Market Position Analysis

Which Strategy When?

F A L L 2 0 1 1 V O L . 5 3 N O . 1

R E P R I N T N U M B E R 5 3 1 1 0

Christopher B. Bingham, Kathleen M. Eisenhardt and Nathan R. Furr

COURTESY OF PIXAR ANIMATION STUDIOS FALL 2011 MIT SLOAN MANAGEMENT REVIEW 71

MARKETS ARE CHANGING, competition is shifting and your business may be suffering or perhaps thriving, at least for now. Whatever the immediate circumstances, managers are forever

asking the same questions: Where do we go from here, and which strategy will get us there? Should

we fortify our strategic position, move into nearby markets or branch out into radically new terri-

tory? To help guide our decisions, most of us have a smorgasbord of strategic frameworks to draw

on. But which one is the right one, and when? The strategic plans, market analyses and hefty bind-

ers that strategy consulting firms leave behind often jumble strategic lenses: Five-Forces analysis,

portfolio review, assessment of core competencies; examination of profit pools, competitive land-

scape and so on. But which analyses are most helpful right now?

Most managers recognize that not all strategies work equally well in every setting. So to understand

how to choose the right strategy at the right time, we analyzed the logic of the leading strategic frame-

works used in business and engineering schools around the world. Then we matched those frameworks

with the key strategic choices faced by dozens of industry leaders at different times, during periods of

stability as well as change. (See “About the Research, p. 72.) Two surprising insights emerged.

First, we discovered that the logics of the different strategic frameworks break into three arche-

types: strategies of position, strategies of leverage and strategies of opportunity. What’s right for a

company depends on its circumstances, its available resources and how management combines

those resources together. (See “Choosing the Right Strategy,” p. 73.)

Second, by observing market leaders employing archetypal

strategies, we found that many assumptions about competitive

advantage simply don’t hold. For example, although strategy

gurus talk about strategically valuable resources, sometimes

Pixar Animation Studios, whose worldwide megahits include the Toy Story movies and Finding Nemo, uses rules such as “great story first, then animation” to guide its strategy.

Which Strategy When? Just when you think you have settled on the right strategy, you may need to change. By understanding the particular circumstances and forces shaping your company’s competitive environment, you can choose the most appropriate strategic framework. BY CHRISTOPHER B. BINGHAM, KATHLEEN M. EISENHARDT AND NATHAN R. FURR

THE LEADING QUESTION How can managers know which strategic framework is the most ap- propriate one?

FINDINGS What’s right for a company depends on its circum- stances, its available resources and how it puts the resources together.

Sometimes ordinary resources assem- bled well can be used to create com- petitive advantage.

To identify the most appropriate strategic framework, start by assessing whether your industry is stable, dynamic or somewhere in between.

S T R A T E G Y

72 MIT SLOAN MANAGEMENT REVIEW FALL 2011 SLOANREVIEW.MIT.EDU

S T R A T E G Y

very ordinary resources assembled well are all that’s

required for competitive advantage. Sometimes it

makes good sense to bypass the largest markets and

focus instead on where resources fit best. In other

circumstances, it may be preferable to ignore exist-

ing resources and attack an emergent market. In

some situations, basic rules of thumb work better

than detailed plans. Surprisingly, these simple strat-

egies can be harder to imitate than complex ones.

How to Choose the Right Strategy To figure out when it makes sense to pursue strate-

gies of position, leverage or opportunity, the key is to

look first at the immediate circumstances, current

resources and the relationships among the various

resources. Understanding these factors will help you

get started with the right strategic framework.

Understand Your Circumstances The first step

for managers is a thoughtful review of their industry.

Specifically, assess whether your industry is stable,

dynamic or somewhere in between. How do you

gauge this dynamism? Begin by asking yourself: Can

I map the five industry structure forces in my indus-

try? If you can identify buyers, suppliers, customers

and substitutes by name and tick off barriers to entry,

and if these five factors tend to stay largely the same,

then you are probably operating within a stable in-

dustry. If the industry is too unsettled to map (think

mobile Internet applications) or the basic rules are

in flux (think clean or nano technology), then you

most likely inhabit a dynamic industry.

