Establishing your current defined strategy and future one can often be difficult without some guide or starting position. A Miles and Snow strategy is an organizational framework to help companies look at their existing operations and define their current strategy, cost leadership and plan for future positioning.
Let’s take a look in more detail…
What are Miles and Snow’s Organizational Strategies?
Miles and Snow identify four different strategic positions:
Each strategic position results in different behaviour in order to maximise the potential opportunity in a marketplace. Decisions you make on investment, structure, org design, processes, approach, all depend on the strategic position you currently are in and the one you wish to be in for the future.
What is the Prospector strategy?
Prospector companies are seen to be first movers in markets with their growth driven by innovation and thought-leadership. Apple is a commonly cited example of what would be considered a company with a Prospector strategy, with launches such as the iPhone and Apple Watch.
Prospectors have a challenge maintaining the position as it requires constant R&D and successful product or service launches. They’ll be more likely to consider options that are higher risk, using tools like the Ansoff Matrix, or looking at Diversification as a strategic implementation option.
Advantages of the Prospector Strategy:
- Seen as market leader visa differentiation
- Customer perception often high quality
- Can command high price points
Disadvantages of the Prospector Strategy:
- Expensive and difficult to maintain this position
Prospectors are highly dynamic but less stable than defenders. Prospector companies seek new opportunities at all times, constantly innovating and changing their products or services. These businesses tend to be fast-moving, taking risks and trying out new ideas quickly.
What is the Defender strategy?
Companies with a Defender strategy are not looking to change their position in the market, instead they wish to defend and maintain their position whilst improving their margins.
Although considered a good position for successful companies, if the Defender strategy is maintained for too long the risk increases that a substitute product or direct competitor will take market share.
Advantages of the Defender Strategy:
- Company can focus on efficiency and margins
- Little investment needed in R&D to maintain position
Disadvantages of the Defender Strategy:
- Risk of falling behind increases
- Risk of missing new opportunities is high
Defenders have low levels of dynamism but high levels of stability. They are slow to change and tend to be risk-averse. The strategy primarily focuses on maintaining the status quo by optimizing operations within existing markets. Defenders typically have a loyal customer base that is satisfied with their products or services.
Starbucks is a good example of a company with a defender strategy. Despite being an innovative business when it first opened in 1971, Starbucks has since become more of a defender by reducing its rate of new store openings in recent years and focusing on improving the efficiency of its existing stores.
What is the Analyzer strategy?
Analyzer companies attempt to take the best parts of both Defender and Prospector. They are defending their current market position, whilst looking for new opportunities and innovating. Many companies can be classified as this position, ensuring their current revenues are well defended whilst looking to take advantage of new opportunities.
If the balance is done well, this is a really strong strategy. The risk being that it’s hard to maintain that balance, as competitors focused on either Defender or Prospector may become specialists in those activities and thus move ahead from the Analyzer.
Advantages of the Analyzer Strategy:
- “Best of both worlds” approach
- Helpful when moving from Defender to Prospector
Disadvantages of the Analyzer Strategy:
- Can be hard to get the balance and focus right
- Competitors may pull ahead if innovation or defence under resourced
What is the Reactor strategy?
Reactor companies focus on their external environment and change their strategy depending on the threats or opportunities that arise and impact them. It’s perhaps better suited to smaller, more agile companies where it’s easy to change and adapt their position, but the lack of planning or analysis can ultimately be fatal for companies that adopt this position.
So mid to long term, this isn’t a good strategic approach to take. It often will result in being slow to market and a struggle to catch up with competitors.
Advantages of the Reactor Strategy:
- Little R&D investment needed
- Outward focused
Disadvantages of the Reactor Strategy:
- Slow to market
- Easy to fall behind
- Difficult to become market leader
- Not prepared for changes
Should companies move between the strategies?
Yes, it’s normal for companies to move between the strategic options.
Product or service launches can come from a Prospector position, moving into a Defender position once established, then utilising the Analyser position to maintain growth. For multiple product companies, there may be an adoption of different strategic options for each market.
What are the advantages of Miles and Snow’s Organizational Strategies?
The advantages of the model include:
- Provides a framework to talk about direction and market position.
- It ensures everyone has the same understanding
- It can help compare your org to competitors in the market
- It is easy to understand
- It applies to most markets
What tools work well with Miles and Snow’s Organizational Strategies?
The most useful framework to use when looking at Miles and Snow’s Organizational Strategies is Porter’s Five Forces. It provides a great overview of the forces on your profitability and your market opportunity.
It may also be helpful to run some competitor analysis, perhaps with a model like Four Corners, in order to establish what the strategy is for each of your competitors.
What are the alternatives to Miles and Snow’s Organizational Strategies?
Who invented the Miles and Snow’s Organizational Strategies?
Raymond E. Miles and Charles C. Snow, both Professors in strategy and business, developed the Organizational Strategies in their book “Organizational Strategy, Structure, and Process”.