture around the world. However, with a closer look at the company’s history, this becomes a more complicated story.

IKEA’s stores have become an iconic part of the retail landscape. Credit: Brandwatch.com

In fact, many of IKEA’s signature elements were stumbled upon by accident. IKEA began in 1943 as a mail-order company, selling pencils, postcards and other merchandise. It only decided to stock furniture as a competing firm was also doing so, but saw that it was selling well and decided to expand the range. However, delivery was proving problematic due to the furniture becoming damaged due to its bulky and awkward nature. In response, IKEA experimented with using flat-pack furniture to prevent this damage: they charged a lower price, and sales soared.

The first ever IKEA store in 1943, when it ran as a mail-order company. Credit: IKEA

Even beyond the origins of the company, experimentation remained key to the development of the organisation. When one store was overflowing with customers, the manager decided to open the warehouse to allow customers to get the products quicker. This became central to the IKEA store experience. With queues developing in the morning of the opening of a new store, the manager decided to serve food and drink to customers to keep them happy. Now IKEA’s restaurants are some of the biggest revenue generators in stores.

As we can see from the example above, many of the developments in the IKEA strategy were not intentional in the way that a Porterian analysis would expect. Board directors did not see market niches, take actions to satisfy them and then effectively disseminate strategy to the store level. Strategy came from experimentation and learning at the store level.

The key skill that set IKEA apart was it’s ability to learn from these ‘errors’, and effectively build them into the direction of the company (Barthelemy, 2006). This provides a great example of ‘Logical Incrementalism’, with a number of small decisions developing into a unique direction for the business. Barthelemy summarises from this case study that there are four lessons for revolutionary strategy: start with a clear vision and improve it over time, constantly experiment and don’t be afraid to make mistakes, try to turn problems into opportunities and make the most of other people’s ideas.

Strategists shouldn’t ignore operations after the implementation of strategy. In fact, a connection with the store-level performance and understanding the success of experimentation can often be central to achieving practical, sustainable strategy success. It is too often overlooked in strategy development.

Sources

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