What has changed the most for strategy in the past 44 years?
By Roger Martin | Published: 2025-11-04 17:36:00 | Source: Fast Company – leadership-2
When I think about the changes that have occurred in the context of strategy over my career, my view stands in stark contrast to the consensus view. Most are obsessed with rising VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) as the main change. I don’t, and I explain my position in this article titled Playing to Win/Practitioner Insights (PTW/PI) What has changed most for strategy: Implications for your strategy. As always, you can find all previous PTW/PI’s here.
VUCA novel
I began advising executives on strategy in 1981. The question I have considered in this article is how has the context of strategy changed over the past 44 years?
The general answer I get from observers is that the context of strategy has become more ambiguous, a concept borrowed from military strategy, which I adopted in the late 1980s and have become more obsessed with than ever since. This obsession has spread throughout the business world. It’s a bit like a SWOT analysis. The acronym rolls off the tongue and is very exciting. The narrative states that as a strategist, you should realize that you are living in an increasingly VUCA world, so you should conduct SWOT analyzes (Ugh) and setting main goals and objectives (double ugh) To deal with this scary world
I don’t buy the idea that the world in general, or the world of business strategies specifically, has become more subject to fluctuations and fluctuations. I wrote about it three years ago in this series. Perhaps my sentiment is inspired by the specific time I entered the business world and my subsequent career in it.
I graduated to my first full-time job from business school in 1981, when economics was in the middle of my third year. The highest inflation rate in three years (39%) since World War I (1916-1918). Unemployment in the United States was on the rise 10.8% in December 1982This is the highest rate so far since the Great Depression. The federal funds rate (the basis for all interest rates) was over 19% by the time I graduated. Policymakers had to come up with a new name to combine high unemployment and high inflation– Stagflation– Which my economics courses taught me is impossible.
Suffice it to say, VUCA was pretty damning. Neither governments nor companies had any idea how to deal with it, and simply made things up as they went along.
Then we had the Iraqi invasion of Kuwait in 1990 and Desert Storm – along with other deep recessions. Then we had the dot-com bubble and its collapse between 1999 and 2001, followed by 9/11 in 2001, followed by the global financial collapse of 2008-2009, followed by the Russian invasion of Ukraine in 2022.
I think it is impossible to say that it was not so VUCA non-stop In the past (at least) 44 years.
Frankly, I think the “VUCA” narrative is so popular because it makes a great excuse: “We’re doing poorly because we’ve become too volatile.” Although the collapse of the Soviet Union has been cited as the impetus for the US War College adopting the “VUCA” narrative, my personal belief is that it had much to do with outmaneuvering the Viet Cong in the disastrous Vietnam War that had ended a decade earlier in 1975. The then-prevailing American doctrine of overwhelming air and technical superiority, the Viet Cong said, No thank you They played a completely different game, beating what in the old game would have been an overwhelmingly superior force. But to justify the loss, the losing side saw it as a manifestation of this terrible new phenomenon – VUCA.
It’s no different than competing against Microsoft in PC operating systems. No competitor was able to weaken him Close monopoly share. but, Real competitors have changed the game and made the replacement device the “computer” of choice— Any smartphone. In that more broadly defined game, Android is the big winner with a 50% larger share than Windows“—which may have been too much VUCA for Microsoft. The dominant winning strategies have and always will create VUCA responses as if out of thin air.
While the world simply hasn’t gotten significantly more VUCA, two changes have made the biggest impact on strategy over the course of my career: the fixed/variable cost mix and price/value discovery.
Mix of fixed/variable costs
Historically, until 1981, variable costs dominated the business cost structure (as I mentioned in this article). Harvard Business Review (Harvard Business Review) condition. Historically, companies were essentially factories (whether product or service factories) with a thin veneer of lofty office towers. The largest proportion of costs varied with production, and a small proportion was fixed. The automobile industry is a perfect historical example. When a customer wants a car, the car company must purchase thousands of parts, assemble them, and physically deliver the product — a large number of variable costs.
But starting in the 1960s, large companies began to have really large and growing revenues 5.3 times in Real terms The period between 1960 and 2000 witnessed tremendous growth. It has then doubled again in real terms since then.
As it grew, it built up fixed costs—in categories such as branding, R&D, and distribution—in part because it became large enough to benefit from economies of scale in these fixed cost categories. As a result, cost of goods sold (COGS) as a percentage of revenue has declined significantly since 1981 and the share of sales general and administrative (SGA) has similarly grown. This in turn led to significant volume. If you don’t spread your fixed costs over a large volume, you’ll be invested by someone else – and then you’ll be in trouble because your product won’t be cutting edge, won’t be branded, and won’t get distributed. In this way, volume begets more volume.
The industries with the lowest fixed costs (as a share of revenue) remain the most fragmented, as is the case with the original auto industry, which has been notorious for its consolidation for decades. However, the largest player, Toyota, still has a market share of only 12%, with the next highest share being less than 10%. Industries with higher fixed costs – such as software where variable costs are minimal – are merged or consolidated. For example, in cloud software services, it has three companies – Amazon, Microsoft, and Google 63% market share. In smartphone operating systems, Android has 75%, iOS 24% and they all combine for 1%..
