Importance of Adaptive Strategy - Coursework Example

Management By Student’s Name Course + Code Class Institution Date Executive Summary An adaptive strategy is a form of business strategies which was used by anthropologist Yehudi Cohen and critically reviewed later by Martin Reeves, the BCG founder. Yehudi used the strategy to describe the system of economic production as used by society’s system. The primary cause of similarities between several unrelated cultures is the use of a similar adaptive strategy. Karma Sherif (2006) applied the adaptive approach to show how well it can manage knowledge in organizations. According to Martin Reeves and Mike Deimler, the modern era is full of instability and risk. Businesses, over the past one decade, have witnessed the rise of a new aristocracy which is technology. The growth of these technology giants has been astronomical, and they include; eBay, Amazon.com, Google and Facebook. Within the first five years of launch, each has recorded and surpassed $1 billion in annual sales. In contrast, there are companies such as Procter and Gamble which recorded $1 million annual sales in 20 years and more than 100 years to hit the $1 billion sales mark. This brings us to understanding that globalization has affected mainline businesses and favored several others which have agreed to dance to the tune. Contents Executive Summary 2 Introduction 4 Importance of Adaptive Strategy 5 Creating Adaptive Strategy 8 Your Strategy Needs a Strategy 10 Reeves on Adaptive Strategy 12 Tesla Motors and Adaptive Strategy 13 Conclusion 18 References 19 Introduction Many CEOs have been given a deep sense of unease by a combination of new technologies, globalization and greater transparencies. The volatility of business margins of operation have remained static since the 1950s to 1980, however, from then, the margins have more than doubled (Bharadwaj et al 2013, p. 167). The gap between losers, those with low operating margins and winners, those with high margins, has widened. Adaptive management is used by managers to improve resource management through lessons noted from management results. The origin of this mode of strategy management is works of Frederick Taylor in 1900s. Most of its perspectives are part of the parallel concepts found in business for instance experimental science, industrial ecology and systems theory. As described above, adaptive management is not applied frequently though many resource managers recommend it and numerous resource planning documents refer to it (Donkin 2015, p. 61). Many people have, however, held a misleading belief which states that by monitoring and occasionally changing activities, one is already practicing adaptive strategy. An adaptive strategy is, therefore, the art of exploring alternative ways of achieving objectives of management, predicting the outcomes of each choice, implementing some of these alternatives and monitoring them to learn the impacts of the implementation (Augier & Teece 2009, p. 80). The results are finally used to adjust management techniques and to implement some of the alternatives realized. The adaptive strategy focuses on adapting and learning through partnerships, stake holders such as scientists and other managers to learn in unison how to create and maintain an excellent management system. Importance of Adaptive Strategy In the modern times, there is a need for strategies to achieve objectives and goals. It can be realized through giving a sense of direction and purpose to the organization because of recent competition and social changes (Fazlollahi 2002, p. 93). There are different modes of strategy which are aimed towards the same thing; however, some are better than others in some cases. Some of these strategies included, opportunistic strategy, emergent, deliberate and planned or intended strategy, realized and unrealized and lastly, imposed strategy (Bharadwaj et al 2013, p. 175). When faced with various management issues, the managers chooses one strategy that will possibly fit in perfectly and help in the decision making. Adaptive mode is preferred by managers especially when faced with a crisis that others strategies have failed to offer solutions. The adaptive strategy ensures the objectives and goals of an organization are reached, regardless of the challenges that are present (Ghemawat 2002, p. 125). The mode counters aggressive moves and adapts to the current unstable business environment for business to thrive. Relatively stable business environments may not need other methods of strategies because they will not manage to maintain the organization and keep it moving (Baisya 2010, p. 67). Adaptive mode is commonly found in non-profit organizations, public bodies and those that face unstable environments regularly. Interaction and bargaining among interested parties are responsible for the development of strategies. In these modern times, the percentage of companies falling from top three rankings in their industry has increased from 3% in the 1960s to 15% in 2009. From those records, it is clear that market leadership is increasingly becoming a dubious prize because the strong correlation between industry share and profitability is non-existent in some areas Augier & Teece 2009, p. 93). According to Reeves, the