Next ask: Where do my products fit in terms of

product life cycle? In stable industries, standards are

well-defined, product expectations are clear, product

life cycles are known and often long and a limited

number of competitors may slowly push the devel-

opment envelope with anticipated innovations.

However, in dynamic industries it’s different. Stan-

dards may not yet exist, product life cycles are short,

products are diverse and no clear dominant technol-

ogy or product has emerged. Some industries are in

between. The auto industry is historically a stable in-

dustry. But new technologies (for example, hybrid

and electric-powered engines), compressed product

development times, volatile oil prices and regulatory

pressure have increased dynamism. Also, don’t for-

get that your own company’s circumstances (for

example, whether you’re a startup with a promising

business model or an established player with global

reach) will also affect where you fit.

Take Stock of Your Resources Once you under-

stand your industry circumstances, take a look at

your company. Assessing your resources and the

links among them is essential. Why? Resources lie at

the heart of strategy. They enable companies to set

themselves apart from competitors. Tangible re-

sources (such as Intel’s fabrication facilities or

Starbucks’ locations) are relatively straightforward

to assess. But intangible resources (for instance,

Amazon’s patents or Procter & Gamble’s brands)

are trickier. Beyond these, organizational processes

(for example, the acquisition process of India’s Tata

Group or General Dynamics’ divestment process)

can provide a critical basis for advantage.

Once you know your resources, determine how ad-

vantageous they really are. The most strategically

important resources are valuable (i.e., useful in your

industry), rare (i.e., possessed by only a few), inimita-

ble (i.e., difficult to copy) and nonsubstitutable (i.e.,

lacking in functional equivalents). These resources are

a potential source of competitive advantage. Yet even if

they can provide advantage, they aren’t absolutely nec-

essary for competitive advantage. Indeed, even

common resources can be a source of advantage de-

pending on how they are linked with other resources.

Determine the Relationships Among Resources

A secret to picking the right strategic framework is as-

sessing how your resources relate to one another. Some

resources are tightly linked. For example, Wal-Mart’s

low-cost strategy in the United States depends heavily

on its physical resources (often rural locations), so-

phisticated information technology (like maximizing

selling space in stores and quickly replenishing inven-

tories), efficient logistics (like cross-docking) and

cost-conscious culture, all of which reinforce each

other. By contrast, Google’s resources are more loosely

linked. Executives can recombine human capital and

technical resources as needed to tackle different mar-

kets and products. Of course, there are trade offs:

Tightly linked resources create more defensible strate-

gic positions, but they resist change; loosely linked

resources are easier to change, but they can be ineffi-

ciently deployed and redundant.

ABOUT THE RESEARCH To understand how compa- nies create competitive advantage in different indus- tries and settings, we conducted in-depth inter- views with more than 90 corporate leaders. The lead- ers included both senior executives (CEOs, chair- men, executive vice presidents and business- unit heads) and managers who are charged with strat- egy implementation. We also surveyed all top man- agement team members at 12 U.S., Finnish and Singa- porean companies about the strategies they used for key strategic processes such as alliances, acquisitions, prod- uct development and internationalization as well as the performance results that followed from using those strategies. In addition, we reviewed relevant re- search articles in the field of strategic management pub- lished in leading academic and practitioner journals from 1980 to 2010. From the data collected in our own research and through the review of the extant lit- erature, we were able to zero in on three archetypal strategic frameworks used by industry exemplars at different times and under different conditions of envi- ronmental dynamism.

SLOANREVIEW.MIT.EDU FALL 2011 MIT SLOAN MANAGEMENT REVIEW 73

Choosing a Strategy When does it make sense to

choose one strategy over another? How do execu-

tives decide whether to build their strategies around

position, leverage or opportunity? We will examine

each framework separately.

