New thinking on strategy has emanated in waves throughout the last few decades. Where does it stand today?

Michael Porter is considered a guru of strategy because he provided a systematic way of assessing an industry, Porter's theory focused on the external environment as he espoused that a company's strategy should be based on competition within the industry. His 1980 text, "Competitive Strategy; Techniques for Analyzing Industries and Competitors" developed five forces that drive competition; bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitute products or services and rivalry among existing Firms. PIMS (profit impact of market strategies) was another strategic approach of that period. It analyzed expected profit performance under different competitive conditions another external approach.

Later in the 1980's, strategy took a different turn most new approaches focused inward. Reengineering, total quality management, and core competencies were all techniques for improving the ways that companies work. For example, reengineering is the procedure of redesigning business processes Core competencies involves analyzing the company's most valuable resources. Both are inward looking. These process oriented techniques are rumored to have had internally focused failure rates as high as 70%. A major reason is that processes are divorced from the competitive environment For example, because customer representatives were rarely included on the reengineering team, downsizing often resulted in insufficient resources to service the customer.

A new strategy framework has emerged which is termed "resource based view of the firm (RBV)". This concept relates how a company's resources drive performance in a dynamic competitive environment. This view combines the internal and external environments The theory attributes competitive advantage to valuable resources, either physical or intangible, hut goes on to say that resources must be evaluated in conjunction with the external environment, i e what activities does the firm perform better than the competition?, what are its distinctive competencies?

We believe that companies must focus on the internal, the external and the future, and combine these views with three keys to successful strategy:

1. Vision supported by actionable policies

2. Allocation of resources

3. Balance of risk

"Vision" is a key to successful strategy it portrays a view of the company and where it is going The business must have an identity and be distinguished from its competitors. There must also be a plan of action to achieve corporate objectives. Actionable policies are needed to mobilize corporate strengths. There must be a roadmap for turning distinctive competencies into competitive advantage. Allocation of resources must be tied to the corporate strategy. Resources must be constantly upgraded and require constant investing. They must be built for the next round of competition. Market tests must constantly and rigorously be applied to the resources to ensure that each investment achieves the required rate of return.

Companies must decide how much risk they are willing to live with. Risk is evident in the amount of resources deployed whose continued value is not assured, and the proportion of resources committed to a single venture.

Keeping tabs on competitors is vital not only competitors of today, but also competitors of tomorrow. The external environment is not static, but is constantly evolving particularly with the fast pace of technology Companies must anticipate the future changes, or be left behind. Corporate competencies are eroded by time and changing competition. IBM is a perfect example. The value of its competency in mainframes diminished as PC technology took hold in the marketplace We must all fine tune our "crystal balls".