probability that was experienced for a long time where the market share leader is also the leader in profitability has declined at an alarming rate, from 35% in the 50s to 6% in 2008. Currently, the situation has worsened to the extent that some executives are unable to identify with which companies and in what industry they are competing. Such uncertainty is a big threat and challenge to strategy making (Donkin 2015, p. 78). Traditional approaches to strategies are preferred at times as the best answer to uncertainty and change which is an unfortunate assumption of relatively predictable and stable world. Thinking about it critically, the goal for every strategy is to create an enduring competitive advantage by assembling the right competencies and capabilities for delivering or making an offering and also by establishing an attractive niche to enhance market positioning. More strategies are being created now and then to ensure organizations endure the possible constraints present in the market (Donkin 2015, p. 89). However, with the growing levels of uncertainty, many organizations have many questions on the kind of strategy they apply. Adaptive strategy steps in to save the team during times when planned strategy proves insufficient. The adaptive mode can help the organization when others cannot manage because it seeks solutions to problems that work to satisfy political forces by stakeholders. Almost all other strategies try to maximize one goal for instance growth and profit while neglecting all other forces (Baisya 2010, p. 76). The organization cannot improve by adding an aspect of growth that is already present because the initial problem will still be present. The adaptable strategy seeks solutions to the problems and not proactively looking for new opportunities. If a problem is with the sources of supply, the adaptive strategy will strive to negotiate and create long-term purchasing arrangements to stabilize the flow of supplies for good. Uncertainties are reduced by adaptive strategy so that organization can keep running with minimal pressures. Other types of policies make disjointed decisions which in the long run contradict normal operations of the organization. An adaptive strategy is considered an evolving algorithm which self-tunes to accumulate knowledge and circumstances that are forever changing. What evolving algorithm does, is simply looking for alternatives in case of a situation and predicting any incoming situation as well as the best response (Eweje & Perry 2011, p. 137). The adaptive strategy, therefore, allows any organization that chooses this mode to have a variety of options and techniques to counter any roaming problem. It helps organizations to thrive under terrible conditions of much uncertainty and rapid change especially with the rise of online business and marketing (Olson et al 2005, p. 76). The adaptive strategy does not push the group into channeling much of it interests to another plan when faced with uncertainty instead it provides alternatives which act as solutions and shield to the problem. Rapid change in the market today has affected organizations in a major way starting with the mode of business which is now online and marketing strategies as well. To win more audience in such a short time, companies are going online and leaving fewer activities to the newly become traditional methods (Elkin 2007, p 123). The adaptive strategy has managed to remain calm and offer best solutions to organizations in times of turbulence because it defines a large option space. The strategy checks from all available options for the best leverage tool for the organization. To ensure speed track decision making, this strategy self-tunes every step to overcoming speed constraints and information complexity. Creating Adaptive Strategy Many companies and organizations are too rigid for change, and that will only harm business further. The current uncertainties and change of ways of conducting business, therefore, calls for action. The adaptive strategy cannot be adopted unless the company is ready to turn most of its operations (Aaker 2001, p. 172). To begin with, companies should foster a mindset full of explorations such that even during successful times, the company is challenging the status quo. Risk taking should he highly encouraged as well as tolerating failure. The management should set goals and methods of operation that are adjustable and those that allow change of course as environments and investments change Augier & Teece 2009, p. 97). Dynamic management of information should be strengthened to develop predictive analytics which manages and measure the process of exploration. To minimize the cost of failure, the organization need to build an experimentation engine where maximum information is extracted from every test and results shared widely. Strategic clock speed should be increased to shorten planning cycles and loops of feedback (Aaker 2001, p. 181). To effect this, hierarchy needs to be reduced, and approval processes simplified. Flexibility in resource acquisition and allocation is essential. For projects that must be aborted, project leaders should not be penalized to act as a motivating factor. The company should source externally and share resources. Fig: creating a self-adaptive strategy Martin Reeves is a strategist who comes up with plans for managing businesses. He analyzed adaptive strategy in his article and insisted that every business should look forward to adopting this mode of management and operation especially at this time when the business arena is dynamic and super challenging (Reeves et al. 2012). Managers who headed companies and big businesses in the early 80s can attest to the fact that there are a lot more challenges in the industry especially after globalization which took root in the late 80s. Businesses have to think of a paradigm shift; else they go down the trench to become inactive and ineffective. Reeves recommends adaptive strategy because it forces the company to change to the current trends so that it remains relevant and actively in business. A company that is still running under the same kind of management it had fifty years ago is either registering losses or having enough for mere sustenance. 78% of corporate renewal programs fail currently due to lack of proper strategy as explained by the BCG’s most respected strategist. He argues that the old model strategy is dead and should be buried with great urgency to prevent businesses from collapsing. According to Reeves one of the best ways to ensure the adaptive strategy is upheld in the business is having fresh minds input. One leader will bring the first phase of transformation to a company, but for the second transformation milestone, someone else should come in. It may sound off, but according to Reeves, the key driver for transformation in the first phase is different from the one who will effectively drive phase two. For instance, if in phase one a company pushed for operational efficiency, and phase two is for innovation and growth, there is no way the same kind of leadership can work for both. Your Strategy Needs a Strategy An article by Reeves, Love, and Tillmanns is as a result of extensive research conducted by the Boston Consulting Group commonly known by many as the (BCG) and strategy institution. The research involves conversations with BCG clients, around 150 organizations from various business categories such as high tech, pharmaceuticals, banking and agri-food among many others. Reeves and his partners analyzed conditions of operations for the past sixty just to understand business environment trend over time. Close to thirty interviews were conducted with CEOs to learn more about their perspectives and experiences on crafting and realizing strategies of winning. With the new business environment, choosing a strategy is likened to looking for a needle in a haystack. There are numerous tools used to select the right strategy for business, and they are increasing each day, something that has become a problem for the managers. While putting together this book, the author confirms that leaders are in a dilemma after having a conversation with most of them (Sharma 2016). With most leaders claiming that strategy has been made less relevant by the compelling circumstances. Other leaders argued that traditional approaches to strategy are no longer sufficient and they would do with more practical ones. To everyone’s surprise, one leader confessed that the word strategy is completely banned from use in his company. Leaders have shown difficulty that is involved in choosing the right strategy for a super large company. To end this difficulty of choosing the best approach, the book suggests a unifying choice framework called the strategy palette. This approach is proposed as the best because it helps leaders match their strategy to the circumstances at hand and help execute it effectively. Additionally, the approach combines different approaches to coping with diverse, dynamic and multiple environments and as leaders to animate the resulting diverse approach. Five archetypal approaches are involved in strategy palette, and they are applied in different parts of business (Jackson 2012, p. 95). Every part of the business, from function to geographies to industries in a life cycle of an organization is well tailored to a particular solution concerning the challenge it faces. Martin Reeves et al. said that since an organization can be faced with diverse problems, it would be good to deal with each problem from its independent department. The business environment is a key determinant to the kind of strategy to be applied. The book looks into three dimensions which are discernible, and they include; malleability, predictability, and harshness. Five distinct environments are achieved when the dimensions mentioned above are checked out. They include classical, renewal, visionary, adaptive and shaping. Reeves on Adaptive Strategy In this paper, we shall discuss the adaptive dimension and find out why Martin Reeves et al. suggested it (Reeves et al 2012, p. 79). An adaptive approach is employed when the business is neither malleable nor predictable. When advantage is short-lived, and prediction is hard, the only shield against dynamic disruption as mentioned by Reeves is an ability and readiness to change repeatedly. Winning in an adaptive environment comes from experimenting continuously and identifying possible options more economically and quickly than others. However, from the way