The Position Strategy When industries are stable, a strong case can often

be made for a position strategy. Position strategies

involve selecting a valuable and unoccupied indus-

try position and then building up its defenses. This

is the strategy that is commonly associated with

Five Forces analysis,1 where competitive advantage

comes from constructing a fortress around an at-

tractive market. Industry stability ensures that the

position of the fortress provides a long-term com-

petitive advantage, thereby justifying repeated

investments to reinforce and preserve the position.

The strategy remains valuable until the terrain

shifts and the strategic position is eroded.

With a position strategy, competitive advantage

depends first on choosing a valuable and unoccu-

pied strategic position in a given industry, and

second on creating and linking company resources

to defend that position. A valuable strategic position

drives superior profitability through the ability to

either boost prices (e.g., Porsche in the automotive

industry) or reduce costs (e.g., Casio in the watch

industry). Companies often defend their positions

by assembling resource combinations that their

competitors cannot easily imitate. In the U.S. mu-

tual fund industry, for example, The Vanguard

Group has built its strategy around conservative in-

vestment management and low costs. Vanguard,

which claims that the average expense ratio of its

mutual funds is a fraction of its main competitors,

defends its position with mutually reinforcing re-

source choices, including low commissions, modest

management perks and an absence of retail

branches. Thus, the key to advantage with a position

strategy is not just having a valuable strategic posi-

tion, but also linking resources to defend successfully

against challengers.

Position strategies seem straightforward, but it is

often assumed their success requires strategically

important resources. Although such resources can

be helpful, they aren’t necessary. Competitive advan-

tage can come from defending a strategic position

CHOOSING THE RIGHT STRATEGY We found that the logics of different strategic frameworks break into three archetypes: position strategies, leverage strategies and opportunity strategies. What’s right for a company depends on its circumstances, available resources and how management links those resources.

POSITION STRATEGY LEVERAGE STRATEGY OPPORTUNITY STRATEGY

STRATEGY Build mutually reinforcing resource systems with many resources in an attractive strategic position. Deepen their links.

Build strategically important resources for current markets. Leverage them into attractive new products and new markets.

Pick a few strategic processes with deep and swift flows of opportuni- ties. Learn simple rules to capture opportunities.

Circumstances Best for

Stable environments Moderately dynamic environments Dynamic environments

Resources Often mundane Strategically important (i.e., valuable, rare, inimitable and nonsubstitutable)

Opportunity-rich strategic processes guided by simple rules

Relationships Tightly interlocked resources Moderately linked resources Loosely linked resources

Basis of Competitive Advantage

A cost leadership or differentiated strategic position that is defensible

Ownership of specific strategically important resources that can be leveraged

Capture of attractive opportunities before rivals

Sustainability of Advantage

Long term Medium term Unpredictable

Inimitability of Advantage

Through causal ambiguity of tightly linked resources plus time to develop the resource system and path dependence

Through property rights, path dependence and time needed to develop the same resources

Through first-mover advantage and the challenge of inferring rules from partially improvised outcomes

Challenges Adjusting system of tightly linked resources quickly enough and with- out producing negative synergy

Adjusting resource portfolio without being blocked by cognitive and polit- ical rigidities

Maintaining “edge of chaos” with the right number and types of rules. Timely pivoting to better strategic processes

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S T R A T E G Y

through a system of tightly linked resources, not nec-

essarily from the superiority of the resources per se.

Consider JetBlue, the low-cost U.S. airline. On the

surface, its strategy is based on common, even mun-

dane, resources: Airbus A320 and Embraer 190

aircraft, comfortable passenger seats, DIRECTV ac-

cess and SIRIUS XM satellite radio, e-mail and

instant messaging services and fast turnaround ca-

pability at airport gates. None of these resources is

particularly special. But as a package, they are mutu-

ally reinforcing and produce a differentiated offering

that gives JetBlue a competitive advantage that other

airlines would have difficulty imitating.

