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.