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The Delta Model: Adaptive Management for a Changing World

January 15, 1999 | Arnoldo C. Hax , Dean L. Wilde II | Strategy

Existing management frameworks do not describe all the ways that companies are competing successfully today. When queried, senior executives concurred that conventional theories and business practices do not provide the necessary guidance and support for decision making in a world of change, complexity, and uncertainty.

The authors' research on more than 100 companies is the basis of their Delta model which (1) defines strategic positions that reflect fundamentally new sources of profitability, (2) aligns these strategic options with a firm's activities and provides congruency between strategic direction and execution, and (3) introduces adaptive processes capable of continually responding to an uncertain environment.

They describe three strategic options having three distinct economic perspectives -- best product, customer solutions, and system lock-in. These strategic options provide a mechanism for defining the vision of a business. Outstanding real-life business successes achieved through strikingly different strategies and drawn from fundamentally different sources of profitability illustrate the nature of these strategic positions.

The Delta model links strategy with execution by selecting a distinctive strategic position and then integrating it with a company's collective processes. The authors identify three fundamental processes that are always present and are the repository of key strategic tasks: operational effectiveness, customer targeting, and innovation.

Strategy must adapt continuously, and implementation must respond to market changes and to greater understanding of the market that becomes apparent only during implementation. A firm's actions must be aligned with its strategic position, and the results must give feedback for adapting the strategy. The authors outline common responsive mechanisms for obtaining feedback from the adaptive processes and suggest metrics that are essential to adaptation. To anticipate the future, it is necessary to track performance against the adaptive processes, which are the initiatives enabling the strategy.

The Delta model provides a rich overall framework that integrates a firm's options and activities without running the risk of oversimplifying the context in which it makes decisions.

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