When resources are tightly linked, they are hard

to copy. Interdependent resources create complex-

ity, and so copying them and their linkages is

challenging and time-consuming. Thus, even if imi-

tators understand which resources are being used,

they probably don’t understand exactly how they fit

together because there are often many resources

with unexpected combinatorial effects. Successful

imitation, therefore, requires not only knowing

which resources comprise another company’s strat-

egy (i.e., ingredients), but also deciphering the

proper sequence of their assembly (i.e., recipe).

Over time, since even fortresses need mainte-

nance, managers with position strategies can’t just

rest on their laurels. To maintain competitive ad-

vantage, they may need to refresh their resources

and strengthen the links among them. For example,

the Spanish clothing company Zara has updated

several resources to bolster its strategic position, in-

cluding more and better small-batch production

that seamlessly links to air shipment logistics. Zara

can now send new designs to any store in the world

in less than two days.

Like any strategy, position strategy has an Achil-

les heel: change. When industries change, moving a

fortress locked into a strategic position is tough.

Changing a tightly linked system means disman-

tling the very synergies that management worked

so hard to build and putting the organization at risk

during the transition to a new strategy. For this rea-

son, many managers either ignore change or make

changes at the margin. But neither approach works.

Once stable markets change, entrenched strategic

positions tend to falter. Change forces managers to

dismantle their existing resource systems and reas-

semble them in new strategic positions. This is

difficult and time-consuming — a combination

that can potentially be lethal because performance

may not improve until the pieces are reassembled

and linked. For example, Liz Claiborne, an apparel

company, relied on a positioning strategy in which

production, distribution, marketing, design, pre-

sentation and sales resources were all tightly linked.

But when the industry changed, the company’s re-

lationships with department stores were disrupted.2

In an effort to adapt, Claiborne executives changed

resources such as their “no reordering” process that

had antagonized department stores. But since this

process was synergistically entwined with other

resources like overseas logistics and distant manu-

facturing locations, the “no reordering” process

could not be undone without damaging system co-

herence. Financial performance sank precipitously.

Only after Claiborne executives dismantled their

existing resources and started reconnecting new

ones did positive performance begin to return.

The Leverage Strategy In markets where change is moderate, leverage

strategies often beat position strategies. Since

change is incremental and predictable, it makes

sense for managers to coevolve their strategically

important resources with the industry. So while

position strategies are based on the fortress anal-

ogy, leverage strategies are more like chess, where

competitive advantage comes from both having

valuable pieces and making smart moves with

them. Take Pepsi. The company has several strate-

gically important resources (including its brand,

product formulas and distribution system). But

what really matters is that the company has smartly

leveraged them to support new products that fit

with increasingly health-conscious consumers.

Alongside its carbonated drinks, Pepsi now offers

an array of alternative beverages, including waters

(Aquafina, SoBe Lifewater), juices (Tropicana,

Dole), teas (Lipton) and sports drinks (Gatorade),

all of which take advantage of the company’s stra-

tegically important resources.

Companies that pursue leverage strategies

achieve competitive advantage by using their strate-

gically important resources in existing and new

industries at a pace that is consistent with market

FALL 2011 MIT SLOAN MANAGEMENT REVIEW 75

change. This strategy, commonly associated with

the resource-based view of the company,3 focuses

on building or acquiring resources that are valuable,

rare, difficult to imitate and nonsubstitutable, and

leveraging them into new products and markets.

But while resources in position strategies are often

tightly interlocked, resources in leverage strategies

are often only moderately interconnected.

Leverage strategies can focus on refreshing and

consistently deploying core resources in current mar-

kets. For example, although Intel’s short-term success

depends on extracting value from its current genera-

tion of microprocessors, its long-term growth depends

on using its well-known design capabilities, branding

and manufacturing resources in future generations of

microprocessors. Similarly, Pizza Hut’s continued suc-

cess depends on updating its highly important service

resources in its existing markets. The company ex-

panded into India in the late 1990s and soon

distinguished itself from competitors based on its

ability to provide customers with pizza and friendly

table service in a relaxed atmosphere. Yet, by 2005,

India’s casual dining sector was crowded. Pressured by

rivals, including Domino’s, Pizza Hut refreshed its ser-

vice resources and leveraged them to create a more

upscale dining experience. As a result, Pizza Hut is still

the most trusted food brand in India.

