How to Maintain Strategic Fit over Time?

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How to Maintain Strategic Fit over Time?

🔥 Zajac, Kraatz and Bresser (2000) developed a dynamic model for strategic fit in Strategic Management, encompassing the relation between strategic fit, strategic change and a firm’s performance. They view strategic fit from a dynamic rather than a static perspective. They argue the challenges of considering a strategic fit over time fall into 3 main categories:

1. THE IMPLICATION OF FACING STRATEGIC CHANGE, i.e. a change in the environmental or organizational circumstances, which a firm faces over time
   
   • Environmental Circumstances: a shift in consumer preferences, changes in government policies, competitor’s actions, technological changes, etc.
   • Organizational Circumstances: for example a firm may lack certain resources or competences that are needed to implement a particular strategy.
2. MULTIDIMENTIONALITY. A firm faces multiple environmental and organizational contingencies, which can create a tension resulting from the choice between the strategy-environment fit and the strategy-competences fit.
3. The pressure resulting from the need to create a NORMATIVE FRAMEWORK that can predict or even prescribe strategic fit over time.

Zajac, Kraatz and Bresser ‘s model of dynamic strategic fit:



The assumptions and logic behind the dynamic strategic fit model are:

1. One can define a set of organizational and environmental factors that theoretically should define strategic fit.
2. Variation in those factors implies variation in the necessity for strategic change (across organizations and/or across time)
3. The comparison of actual and necessary strategic change determines the degree of dynamic strategic fit, which should then influence subsequent organizational performance

Following this logic, Zajac, et al (2000) created a strategic change matrix with 4 possible scenarios for firms that try to maintain strategic fit over time, showing the connection between strategic change, dynamic strategic fit and firm performance:

1. BENEFICIAL STRATEGIC CHANGE. This represents a situation where, because of environmental or organizational contingencies, a firm changes exactly as much as needed leading to performance benefits. In other words: there is an exact alignment between strategy and current circumstances. Still, challenges are: controversial effect of alignment with other contingencies, differences in magnitude and direction of the strategic change.
2. INSUFFICIENT STRATEGIC CHANGE. The "worst case scenario". A situation where a firm does not change adequately enough or is reluctant to adapt when facing a strategic change, resulting in bad performance.
3. BENEFICIAL INERTIA. A situation where a firm does not need to change as a result of an already implemented strategy that is not affected by a shift in the contingencies, where a firm is continuously striving to achieve an alignment with the changing environment by accumulating strategy-specific competences, which leads to performance benefits.
4. EXCESS CHANGE. A situation where a firm changes even though it is not necessary to do so. This could seriously impede performance. This could be reflecting an “organization's well-intentioned but miscalculated pursuit” of strategic fit or an "opportunistic adaptation".

The testing by Zajc et al of the model led to the following conclusions:

1. The timing, direction, and magnitude of strategic changes can be logically predicted based on differences in specific environmental forces and organizational resources.
2. Organizations that deviated from the model's prediction of dynamic strategic fit (i.e., they changed more or changed less than the model prescribed) experienced negative performance consequences.

⇒ What in your opinion could be the practical implications of applying this model?

Source:
Edward J. Zajac, Matthew S. Kraatz and Rudi K. F. Bresser (2000) "Modeling The Dynamics Of Strategic Fit: A Normative Approach To Strategic Change", Strategic Management Journal, 21: 429-453

		Comments by date▼ Comments by rating Rating
		5 Govers Business Consultant, Netherlands
	Vucability in a VUCA-world .. How does one measure/assess the level of VUCA going on outside? And how to (re)act accordingly? Isn't it all about agility to match dynamic or even unpredictable environments? Resulting in an adequate response somewhere in the range from agile working, stretching via an agile structure to an agile strategy or strategy development? According to some only a holistic approach works to reach agility.

		8 Jaap de Jonge Editor, Netherlands
	Maintaining Strategic Fit over Time in VUCA Circumstances This subject is definitely practical, because it ranks at the top of the priority list of most businesses. But it's a hard nut to crack… I agree with @Mr. Govers: we are facing the challenge of having to manage our organizations in VUCA-circumstances (Volatile, Uncertain, Complex and Ambiguous). We know "All things are in a state of flux" since the days of Greek philosopher Heraclites, but over the last decennia the speed of change has gone up all the time, catalyzed by the impact of information technology, the internet and the resulting globalization to mention just 3 of the underlying causes. And the speed of change of the external environment will probably increase further in the future… And as a result, our management challenge to maintain strategic fit also increases. The topic of this discussion might also have been: How to maintain strategic fit over time … in an increasing VUCA external environment? Several of our competence centers are addressing at least parts of the solution, take a look at strategic agility, real options, scenario planning. Perhaps an innovative, learning, change-embracing organizational culture is most important. Again an issue with that is that changing organization cultures is so hard. Look here for project management and ambiguity. Who ever said management is easy?

		1 Helen Strong Business Consultant, South Africa
	Elements in Model of Dynamic Strategic Fit I have not read the original articles re Dynamic Strategic Fit... So apologies if I speak in ignorance. What I miss most are feedback loops from organisational performance to the need for strategic ch...

		2 Damodaram Kuppuswami Consultant, India
	Embracing Dynamism This topic revolves around the understanding of the 'dynamic' nature inherent in society and in its processes. Organisations that do not believe in this paradigm are probably already a misfit. What F...

		2 HARWINDAR SINGH Business Consultant, Malaysia
	Framework for Dynamic Strategic Fit The model attempts to provide a road map to align strategic changes forced by external forces and/or internal contingencies within the limits of desirable change and undesirable change. It also uses t...

		2 Graham Williams Management Consultant, South Africa
	How to Maintain Strategic Fit over Time? The ongoing challenge to maintain strategic fit will inevitably grow and accelerate. Perhaps Big Data, advanced business analysis capabilities, even savvy use of AI will satisfy the need for quicker j...

		2 Barney Wade Howard Manager, United States
	Always Repair the Foundation First I really like this subject. To grow and adapt, there must be a viable foundation. Next you have to reverse-engineer some businesses whose foundations are based upon an ideology of the past. Re-brandin...

		0 Maurice Hogarth Consultant, United Kingdom
	How to Maintain Strategic Fit over Time Practically the need is for a combination of monitoring and responding to the information received so as to modify the intended ‘should be happening’ in time. The need is to overcome the delay of the...