Summary

The challenge with strategy frameworks lies in their ability to evaluate the attractiveness of opportunities and the viability of strategies. However, they often fall short in aiding the identification of opportunities or the initial creation of strategies. This article presents a new framework, informed by an in-depth analysis of creativity literature. This framework aims to bridge this gap by providing a systematic approach to uncovering potential strategies. It classifies all types of business strategies into four categories, ranked from least to most creative. They are: adapting an existing industry strategy, combining various existing industry strategies, importing strategies from other industries, and crafting an entirely new strategy from scratch.

 

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Strategy frameworks can be invaluable in assessing whether a particular opportunity is worthwhile or if a specific strategy is likely to succeed. However, they typically don’t assist much in identifying opportunities or formulating strategies initially. As the renowned strategy expert Gary Hamel once remarked: “The dirty little secret of the strategy industry is that it doesn’t have any theory of strategy creation.

To address this gap, this article introduces a classification of potential strategies. Such classification was based on an in-depth examination of the strategy and creativity literature done by experts. Essentially, all business strategies can be grouped into four categories, listed here from the least to the most creative.

 

  1. Adaptations of Successful Strategies from Your Industry

A prominent example of this approach is Shein, a Chinese company that has taken the fast fashion concept to its extreme. Traditional fast fashion retailers like Zara and H&M release about 500 new items weekly. Shein, on the other hand, introduces 1,000 new items daily. Additionally, Shein’s products are 30–50% cheaper than those of its competitors. Unlike Zara and H&M, Shein operates solely online, with no physical stores. Moreover, it leverages artificial intelligence extensively for trend detection and production optimisation. This strategy has proven highly effective. Between 2020 and 2022, Shein’s share of the U.S. fast fashion market surged from 18% to 40%.

Rocket Internet provides an even more extreme example. This German company “creatively imitates” successful online retailers and marketplaces. It has launched over 100 new companies, primarily in Latin America, Southeast Asia, India, China, Africa, and the Middle East. Among these is Jumia, an online retailer operating in 11 African countries. Jumia’s leaders modelled their strategy after Amazon’s “everything store” concept but adapted it to the African context.

As the deputy head of customer service explained: “We have Amazon as our target, so we try to emulate Amazon. However, the business environment and challenges here prevent us from fully replicating Amazon’s business model. It requires significant modifications to fit this context.” For example, due to Africa’s infrastructural challenges and the lack of reliable third-party logistics providers, Jumia created its own fleet of vehicles. Additionally, limited internet access in rural areas required sales agents equipped with tablets to assist customers in placing orders.

 

  1. Importing Strategies from Other Industries

Executives and entrepreneurs often fail to look beyond their industry’s boundaries. By doing so, they miss out on strategies that have proven effective in other sectors. Drawing analogies is straightforward when there are strong similarities between industries.

When Hubert Joly became CEO of Best Buy in 2012, the U.S. retailer was struggling. Consumers were using its stores for product information and advice but then making purchases on Amazon, turning Best Buy into Amazon’s showroom and causing significant revenue and profit declines. Four years later, the Wall Street Journal reported: “Best Buy has accomplished what many once considered impossible. It successfully fought off an attack from Amazon.com.” This turnaround was largely due to Joly’s “store-within-a-store” strategy, implemented in 2013. Recognising that Best Buy was the last national consumer electronics retailer in the U.S., Joly saw an opportunity for brands like Samsung, Microsoft, Hewlett-Packard, LG, and Sony to set up branded shops within Best Buy stores in exchange for a fee.

While this was a novel approach in consumer electronics retail, it was a well-established model in department stores. The French department store Le Bon Marché pioneered this concept in 1852. For a Frenchman like Joly, the parallel was clear.

Drawing analogies becomes more challenging when industries differ significantly. Hilti, a European tool manufacturer, faced difficulties in the mid-2000s due to market commoditisation. Leaders realised that neither price cuts nor quality improvements would restore profitability. Inspired by the leasing model common in heavy machinery and vehicles, Hilti introduced the Tools On Demand programme. Through this programme, Hilti started to offer tools on a subscription basis. This allowed customers to avoid large upfront investments and access the latest tools as needed.

 

  1. Combining Strategies from Multiple Industries

New strategies can also emerge by integrating features from different industries into an existing strategy. Spotify exemplifies this approach. Launched in 2008, Spotify has grown to over 500 million users by 2023, surpassing Apple Music fivefold. In addition to on-demand music streaming, Spotify enables users to connect with others, share playlists, and follow artists, combining conventional music streaming with social networking. This way, Spotify fosters a community that keeps users engaged beyond just listening to music.

Sometimes, entrepreneurs create new strategies by selecting and combining features from multiple existing strategies while discarding others. The Huffington Post, launched in 2005, did just this. Founder Arianna Huffington described it as a new Internet publishing venture combining a breaking news section with an innovative group blog featuring contributions from various creative minds.

The Huffington Post merged journalism and blogging into one media entity. It retained key features of newspapers (professional journalists, original reporting, rigorous fact-checking) while dropping others (e.g., a print version) in favour of blog features like continuous updating. In the early 2000s, newspaper websites were static, refreshed only once daily with limited reader interaction. Blogs, however, were already dynamic and interactive. The Huffington Post combined the best aspects of both.

 

  1. Strategies Created from Scratch

The first three strategy types adapt or combine existing strategic features. The fourth category involves developing novel strategies from first principles. As Elon Musk advises: “boil things down to their fundamental truths and reason up from there instead of reasoning by analogy.

 

This process entails three steps:

(1) challenging conventional thinking;

(2) breaking problems into fundamental principles;

(3) creating new solutions from scratch.

 

Musk used this approach for SpaceX’s affordable and reusable rockets. Initially planning to buy second-hand rockets from Russia, he found them too expensive. Using first principles thinking, he questioned why rockets were so costly (step 1). After deconstructing them into components, he noted that material costs were only two percent of the total price (step 2). Consequently, he decided to purchase raw materials (like aluminium alloys, titanium, and carbon fibre) and build his own rockets (step 3).

First principles thinking applies beyond products. Airbnb revolutionised the hospitality industry by enabling individuals to rent their homes to others. The idea of hosts renting to strangers and guests staying in strangers’ homes was initially met with scepticism. At least seven major investors declined to fund the project, doubting its market potential. The Financial Times initially compared Airbnb to an “eBay-style intermediary,” but the founders didn’t use analogical reasoning.

In the late 2000s, the conventional wisdom in hospitality equated accommodation with hotels (step 1). Airbnb’s founders challenged this notion, identifying two fundamental truths: travellers need a place to stay, and some people have spare rooms or properties (step 2). They built a platform connecting travellers seeking more authentic, often cheaper, experiences with hosts willing to rent their spaces (step 3). Ironically, Airbnb’s strategy now serves as an analogy for executives and entrepreneurs in various industries (e.g., “the Airbnb of fashion”).

 

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The demands of these types of business strategies vary. Adapting a familiar strategy requires knowledge of a single industry. Successfully importing or combining strategies requires familiarity with different contexts. And the more industries one knows, the more sources of inspiration one can draw upon. However, the creativity needed for developing new strategies from scratch also requires deep reflection on existing knowledge.

 

Source: Harvard Business Review (2023)

 


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