While leveraging resources in existing markets is

important, leveraging resources into new markets is

important, too. Under Armour, a Baltimore, Mary-

land, sports apparel company founded in 1995,

offers a good example. CEO Kevin Plank originally

planned to make breathable garments for football

players. But he and his team soon realized that they

could leverage their moisture-wicking synthetic

fabrications into other markets. After screening

markets to see where this resource could be intro-

duced most effectively, Under Armour executives

developed their first line of moisture-wicking run-

ning shoes. Similarly, Home Depot is currently

attempting to leverage its core resources by selling

automotive replacement parts. By exploiting both

its extensive expertise in “do-it-yourself ” and its

2,200 store locations, it hopes to propel growth.

A common mistake with leverage strategies is

forgetting to reassess the strategic importance of

resources (especially value, rarity and nonsubsti-

tutability) in potential new markets. For example,

when Amazon.com first tried to leverage its online

ordering and inventory fulfillment capabilities be-

yond books and music to include other product

categories such as toys, it hit a wall. As it turned out,

the inventory systems that were tailored for books

and music were not well suited for the extreme sea-

sonality of toys, and the company’s warehouse

logistics were not designed to handle toys, which

come in all sorts of shapes and sizes.

Leverage strategy is not only about expansion.

Sometimes, it makes sense to pull back and rede-

ploy resources. For years, Califor nia-based

Advanced Micro Devices used its superior engi-

n e e r i n g d e s i g n re s o u rce s to d e ve l o p s e m i -

conductors. Recently, however, the company has

redeployed some of its resources away from the

hotly competitive semiconductor industry and

into design services. Although products and ser-

vices may rely on particular strategically important

resources, these resources need not be wedded to

specific products or services. Rather, they can be

used to create competitive advantage in other con-

texts. In other words, a deep knowledge base of

resources and capabilities is often fungible across

multiple products and markets.

A primary challenge of creating competitive ad-

vantage with a leverage strategy is updating the

resource portfolio as industries change. This can mean

choosing whether to acquire, partner or develop key

resources in-house. Toyota’s Prius is an example of le-

veraging some existing resources, including brand

and electronics technology, even as the company de-

veloped and acquired new resources for hybrid

technology, engine control software and regenerative

braking. But, even when managers see the need for

adding, upgrading or eliminating resources, en-

trenched beliefs and internal power struggles can

interfere. Immediate performance from existing re-

sources takes precedence over later performance

from new resources that may be several years away.

To support this point, one needs to look no further

than Chrysler. In 1984, Chrysler introduced the first

minivan. Over the next 20 years, it sold more than

10 million minivans, revitalized its popular Jeep line

and introduced successful Ram and Dakota pickups

and Dodge Durango SUVs. But the auto industry

changed. While General Motors and Ford adapted

their engine technologies to emphasize fuel efficiency

Under Armour CEO Kevin Plank and his team realized that they could leverage their moisture-wicking synthetic fabrications into new markets.

COURTESY OF UNDER ARMOUR

76 MIT SLOAN MANAGEMENT REVIEW FALL 2011 SLOANREVIEW.MIT.EDU

S T R A T E G Y

and retooled their manufacturing plants for small

cars, Chrysler failed to update its resource portfolio.

As a result, the company, now controlled by Fiat, has

yet to prove that it can gain the resources necessary to

compete well in the new reality.

