The one about strategic adaptation
What does it actually mean?
Friends,
I hope that all is well with you and yours, and that this e-mail finds you on a boat with shoddy connection, in the tropics, three months after I sent it.
Today, we take a look at strategic adaptation: what does it actually mean?
Additionally, as always, some personal notes and the market vitals - today featuring crap onboarding processes, potential Tropicana dilution, silly laws, big brand DEI pullbacks, another thing for strategists to consider with Trump’s fiscal policies, another two predictions from yours truly and James Hankins which have come true, BYD’s smart move to add resilience, Salesforce successes and Intel failures.
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What to Do When You Don’t Know What to Do: How to turn change into a competitive advantage. (Based on the new book by the same name.)
Leadership in a Time of Change: How to steer an organization through a sea of uncertainty.
Resilient Retail: How to build a profitable retail business in the modern marketplace. (Based on the 2025 follow-up to the highly praised 2022 white paper The Gravity of e-Commerce.)
Artificial Intelligence Beyond the Fantasy: How to understand the narratives, risks, opportunities, and best uses of a new technology.
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A couple of updates annoyances before we go-go
The Swedish railway company (SJ) must have the most dim-witted onboarding process I have had to suffer in quite some time. It goes as follows:
Decide you want to go by train to your keynote gig.
Realize you have to set up a corporate account because there is no way of actually buying a ticket on the company card without one.
Apply for a corporate account.
Wait three days for manual processing.
Sign a written contract.
Wait another day to have the contract manually verified.
Realize that you have to manually create a login to use the now verified corporate account.
Realize that you have to manually link said login to the already verified corporate account, even though it is the same damn email address.
Wait another 1-3 days for the link to be manually verified.
Remain unable to purchase tickets A WEEK LATER.
I mean, it is no wonder that people fly domestic.
Also, this company spends millions upon millions on all kinds of advertising and whatever else, ignoring that it is not enough to be mentally available, brands have to be physically available too. That is to say, you have to be easy to find and easy to buy.
For anyone who also drinks Tropicana juice in the morning, is it just me and my wife (or a local thing) or has it not suddenly begun to taste as if it has been diluted? The orange juice in particular is just… …watery all of a sudden.
A recent law passed in Denmark just goes to show how utterly infantile people are when it comes to their precious flags. Apparently a family was taken to court over daring to raise an American flag outside their Danish house; this was deemed entirely unacceptable. And so, it is now illegal to raise any other flag than the Danish one (except Nordic ones and the German one, for some reason) unless there is a sporting event or suchlike on.
I mean, genuinely who gives a flying fuck into a rolling donut? You do not actually steal countries using flags; Eddie Izzard was only joking.
The market vitals
Walmart is the latest company to roll back DEI programs, electing not renew a five-year commitment to create a racial equity center while scrapping its supplier diversity goals. Previously, companies such as Microsoft, Tractor Supply, Harley-Davidson, Ford, Molson Coors, and SHRM, have taken similar paths.
The moves not only indicate a pendulum swing back, but also an increasing chasm between the EU and the US. In Europe, these kinds of questions are considered important enough to warrant legislation (as in the case of pay transparency and sustainability directives, for example). Conversely, in the US, they cause law suits by those looking to remove them from the agenda altogether.
It will be interesting to see how big corporations respond. Where one chooses to place one’s HQ, for instance, may indicate what ultimately matters most: profits or principles.
There has been a lot of talk about what Trump’s fiscal policies may or may not mean for companies and consumers (TL;DR: tariffs are believed to benefit local SMEs, but alongside other policies also lead to higher inflation and interest rates). However, a couple of days ago, Jonathan Weil raised an interesting point that few had considered.
In short, with higher interest rates come higher bond yields. For anyone (read: banks) holding large amounts of long-dated, fixed-rate asset (such as Treasurys and government-sponsored mortgage bonds), that could mean greater unrealized losses as bond values decline.
Why does this matter? Because it is precisely what led to the losses that ultimately sunk Silicon Valley Bank last year - and who knows what the Trump administration would do if another one failed. A lot of people could end up losing a lot of money. If you are a US based strategist, it is worth thinking about how well your company’s assets are protected.
The mainstream news media is starting to pick up on the fact that retailers, much as James and I have been telling them to for years, are starting to charge for their returns. As we said at Cannes in 2022, it is simply unavoidable; return rates are much higher (15-40% in our analysis, compared to 3-8% in physical retail), as are costs (not only those immediately tied to the return, but also costs associated with getting the item back into a sale stream), and then there is the issue of return fraud.
The emotional story, though, is that “customers are fighting back” by choosing not to buy from certain retailers. This is:
a) Predictable. We explicitly said they would; free shipping and free returns are an acquisition tool - lose them and lose buyers. The strategic decision is how one chooses to balance the customer loss incurred by the move against the financial loss incurred by allowing free fulfillment. And yes, feel free to insert your. “long and the short of it” observation of choice.
b) Largely exaggerated. Black Friday sales rose 3.4% YoY according to Mastercard SpendingPulse, which tracks purchases both in store and online. Online sales rose 14.6%, while in-store sales grew 0.7%. Certainly, there will be some shifts beneath the numbers, but I would not expect any long-term impact worth sacrificing profitability for.
The world’s second largest EV manufacturer, BYD, has added the putting together of mobile phones and tablets to their repertoire. This is, in my view, a smart move to exploit their expertise (there are a lot of similarities between the two industries) while adding resilience, particularly as the overall EV market now has begun to wobble and shake like a retired boxer. The company builds more than 30% of Apple’s iPads, assembles phones for Xiaomi and Huawei, and gets roughly $6B of quarterly revenue from it. Not too shabby.
Salesforce released a Q3 report strong enough to get the tech stocks back on track. In particular, the firm claimed to get traction from its AI offerings, though I tend to take such statements with a grain of salt given the immense financial attraction to make them.
To illustrate, company CEO Marc Benioff said “AI agents work alongside humans in a digital workforce that amplifies and augments human capabilities and delivers with unrivaled speed. And Salesforce is unique as we are perhaps one of the only companies at scale in an enterprise that is now delivering this globally."
If you can read that without getting at least a bit of vomit in your mouth, you are a stronger person than I.
Not all is well in tech land, though. Intel has been struggling mightily of late; its core foundry business, which handles manufacturing for external clients, lost more than $11B in the first nine months of this year and has yet to generate more than half the annual revenue it made in 2020.
Its attempt to create a data center GPU has also been a massive failure; the company said it would not reach its $500M revenue target this year. By contrast, Nvidia’s data center GP family is projected to generate close to $83B over the same time span.
Unsurprisingly, at least to most, the company CEO has been told to step aside.
It just goes to show, once again, how difficult it is to maintain success. The only sustainable long-term competitive advantage is superior adaptability.
Moving on.
Strategic adaptation
What does it actually mean?
Last week, we began to break down what adaptive strategy entails by defining what we mean by the term “strategy”. To recap, it was not a plan, an emergent pattern, a position, a vision, a tool with which to solve problems, nor even a way to “win” in the market place - it was something a lot more pragmatic, if also a lot less fancy.
Today, we are going to take a look at the second constituent part: adaptation. What does it really mean to adapt strategically?