Strategic Drift

12 April 2008 |

The concept of strategic drift, where an organisations response to the changing environment is often within the parameters of the organisations culture, which over time becomes more and more apparent.

  • In this respect culture is traditionally seen as a preventative to change, which stifles innovation and results in a momentum of strategy that can lead to strategic drift.
  • In short the organisations response to the business environment is internally constructed rather than objectively understood. This view therefore supports the assumption that strategic change must always be accompanied by an appropriate cultural change.
  • Faced with a stimulus for action, managers may seek to extend the market for the business, but may assume that it will be similar to their existing market, and therefore set about managing the new venture in much the same way as they have been used to.
  • If this is not successful, strategy development is likely to go into a state of flux, with no clear direction, further damaging performance.
  • Eventually transformational change is required if the demise of the organisation has to be avoided.
Case Study:

Marks N Spencers’s past success depended upon a philosophy of value for money, quality and service. It had built an extremely strong brand which had an appeal to a high proportion of the ‘middle market’ in the UK who had high brand loyalty. MnS was very selective in having quality locations and relatively simple product ranges. Click here to Read More - Article by Tony Grundy



AEGON UK

This case study focuses upon AEGON in the UK, part of the AEGON Group, one of the world's largest life insurance and pensions companies. AEGON owns pensions, life insurance, asset management and adviser businesses in the UK. The case study illustrates the success that embracing and pursuing change has brought to AEGON in the UK. It is helping AEGON move towards its goal of becoming 'the best long-term savings and protection business within the UK'.
Strategic drift diagram


The AEGON Group has 27,000 employees and over 25 million customers worldwide. Its major markets are in the USA and Netherlands. Since 1994, the UK has become another major and increasingly important market. In 1994 AEGON bought a large stake in Scottish Equitable. Scottish Equitable was a strong brand with a heritage that went back to the 1830s. Since then AEGON's UK business has grown both organically and by acquiring other businesses.



As most of the acquired companies kept their existing identities, awareness of AEGON in the UK remained relatively low. AEGON realised that such low levels of awareness could impact on its ability to achieve its ambitions. Therefore, it needed to combine the global strength of its parent with the experience and reputation of the domestic company brands, like Scottish Equitable, that made up AEGON in the UK.


Sources:

  1. Business Essays
  2. Times Online - Case Study
  3. Tony Grudy Article on Strategic Drift
Further reading on Strategic Thinking


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