𝑾𝒉𝒆𝒏 𝒎𝒂𝒓𝒌𝒆𝒕𝒔 𝒔𝒉𝒊𝒇𝒕 𝒐𝒗𝒆𝒓𝒏𝒊𝒈𝒉𝒕, 𝒘𝒊𝒍𝒍 𝒚𝒐𝒖𝒓 𝒃𝒖𝒔𝒊𝒏𝒆𝒔𝒔 𝒂𝒅𝒂𝒑𝒕—𝒐𝒓 𝒃𝒆𝒄𝒐𝒎𝒆 𝒐𝒃𝒔𝒐𝒍𝒆𝒕𝒆?

Strategic renewal is essential for businesses to respond to unexpected market shifts and ensure continued survival (as well as to proactively seize opportunities)

For instance, producers and component suppliers for biomass boilers faced a sudden plunge in demand in Germany when legislative amendments wiped out subsidies due to an adjusted CO2 classification. 

From studying 1,451 cases of this reinvention dilemmas HBS professor Ryan Raffaelli found that that failure to renew in these situations is not based on an inability to see arising market or technology changes, but a lack of balancing between exploitation and exploration (ambidexterity). 

Three traps specifically threaten organisational efforts in strategic renewal: 

1.  𝐓𝐡𝐞 𝐈𝐝𝐞𝐧𝐭𝐢𝐭𝐲 𝐓𝐫𝐚𝐩 – When organisations define themselves primarily through a single product or service, they create two risks: 

 - Leaders are not capabilities for innovation, and may hence pass up opportunities. 

- A product or service-focussed identity contributes to employee resistance as new ideas are perceived as incompatible with what the company does.

How to avoid it?

Communicate a broad enough, yet meaningful identity early on. Who we are must be more than what we do, but less than a generic boilerplate statement.

2.  𝐓𝐡𝐞 𝐀𝐫𝐜𝐡𝐢𝐭𝐞𝐜𝐭𝐮𝐫𝐞 𝐓𝐫𝐚𝐩 – When organisational structures (hierarchies, incentives, processes, teams) are not reevaluated in the light of differing innovation demands. 

How to avoid it?

Build structures that suit the innovation goals and create balanced incentives that matter to the individual innovation areas.

3.  𝐓𝐡𝐞 𝐂𝐨𝐥𝐥𝐚𝐛𝐨𝐫𝐚𝐭𝐢𝐨𝐧 𝐓𝐫𝐚𝐩 – when individuals or groups do not develop trusting relationships that support the individual value contributions, i.e. due to perceived favouritism for a particular innovation area.

How to avoid it?

Create opportunities for joint-decision making and idea exchanges across innovation teams in different phases, for instance by creating a shared space for specialists to temporarily enter one another’s domain. 

𝐑𝐞𝐚𝐝𝐲 𝐭𝐨 𝐭𝐚𝐤𝐞 𝐚𝐜𝐭𝐢𝐨𝐧?

Strategic renewal starts long before the crisis. 

🔍 Is Your Organization Ready for Strategic Renewal? Take a quick self-assessment below to find out.

Source: Raffaelli, R. (2024). The Three Traps That Stymie Reinvention. MIT Sloan Management Review, 66(1).