In times of high uncertainty, adaptation is the winning strategy. So goes the conventional wisdom. But, what if that misses a big opportunity?
In a new article just published in Harvard Business Review, I suggest in collaboration with John Seely Brown and Lang Davison that shaping strategies may hold far greater promise. Executives have far more degrees of freedom to shape target markets and industries in times of high uncertainty and rapid change than in more stable times.
The concept of shaping strategies
These strategies use positive incentives to mobilize and focus thousands of participants in shaping specific markets or industries. In times of high uncertainty, we all have a natural tendency to discount rewards and magnify risk. The result is often paralysis or, at best, hesitant small moves on the margin while we wait for the fog to clear. The opportunity for aspiring shapers is to flip that risk/reward perception by magnifying perceptions of rewards and discounting perceptions of risk. By re-shaping mindsets, shapers can unleash significant investment by many participants and ultimately re-shape broad markets or industries.
We explore in the article examples of successful shaping strategies in industries as diverse as shipping, apparel, financial services and high tech. Three key elements come together in these strategies – a compelling shaping view to provide focus for investment by participants, a powerful shaping platform that provides economic leverage for participants and a set of acts and assets by the shaper to communicate conviction and capability to potential participants.
Shaping strategies can be very powerful because they unleash increasing returns. Once a critical mass is achieved, the value of participation increases as the number of participants expands. But, the challenge of any increasing returns opportunity is getting to that critical mass of participants – many efforts have foundered in this early stage. Shaping strategies help to reach that critical mass quickly and cost-effectively.
Shaping strategies depend upon mobilizing large ecosystems of participants. Now, of course, all companies operate within broader ecosystems of business partners. But there are four critical, and related, differences in shaping strategy ecosystems.
- The first is the scale of the ecosystems involved. Rather than dozens of participants, shaping strategies typically involve thousands, and in some cases hundreds of thousands, of participants.
- Second, these ecosystems come together and are focused by an explicit long-term shaping view that defines a very different industry or market structure and the opportunities created not just for the shaper, but for all participants.
- Third, these ecosystems are characterized by a significant diversity of participants. Rather than pitting individual participants against each other, these ecosystems generate diverse niches that encourage participants to specialize in their areas of greatest expertise and to differentiate themselves from other participants.
- Fourth, these ecosystems create incentives for distributed innovation among participants. We are all familiar with the concept of open innovation. Shaping strategies encourage thousands of participants to innovate aggressively in their particular domains but help to focus and integrate this innovation so that it ultimately re-shapes broader markets or industries.
Not everyone can be a shaper, but all companies need to make explicit choices on this front. If they choose not to be a shaper, they need to understand the shaping strategies that are in play in their relevant markets and make choices about what role to play in the shaping strategies of others. Our perspective can help executives evaluate the likely success of aspiring shapers and make choices regarding the roles that may be appropriate.
While our HBR article focuses on the application of shaping strategies in the business arena, this approach to strategy has the potential to to be applied in many other domains. For example, we have held workshops exploring its application in such diverse fields as public diplomacy and and education. Even movements for social change may find that shaping strategies can provide significant leverage.
If you find this perspective intriguing, Harvard Business Review has created an online discussion forum for this article and I’d welcome your participation to help test, challenge and refine the shaping strategy concept.