Macro Shocks and Perfect Storms – Why a Good Strategy Still Matters

For business leaders, the last 18 months have changed their external environment dramatically. For many, Covid-19 has taken centre stage when it comes to factors driving change in their industry. However, on its own the pandemic is not the only factor determining the corporate winners and losers of 2020/1.

For some companies providing digital goods and services, like Zoom or Spotify, the pandemic provided a significant boost but even here, government action on lockdowns, advances in technology around access to broadband and use of mobile devices had a role to play. For others, such as retail giant Arcadia, which collapsed at the end of 2020, the pandemic played a part in their demise, but often it was a strategy that failed to take account of wider factors that ultimately led to their collapse. Losing touch with the needs and wants of customers, moving online too slowly, and not recognising the threats posed by disruptive new entrants to the market all added to the downfall of several retail giants.

The danger facing many strategists at a time like this is to focus too much on a single factor – forgetting that the reality is much more complex. When Ciara Sutton and I updated our Crafting and Executing Strategy textbook we were keen to include tools such as scenario planning, which help businesses think in broader terms about what the future of their wider environment will look like in five- or ten-years’ time. We also covered newer ideas, such as Ripple Intelligence, which acknowledge the multiplicity of factors impacting businesses – some of which cancel each other out and some of which combine to make the perfect storm.

One example of a company facing different connected threats and opportunities is model train maker, Hornby, which saw its sales grow dramatically during the pandemic as consumers renewed their interest in hobbies to cope with the boredom of lockdowns. However, a shortage of shipping containers, the pandemic’s impact on manufacturing in India and China, and Brexit all threatened its ability to fulfil those new orders. How the firm’s strategy performed in these circumstances is one of the six case studies in the new Crafting and Executing Strategy: Case Book

So what can strategists do to prepare for so-called “black swan” events?

• First, they need to acknowledge the complexity of their firm’s environment, which means taking a broad view of external factors beyond their industry’s boundaries.
• Second, not all organisations have the need or resources to invest in full blown scenario planning, but business leaders should take time to think about different futures with their teams. This can help to open minds to potential threats and opportunities and challenge existing mind-sets and biases.
• Finally, they should use those different scenarios to assess strategic options – future proofing or dynamic fit is an important test for finding the right choice of strategy.       

Alex Janes is Senior Lecturer in Strategy at the University of Exeter Business School. He currently leads a number of postgraduate Strategy modules as well as serving on the University’s Senate as one of the elected members for the Business School. He has also held Visiting Lecturer posts at Imperial College Business School and Stockholm School of Economics in recent years. Alex is a Senior Fellow of the Higher Education Academy (SFHEA), a Fellow of the Chartered Management Institute (FCMI) and a Certified Management and Business Educator (CMBE). Prior to joining the Business School in 2009, Alex spent over 20 years in industry as a consultant and senior manager. He is co-author of the International Edition of McGraw-Hill’s leading strategy textbook, Crafting and Executing Strategy. 

Crafting and Executing Strategy, by Alex Janes and Ciera Sutton, is available for puchase now.