The Opportunity Strategy In contrast to stable industries, dynamic industries are

characterized by superabundant flows of fast-moving

but often unpredictable opportunities. Industry struc-

ture is characteristically shifting as competitors come

and go, customers modify their preferences and busi-

ness models are in flux. How long will competitive

advantage last? It’s impossible to know, but probably

not very long. As the CEO of a security software com-

pany told us half-jokingly, “You need a degree in

astrology to compete in our industry.” Even though

managers seek a long-term competitive advantage,

they do business as if it doesn’t exist. The famous Intel

axiom that “only the paranoid survive” reflects senior

management’s belief that at any point in time their

competitive advantage will vanish. As a result, strategy

focuses on capturing opportunities that create a series

of temporary competitive advantages.

In contrast to the fortress and chess views of

strategy, pursuing an opportunity strategy is like

surfing: Performance comes from catching a great

wave at the right time, even though the duration of

that wave is likely to be short and the ride a precari-

ous “edge of chaos” experience where falling off is

always a possibility.4 Timing and capturing succes-

sive waves are what matters. The video game console

industry provides a useful case in point. In the space

of only a few years, different companies (including

Sega, Nintendo, Sony and Microsoft) have “caught

the wave” and for a time led the industry.

For companies pursuing opportunity strategies,

competitive advantage comes from capturing at-

tractive but fleeting opportunities sooner, faster and

better than competitors. This strategy, which is

commonly associated with “simple rules” heuris-

tics,5 requires combining two elements: choosing a

focal strategic process and developing simple rules

to guide that process. Together, they enable compa-

nies to be flexible enough to capture unanticipated

opportunities while still being broadly coherent and

efficient. In choosing a focal strategic process, the

key is to choose one where the flow of attractive op-

portunities is steady and deep. Tata Group, whose

diversified operations range from steel and autos to

communications and beverages, provides a good

example. Because of its high market capitalization

and ready access to corporate debt, Tata has relied

heavily on acquisitions as its focal strategic process.

Its managers have pursued a series of acquisition

opportunities quickly and effectively. For example,

in 2007, the company paid $12 billion for Corus, a

European steel company. Several months later, it

paid $2.3 billion to buy Jaguar and Land Rover from

Ford. In contrast, Apple focuses on a different stra-

tegic process — product development — to churn

out coveted new designs. Yet in contrast to position

strategy, which depends on tightly connected pro-

cesses, opportunity strategy is built on processes

that are only loosely connected to one another.

Once managers have identified their focal strategic

process, they need to learn some simple rules. The easi-

est to learn are rules of thumb for picking and

processing opportunities; rules for pacing and priority

rules are more difficult to learn. The idea is to provide

enough structure for action while also allowing flexi-

bility to capture unanticipated opportunities. At Pixar

Animation Studio, whose animated films (including

the Toy Story movies, A Bug’s Life, and Finding Nemo)

have become worldwide megahits, the rules are clear.

One rule is “no studio executives.” Pixar is run by cre-

ative artists, or as Andrew Stanton (director of WALL-E

and Pixar’s ninth employee) called it, “film school

without the teachers.” This gives company artists maxi-

mum leeway to create without having to fight their way

through middle management. A second rule is “great

story first, then animation.” That not only ensures a

steady stream of prestigious awards (Ratatouille holds

the record for the most Oscar nominations for a fea-

ture-length animated film), but also makes it easier to

attract talent. Another rule stipulates “in-house origi-

nal ideas only.” And while ideas must come from

within, they don’t come just from creative types: Every-

one from janitors to auditors is encouraged to submit

ideas, and all ideas are considered. Finally, as the surf-

ing analogy would suggest, the rules affecting pacing

are particularly important. A key one at Pixar is “one

new movie per year.” But while there are rules, there is

plenty of space at Pixar to create unique movies.

On the surface, opportunity strategies relying

on simple rules seem easy to copy. But since the op-

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portunities and outcomes are so varied, it is actually

difficult to decode the rules from the outside. Of

course, competitors can try to mimic processes (say,

for acquisitions or product development), but rules

are often the results of idiosyncratic trial and error,

making them difficult for rivals to duplicate. More-

over, even if competitors understand the underlying

logic and copy a company’s rules, it’s often too late:

The most attractive opportunities will have already

been captured. For example, although Cisco Sys-

tem’s networking rivals eventually copied the rules

of its acquisition process, they could not replicate

the opportunities that Cisco had already acquired.

