THE CHANGING LANDSCAPE
Adapter strategies in level one situations are not necessarily incremental or boring. For example, Southwest Airlines’ no-frills, point-to-point service is a highly innovative, value-creating adapter strategy, as was Gateway 2000’s low-cost assembly and direct-mail distribution strategy when it entered the personal-computer market in the late 1980s. In both cases, managers identi- fied opportunities, in low-uncertainty environments, that could be devel- oped within the existing market structure. The best level one adapters
Postures and moves
A company can assume three strategic postures vis-à-vis uncertainty, and three types of actions can be used to implement that strategy.
Strategic postures: shaping, adapting, and reserving the right to play. Fundamentally, a posture defines the intent of a strategy relative to the current and future state of an industry. Shapers aim to drive their industries toward a new structure of their own devising. Their strate- gies are about creating new opportunities in a market, either by shaking up relatively stable level one industries or by trying to control the direction of the market in industries with higher levels of uncertainty. By contrast, adapters take the current industry structure and its future evo- lution as givens and react to the opportunities the market offers. The third strategic posture, reserving the right to play, is a special form of adaptation relevant only in levels two through four. It involves making immediate incremental investments putting a company in a privileged position—through superior information, cost structures, or relations between customers and suppliers—that allows the company to wait until the environment becomes less uncertain before formulating a strategy.
A portfolio of actions: big bets, options, and no-regrets moves. A posture is not a complete
strategy: it clarifies strategic intent but not the actions required to fulfill that intent. Three types of moves are especially relevant to implementing strategy under conditions of uncertainty. The first is big bets—large commitments, such as major capital investments or acquisitions, that will produce large payoffs in some scenarios and large losses in others. Not surprisingly, shaping strategies usually involve big bets; adapting and reserving the right to play do not. Options are designed to secure the big payoffs of the best- case scenarios while minimizing losses in the worst-case ones; classic examples include con- ducting pilot trials before the full-scale introduc- tion of a new product, entering into limited joint ventures for distribution to minimize the risk of breaking into new markets, and licensing an alter- native technology in case it proves to be superior to a current alternative. Companies reserving the right to play rely heavily on options, though shapers use them as well, either to shape an emerging but uncertain market as an early mover or to hedge big bets. Finally, no-regrets moves are just that—moves that will pay off no matter what hap- pens. Managers often focus on obvious no-regrets moves such as reducing costs, gathering competi- tive intelligence, or building skills. However, even in highly uncertain environments, strategic deci- sions such as investing in capacity and entering certain markets can be no-regrets moves.