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People Advantage

March 25, 2010 by Martin Reeves, Yves Morieux, and Mike Deimler
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In This Article

This article is part of the BCG Strategy Institute’s series on adaptive advantage and the future of strategy.

  • A company’s ability to adapt to incessant change is embodied in the decision making and behavior of its employees.

  • Classical approaches to managing scale under stable conditions are too rigid for the rapid learning and change required in turbulent environments.

  • A narrow focus on leanness can impede adaptability. Some large companies have eliminated not only inefficiency but also the diversity and variation needed to adapt.

  • Management paradigms die hard. Often, they have been the basis for historical success and offer the illusion that a company can accurately foresee and control its destiny.

 

The turbulence of today’s business environment—volatility in market positions, unpredictability of competitive outcomes, and a widening gap in performance between winners and losers—makes classical strategic planning increasingly limiting. To keep pace with incessant change, companies need a more adaptive and dynamic approach to strategy. In “Adaptive Advantage,” we described an approach that involves iterative experimentation through a process comprising variation, selection, and amplification, with modulation at its center.

Companies adapt to rapid changes in competitive markets by introducing variation into their products and internal routines. They select the most promising variations through stage gates, portfolio management, pilots, or full-scale tests. And they amplify and embed their successes through resource allocation, internal or external competition, and specialization. These activities are fine-tuned through modulation—the locus of strategic intent in the process—in response to the environment, corporate goals, and outcomes.

The choices a company makes in modulating variation, selection, and amplification are at the heart of adaptive strategy and its organizational implications. They affect organizational structure, governance, external relations, innovation, marketing strategy, and culture, to name but a few elements. The mechanisms of modulation are fundamentally organizational in nature: they are embodied in the way people make decisions and behave in the workplace. There is no adaptive strategy without an adaptive organization. Hence the critical importance of people advantage.