Is strategic design a school of strategy?

on. A few months ago, I met with a client who made me question the strategic value of Design Strategy. Somewhat tired of the traditional approach to strategy plans, this client was eager to lay out the company’s corporate strategy by using a strategic design framework.
Beyond the unusual request, I was impressed about how right this person was in identifying strategic design as a path for setting the corporate strategy of an organization in the midst of a transformation process.

When we talk about strategic design, it is very common to link it to Customer Experience, User Experience, Service Design and even sometimes – although a bit confusingly – to Design Thinking. All these disciplines, together with strategic design, share the design variable. But the latter has a distinct inherent ability, which is the strategic variable. What do we mean when we talk about the strategic part of strategic design?

Formulating a strategy is fundamental for any company seeking to dominate a market and sustain itself over time. Throughout history, academics such as Henry Mintzberg, Michael Porter, Alfred Chandler or Brian Uzzi, have created different approaches for strategic thinking. All of them propose a particular point of view to answer a fundamental question of Strategic Management: how can an organization achieve and sustain competitive advantage over time?

Depending on a company’s context or industry, it will be more appropriate to use one or another school of strategy in order to study a company’s situation and pursue a course of action. In this way, a strategist will be able to consider different variables when designing a strategy that will help that company find competitive advantages. Let’s take a look on the different schools of strategy.

Strategic Thinking Approaches

In 1979, Harvard Business School professor Michael Porter created the Positioning School, one of the most popular and prestigious business strategy schools to analyze a company based on the industry to which it belongs. Porter sets out a framework for strategic action by presenting five “forces” that an organization must overcome to gain competitive advantage: bargaining power of buyers or customers, bargaining power of suppliers or vendors, threat of new entrants, threat of substitute products and the current rivalry among competitors. This is perfect for analyzing companies in the automotive and smartphone industries for example, in which these forces carry a lot of weight and – depending on their level of influence – can reduce profitability to a greater or lesser extent.

Later, in the 1990s, a dominant paradigm called the Resource Based View (RBV) emerged from a publication by strategic management professor Jay Barney. This approach states that for a company to achieve competitive advantage it must focus on identifying, creating or acquiring valuable resources that must be: scarce, difficult to copy, slow to depreciate, irreplaceable and immovable. Some companies like Airbnb and Snapchat have their secret formula in possessing valuable resources such as algorithms that allow them to gather data from hard-to-get audiences. Other companies have as a key resource their operational routines. This is the case of ZARA, leading it to be the largest retailer in the world.

Entering in the new millennium, authors David Teece, Gary Pisano and Amy Shuen define the concept of Dynamic Capabilities. This approach states that what matters when it comes to gaining competitive advantage is corporate agility and the ability of managers to sense opportunities, seize those opportunities and transform the organization while maintaining competitiveness. This is the case of companies such as IBM, which has been able to adapt its strategic execution to the context’s needs and redirect its resources towards highly profitable markets. Throughout the time, IBM went from developing a wide range of products such as electromechanical tabulating machines and mainframe computers to today having a successful IT and software-based services business.

Strategic design as a school of strategy

As per schools of strategy, Strategic Design also offers an approach for a company to achieve competitive advantage. Today’s organizational context is more dynamic, challengingand fast-changing than it was years ago, so Strategic Design appears to be an interesting complement to traditional business strategy perspectives. With an heterogeneous approach to help companies navigate uncertainty, strategic design has certain elements that add value to the other schools:

• Quantitative Data + Qualitative Data
Unlike traditional schools of strategy, Strategic Design goes beyond the analysis of a company’s capabilities and the surrounding context, proposing action strategies based on information about people’s behavior, perceptions and satisfactions. This allows us to understand in depth the causes behind quantitative data and to design strategies based on behavioral profiles of the markets to conquer.

• Top Management + Stakeholders
Developing a strategy in a company involves a political act, a cultural change in many aspects. The nature of Strategic Design is multidisciplinary, collaborative and horizontal, and considers different perspectives in a company, not only those of the top management. In this way, Strategic Design can help to improve the organizational routines of companies, so that strategic decisions and responsibility are shared, bonding different stakeholders in a course of action.

• Global Strategy + Partial Strategies
Strategic Design has application in a wide range of strategic situations, solidly reinforcing specific tactics such as the creation of a service model, a new product, a new business model, restructuring operations and teamwork, etc. In this way, it fluctuates between an organization’s global strategy and additional specific strategies, continuously adapting plans and in parallel to the overall vision.

• The What + The How
Michael Porter’s “5 Forces” proposes a clear framework for creating a business strategy in a static way, as it does not explain how to put the strategy into action. In contrast, Strategic
Design goes one step beyond the analysis and proposes a dynamic approach for implementation. This way, not only takes into account the context, the appropriate resources and the dynamic capabilities of the company but also uses a set of tools that guide the implementation of the proposed strategy.

• Drawing a Horizon + Testing a Horizon
Implementing a strategy involves altering the flow of a company’s resources significantly without knowing what the payoff will be. Strategic Design mitigates this risk by constantly testing and validating the hypotheses that guide the course of action and redefines the strategy based on the results of the research. This is very important especially in new ventures or large companies’ new initiatives, where economic models do not yet exist and it is necessary to identify whether the strategy is on track or not.

While Porter’s strategic focus is on looking at the industry, RVB is on internal resources and Dynamic Capabilities puts its focus on internal capabilities, Strategic Design takes a hybrid
approach involving an understanding of the market, the organizational capabilities and people’s needs.

Organizations are asking themselves completely strategic questions, questions that have to do with the future and how people will behave in it. Companies are seeking to decipher from a new perspective how to gain competitive advantage. For generating significant value for people, is Strategic Design that nowadays has the potential for them to achieve it.

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