Managers often tinker with their rules by mak-

ing them better or more suited to their changing

industries. In doing so, managers not only alter the

number and content of rules, but also their abstrac-

tion. For example, CRF Health, an international

company that expedites drug discovery in the phar-

maceutical industry, frequently adjusted the rules

that guided its internationalization process. When

the company entered the United States, it relied on

a rule that had been highly effective in Sweden:

“Hire strong locals using online resources.” But this

rule proved ill-suited to the new market because

there were few individuals with both clinical devel-

opment and technical skills willing to work in a

startup. Indeed, the rule led to several early hires

who were not well-qualified. Based on this experi-

ence, CRF’s team decided that the existing rule

needed to change to one emphasizing local hiring

without regard to source. Thus, leaders raised the

abstraction from “Hire strong locals using online

resources” to the more general “Hire strong locals.”

This new rule focused attention on the overarching

aim of hiring, but did not prescribe whether to rely

on online resources, headhunters or other sources.

Although intuition suggests that rules begin as ab-

stract and become detailed, opportunity strategy

stresses the opposite. Rather than becoming rou-

tine to ensure efficiency, rules often become more

abstract and remain few in number to ensure flexi-

bility to address unanticipated opportunities.

When an opportunity flow becomes less attractive

(e.g., greater competition for the opportunities or

lower payoff from the opportunities) or when more

attractive opportunity flows emerge, it’s time to pivot

to the superior flow and its related strategic process.

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S T R A T E G Y

The key point is that shifts in where to compete are

driven more by the attractiveness of opportunity flows

than by fit with the company’s strategically important

resources. For example, as product development op-

portunities slowed down at Google, management

placed more emphasis on internationalization oppor-

tunities. The company ramped up to enter more than

55 countries with more than 35 languages by support-

ing localized search, and it now generates more than

half its revenue from outside the United States. Simi-

larly, once its user network had grown to a sufficient

scale, LinkedIn switched from emphasizing its strate-

gic process for user acquisition to one for developing

new revenue-producing services.

Just as positioning and leverage strategies have

their pitfalls, so does opportunity strategy. For entre-

preneurial startups, it is often critical to add more

strategic processes and rules than is comfortable.

Too little structure is riskier than too much. But for

large companies, the greater risk is having too much

structure. Most managers intuitively worry about

bureaucracy and red tape. But what they don’t know

is that pursuing an opportunity strategy requires

holding the line on the number of rules, not just their

content. In other words, the number of rules mat-

ters. Managers should also be alert to signs of

consolidation, standardization, longer product life

cycles and other such indications that the industry is

maturing and becoming less dynamic.

SO WHICH STRATEGY SHOULD YOU USE? The real-

ity is that no single strategy works in every industry

always. Although the essence of strategy is being

different, establishing that “difference” — whether

it’s through different positions, different resources

or different rules — depends on the circumstances.

Each approach works best in particular settings and

has its own implications for strategic actions, pit-

falls, competitive advantage and performance. And

just when you think you have it right, you may well

need to change again. But by understanding the ar-

chetypal strategic frameworks and the factors

underlying each choice, you’ll be better prepared to

craft your next strategy.

Christopher Bingham is assistant professor and Phil- lip Hettleman Fellow of strategy and entrepreneurship at the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School. Kathleen Eisenhardt

is the Stanford W. Ascherman M.D. Professor of Strat- egy and Organization at Stanford University. Nathan Furr is assistant professor of entrepreneurship and strategy at Brigham Young University. Comment on this article at http://sloanreview.mit.edu/x/53110/, or contact the authors at [email protected].

ACKNOWLEDGMENTS

The authors thank Kenan-Flagler Business School at UNC, Stanford Technology Ventures Program, Marriott School of Management at BYU and the National Science Founda- tion (grant #0323176) for their support.

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