these approaches are expounded in the book, they lack a convincing and a concluding factor which can help managers. Providing a broad range of options to a single manager is confusing him the more bearing in mind that he is already in a dilemma. Following modern trends in business, the dynamism and a wide range of approaches in this book could not be helpful. According to Reeves et al. there are three steps involved in adaptive strategy, and they are varying, selecting and scaling up. This process is tedious and tiresome for managers only to solve a single problem in a department (Reeves et al 2012, p. 82). Every leader is conversant and familiar with several strategy concepts, but that is as far as it goes. Most leaders can only apply one strategy at a time while in this case he or she needs to apply as many as the business requires. Though businesses need to be back to their feet, a lot of work is involved in selecting the right approach for a single problem (Peltoniemi and Vuori 2004, p. 134). Strategy palette suggests that all its approaches have been used by various scholars and leaders only that they were in a different form. For example, Bruce Henderson exemplifies classical approach through his experience on curve and growth-share matrix. Michael Porter, on the other hand, is known for five forces model still under classical approach. For adaptive approach, Rita McGrath’s work on strategies of agility and Kathleen Eisenhardt’s approach of simple rules. Such scholars show us that the approaches were there before only that they have evolved with the changing business environments and dynamisms. The visionary approach is explained by Gary Hamel and Prahalad in their book ‘competing for the future.' Business management is becoming complex which the changing trends in the business arena. Reeves has brought a revolution in the management of business though drawing lessons from this article, and he has complicated the whole exercise. The adaptive environment appears a whole lot of work for the company because of the continuous experiments involved. For a business to tune to the current dynamic changes, research and experiments are used to play the important role. As mentioned, experiments are employed so that one can be sure of the results expected. Adaptive response requires the organization to change to the current trends so that the business thrives (Reeves et al 2012, p. 84). Such changes may interrupt with the originality of the business thus affecting it adversely. The organization might be forced to get more employees or incur too much cost which lowers its profits. Tesla Motors and Adaptive Strategy Tesla Incorporation has made tremendous steps in the creation of electric vehicles. The business itself in under technology which is the driving force of the global economy. The company is using the 4Ps marketing strategy that is the place, promotion, product, and price. The company uses this strategy because it is most favorable for motor industry. Tesla changed to adaptive strategy in most of its operations so as to penetrate the changing market. The classic strategy would not work for Tesla Motors because of the frequent changes and surprises in the business. The plan of adaptive strategy is to enable the company to adapt quickly to new environments. In the motor industry, every company is looking forward to producing the best vehicles, those that are more efficient and reliable. Tesla has faced several setbacks because of the durability of the battery pack and time taken to charge it. The company is open to changes, and they have set up a Giga factory that is entirely working on producing the best battery pack. In the new Model S, Tesla has improved its software to give users a better experience. To fit in even those that have already purchased previous models, the company will send the updates remotely to the vehicles, with permission of the owner. Tesla Motors has substantially shown is the adaptive strategy at work after a rocky 2016. The company in February 2017, announced that it had changed its name officially from Tesla Motors to Tesla Inc. The primary purpose of changing the name was to allow it to conduct other trades other than just vehicles as it had done initially. The company had to make more profits, and since electric cars were not doing well, it adapted to the change by investing in other industries as well. Tesla recently acquired SolarCity Company to manufacture solar panels. Tesla Inc. will mainly deal with solar panels, integrated auto, and energy storage. Since its founding, Tesla is greatly engrossed in the manufacture of electric vehicles and has not wavered from it. The company is making tremendous steps in the market, and from research and interview made with some of the senior managers, they had to change their strategy (Hansen & Smith 2006, p. 128). Every company that is thriving the present turbulence in the market caused by globalization has shifted its strategy to adaptive. Tesla has made great discoveries in the electric motor world, and many other motor companies are using their idea to build their electric cars. The company has split its business into two as suggested by Burgelman that is; Blue products, the electric vehicles which are created through an induced process