Across sectors, this fixed/variable cost shift has led to increased concentration, which I discuss in the article Harvard Business Review The above article appears in various research papers including This study is at the University of Chicago.
Discover price/value
The second big change affecting strategy is the significant increase in the speed and efficiency of price/value discovery. Starting in 1981, it was really difficult to compare prices and assess the value of offerings, whether in B2C or B2B. Competitive prices were not readily available. You may need to physically go from store to store to compare – and in many B2B businesses this has been more difficult. To get accurate quality/value ratings, you’ll need to subscribe to Consumer Reports or Car & Driver magazine and wait for the issue that covers the show you’re interested in. In B2B, the leading Gartner Group only came into existence in 1979.
In B2C, if a seller can lure you to their physical site, they have a good chance of selling you something without you knowing what it costs elsewhere or how the offer actually performs. In business-to-business (B2B) transactions, a seller visits you to sell to you in person and uses the relationship to get you to buy – again often without knowing pricing or competitive performance.
Obviously, it’s very different after 44 years. In most industries, there is ease and efficiency in comparing prices. There is very little you buy today without knowing the price compared to competitive offers. There are countless customer reviews available to provide a (relatively) unbiased assessment of the value. Price and value are discovered instantly and inexpensively – just a few clicks and you’ll have what you need.
Implications for strategy
To me, there are three big implications for crossover strategy between these two fundamental changes.
More inevitable
Strategy has become more imperative. With customers able to discover price and value quickly and efficiently, companies cannot hide or obscure. Either you invested more fixed costs wisely in making your product more attractive, or you didn’t. This will determine the results.
Of course it’s not entirely deterministic. Nothing in life – except death and taxes! But it is more inevitable today than it was in 1981, when obfuscation was more effective.
Hurry to the logical conclusion
The path to a logical competitive outcome is shorter. In 1981, medium-sized companies could remain viable entities for decades. It was a controversial statement when Jack Welch said in his famous 1981 speech that General Electric would either be No. 1 or No. 2 in its industry or go out of business. That seemed pretty extreme – players No. 3 or 4 could be profitable for a long time, right?
They could then but they can’t now. If you can’t find a Play Place (WTP) where you can place a How to Win (HTW), the clock is quickly ticking for your demise. Winners get an upward spiral of being economically able to invest more fixed costs for greater gains while losers get a downward spiral of investments becoming unaffordable – and these up and down spirals are happening faster than ever before.
Peak
Winners win bigger than ever. As I discussed in the Harvard Business Review condition above,
In 1978, the 100 most profitable companies generated 48% of the profits of all publicly traded companies in the United States combined, but by 2015, the figure had reached 84%. More specifically, the so-called Fab Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Telsa) have been responsible for a huge percentage of stock market growth in recent years. I wrote about it in this series earlier (Although Telsa less so lately).
While these winners make big gains, the losers lose big – whether it’s Rite Aid, Tupperware, Silicon Valley Bank, Neiman Marcus, Spirit Airlines, etc.
Practitioner insights
The first idea is that strategy is more important than ever in the context of deterministic, fast-paced, and peak business. Please ignore the voices that claim that striving for competitive advantage is fruitless in this VUCA worldThey are 180 degrees wrong, and so is their advice deadly To your health.
Choose a WTP in which you aim to create a matching and strong HTW. Invest in the WTP/HTW combination quickly and aggressively. If your payment plan is too broad and/or your investment is slow or tentative, someone else will be able to out-invest you – and clients will quickly find out. When they do, it’s a quick downward spiral for you.
If you invest energy and capital in activities With no intention of winningYou are fooling yourself. I always hear it: Roger, we cannot exit the mediocre product line/business unit because our total sales will shrink. They foolishly assume that their position in this humble job is stable. It’s not like that. They will be crushed – faster than ever before, and will continue to drain investment resources away from product lines/businesses that have a chance to scale up.
Find out where you stand – and fight to win. Invest more than your competitors. If you can’t, you’re kidding yourself. If you can, redouble your efforts and fight your competitors. Encourage transparency in price/value discovery. Be like Progressive Insurance and display your competitors’ rates on your website. If you truly excel, the more transparency the better.
It’s the era of “killer apps” (figuratively I mean the F-150 is a killer app). A few shows will win and win a lot. Many offers will fail and lose completely. If your chances are you’ll create a killer app while doing this X Things A%, would be>A% If you focus on doing .5X Things.
Simply put, what has changed most in strategy is that the effectiveness of throwing spaghetti at walls and playing for the sake of playing has diminished.
The early deadline for Fast Company’s World Changing Ideas Awards is Friday, November 14, at 11:59 PM PT. Apply today.
(tags for translation)business strategy
ــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــ
