Strategic Constancy
How agility trapped Suning
Readers of my blog may be interested in a recent article by Jiangwen Lao and Feng Zhu in Harvard Business Review: “How to Avoid the Agility Trap”. It presents a case study of how Suning, a major Chinese online retailer, lost much of their competitive advantage by trying to be too agile. The authors then present a vision of what they call Strategic Constancy: retaining focus on enduring fundamentals, while navigating a dynamic marketplace.
To summarise:
- Suning were an established bricks-and-mortar retailer, who expanded into eCommerce in the late ’00s.
- They spent the next decade aggressively expanding via acquisitions into various markets, including video streaming, soccer clubs, and finance
- This approach led to sustained losses. The company has now pulled out of non-core markets, and faces a challenging struggle to regain leadership in its core sector.
Zhu and Lao contrast the agile, scattergun approach of Suning with companies like Amazon, who stayed dedicated to a successful core operating model while diversifying.
They present the following as “The Problem with Agility” in Business Strategy:
- The business environment changes faster than firms can keep up. By trying to chase every new opportunity, they lose capacity to retain healthy fundamentals
- “Building a competitive advantage is a gradual process and often requires concentrating on a select group of synergistic activities over a long period”. By being hung up on agility, Suning lost synergy among its various divisions
- Companies who focus on agility chase opportunities for quick returns, leading to “Strategic Myopia”
- “Organizational Chaos”. Every change in direction requires some restructuring and re-communication. Employees get exhausted, managers make poor and ill-informed decisions.
I won’t go into too much detail here about the suggestions they make for implementing Strategic Constancy. The original article is very clear, I’d rather you read it than my paraphrasing.
It’s just nice to see the Business Strategy community beginning to align with the Engineering community on the fact that there are limits to the safe and effective use of agility. Agility can be an essential and occasional tactic, it’s rarely an effective strategy. Nearly all the same human and technical factors apply to building software as to building corporations. It’s interesting (but not really surprising) how closely some of the language in the HBR article mirrors the justifications I’ve seen for Platform Engineering and more up-front design on software projects.
Since I’m feeling charitable today, I might allow that Agile could have been an optimal approach for some companies and some investors, about 25 years ago. The macroeconomic context was different then — with cheap money being pushed into dotcom startups. When you know there’s a lot of money to be made on the web, somehow, but consumer preferences are unknown, maybe it does make sense to throw a lot of different muds at the wall and see what sticks. Any other time or place, outside of a goldrush, forming a strategic plan and sticking with it is vital.
