What is Strategic Drift?
Strategic Drift implies a condition in which the company’s management fails to notice or remains unaware of the minute changes in the business environment. Hence, till the time they come to know that the environment has changed, it is very late. And the business has to face difficulties. It may result in the decline or failure of the business.
Over time, strategic drift has become one of the main causes of reported failures of a number of businesses.
Strategic Drift connotes the slight shift from the predetermined course of action or direction to another one, often unwanted, specifically in the long run.
It is obvious that in some situations, the shift is important. However, too many shifts over time may result in the company losing its focus, and it might turn out as highly reactive, which is going to adversely affect its success.
It is the step-by-step decline of the competitive action, leading to the failure of the firm to identify and react to the change in the business environment.
In finer terms, when the firm’s business strategy is not more relevant to the business environment, it is called Strategic Drift.
The failure of Kodak and Nokia are classic examples of Strategic Drift.
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Concept of Strategic Drift
When the established strategy of the firm remains unchanged for a long period or even if it changes, the change is marginal. However, the environmental change is much faster than the change in the strategy. So, if the marginal change lags behind the environmental change, the organization will lose its track.
In such a situation, the firm becomes only reactive to the environment and fails to identify all the happenings around it. Also, it fails to create new opportunities. This is the situation of strategic drift.
- An organization’s outdated values and belief system block out deviant strategies on the grounds that ‘it is not what the organization does.’
- Managers are restrained in their reactions to the changes they perceive in the business environment by their limited thinking of what change should be.
- Those who have power often reject new strategic solutions and suggestions. They do so because they think that any change would result in undermining their own position.
There are four stages in strategic drift, as represented in the figure:
As shown in the figure, the green line represents the changing business environment. While the red line indicates the firm’s strategic position.
Incremental Change: It takes place prior to any remarkable change in technology, demand, preference and economy. Firms adapt to such change in order to stay aligned with the dynamic business environment.
Strategic Drift: When the business environment experiences change at an increasing rate. But the business organization continues its operations, as per the previous stage, i.e. it only makes incremental changes. However, such incremental change is not enough to match with the actual change in the business environment.
Therefore, its effect on the firm is insidious, which can be visible in the drop in financial performance. Also, the causes of such decline are not fully ascertained by the top management. At this stage, the strategic actions turn out as less effective.
Flux: Now, at this stage, the company’s management cannot fail to consider the gap between the product demanded by the customers and the products offered by the firm. And the firm clearly understands that they have to implement the change. But, it is not easy for the management to concur on what they need to change and how they are going to do it.
Hence, here the change required should be transformational rather than incremental.
Transformational Change or Death: At this stage, the firm has two alternatives:
- The firm can formulate and implement a change management strategy. They do so to make the desired change in the firm. It will result in the success or failure of the firm.
- The firm can also continue with its old strategy, whose result will be dying a slow death.
What are the effects of Strategic Drift?
- Damage to Employee Morale: Because of the psychological fallout from the continuous shifting and change of long-term effect on the firm, it usually tends to develop a regressive state of mind, which makes the staff members indifferent to a constant state of alert.
- Change for change’s sake: Due to continuous shifts, change is not perceived any more as a strategic move, but it is considered as a change for change’s sake.
- Sceptical: Managers and executives become sceptical. It happens because of the lack of certainty, due to which the motivation to stand up and the fight for survival diminishes with time.
How to prevent Strategic Drift?
There are certain ways that the organization can implement to prevent strategic drift; these are:
- Develop a culture in the organization which is not just openly tolerant of both positive and negative feedback but also gladly receives it.
- Ensure that the firm accepts change as and when required. Also, it is not reluctant to question the change when it seems irrelevant.
- Develop a flexible environment in the organization in a way that all levels of management take part in the decision-making process.
- Identify new challenges and prioritize them as per their significance.
- Formulate comprehensive and clearly defined strategies for business.
Consequently, loss of momentum, increase in unnecessary cost, diversion of focus, decline in performance, preservation of status quo, and decline in competitive advantage, innovation and market adaptability may take place due to strategic drift.
Strategic Drift is the increasing gap between the demand for change by the forces of the environment and the actual strategic change in the firm. It indicates a situation of lack of fit with the environment.