and the green products which are fostered by the company through the encouragement of decision making and autonomous thinking. Burgelman’s strategy making resulted in a model called internal ecology. In this model, the strategy is induced by the top executives while independent, bottom-up strategy processes are still running. Burgelman’s model uses three tools with tool one being the dynamic forces that facilitate the evolution of the company. The first tool under internal ecology model is as shown below; The company is making steps in the industry and changing with the market. To gain the competitive advantage, thorough market analysis has to be made using a tool such as Porter's five forces, SWOT analysis, and PEST analysis to understand the new entrants, competitors, suppliers, and substitution. It is easy to venture into a market with the assurance that the market is ready for you (Peltoniemi and Vuori 2004, p. 112). After studying the market, the suppliers understands the needs of the people and how they would wish to be served, and that is what Tesla is capitalizing on making huge sales like never before. The top management of Tesla is pent up on the prosperity of the company; thus they are doing everything possible to ensure production cost is low for more profits. The company has laid out strategic action to take and ensure there are distinctive and novel ways to respond competitively to the environment (Sharma 2016, p. 57). The action is distributed over different groups and management levels as well. Internal selection is where a medium is found to link up the strategic actions and official strategy. Tesla started at a time when the world is going green, and motor industries are challenged to make cars which do not release carbon gasses to the environment. Carbon dioxide is the major contribution to environmental degradation and mostly produced by vehicles according to recent research (Tallon 2008, p. 77). Tesla is an all green car company hence it received a warm reception on the market. Tool two is about the evolutionary framework of the process of strategy making conceptualizing it regarding autonomous and induced processes. The third tool is process model of internal corporate venturing, which focuses on intra-company levels of analysis. Tesla has faced four major challenges, and they are; limited range of batteries, corresponding degradation of the battery requiring owners to replace at huge costs. Another challenge is the need to put up battery stations across the world and time have taken to recharge the battery packs. Tesla has however made some strategic moves to counter these perils. The primary complaint being time taken to recharge (Tanriverdi et al 2010, p. 66). One owner complained saying that he could not drive from San Francisco to Los Angeles without stopping for more than 20 hours to recharge his 110V battery. The company has rolled out superchargers which will be strategically located. The Chargers will be used for free, charging the battery for just 30 minutes, giving it another stretch of 270 kilometers. This is an illustration of how Tesla has adopted the adaptive strategy. The company responds to factors affecting the client to ensure they create a better customer base for referrals and repeat. Tesla recently opened its patents to competitors because they understood that electrotechnical world could never standardize on proprietary designs of a single company. By rolling out its patents, it gives room to other companies to try something new, and it will be to their advantage. This lesson was learned from Hewlett Packard around forty years ago when they handed their interface bus design to the IEEE. It did not take long to get IEEE- 488 standard which is an interface that allowed people to connect computers to printers, as a result making HP super delicious (Trzec et al 2006, p. 87). Companies are supposed to learn from the environment and understand how they can change to fit in the market. Conclusion Adaptive strategy is a form of business administration strategies used by a company to counter problems experienced. An adaptive strategy is mostly used in places where other methods are unable to rule because of market turbulences and unpredictability. Due to globalization, markets have shifted, and traditional modes of manufacture, packing, marketing, and selling have drastically shifted to favoring only those that have complied to modern trends. Martin Reeves has played a great role in expounding more about adaptive strategy, thus making it seem applicable by management. Despite these efforts, some companies are unwilling to change because they feel they will lose their originality. It needs a lot of caution because it means tampering with most operations of the company; however, that is not a big issue because at the end of the day profits are more important. Tesla Motors has applied adaptive strategy to remain relevant in the market that is incredibly dynamic. Tesla is responding positively to the market needs because their customers are more important than other operations. Adaptive strategy is highly recommended for other companies that are wondering how to counter the adverse effects dynamic and changing universe. 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