Teaching Strategy Using the Strategy Wheel

Chris Styles, University of New South Wales

Jules Goddard, London Business School, UK

Abstract

This paper presents the Strategy Wheel as an integrating framework for teaching strategic
marketing. The Strategy Wheel combines concepts, perspectives and theories from
marketing, innovation and strategic management into a single 8-step heuristic for teaching
(and practising) strategy development. Based on the action-learning model from
organizational behaviour, this approach emphasises ‘learning by doing’. The Strategy Wheel
was originally designed for a three-day executive education course for a major business
advisory practice in Europe (PricewaterhouseCoopers), but has more recently been adapted
for inclusion in a post graduate level subject on strategic innovation. The framework has had
great success in both environments.

Introduction

Great strategies, like great works of art, or great scientific discoveries, call for technical
mastery in the working out, but originate in insights that are beyond the realm of
conscious analysis. (Kenechi Ohmae)

This paper presents the Strategy Wheel as an integrating framework for teaching strategic
marketing. Computer simulations, the most well known being Markstrat (StratX, 1999), have
so far been the dominant experiential learning tool in this area. However, these simulations
tend to be resource optimizing tasks, and are firmly rooted in the neo-classical (Arndt, 1983),
microeconomic, or “marketing mix” (Gronroos, 1994) tradition of marketing that has its
origins in the mid-1900s. More recently, the practice of strategy has been influenced by a call
for greater innovation and creativity, as well as approaches that are ‘market leading’.
Influential writers in this new strategic innovation movement include Hamel and Prahalad,
(1994), and Hamel (2000).

The Strategy Wheel framework was developed to address three issues: i) the need to reflect a
more innovative approach to strategic thinking, that goes beyond computer friendly
optimization tasks; ii) the diversity of concepts, tools and techniques within the new strategy
paradigm; and iii) the difficulty of helping students understand and experience this kind of
strategy development process. The Strategy Wheel was originally developed as the basis of a
3-day executive program for partners in a leading business advisory firm, but has since been
adapted for post-graduate teaching.

In the next two sections the theoretical and pedagogical foundations of the Strategy Wheel are
presented. An overview of the framework itself is then provided with a description of the
eight steps that make up the heuristic. How best to use the Strategy Wheel in the classroom is
then discussed along with the results so far of using the framework.

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 The New Strategy Paradigm

Key writers that fall under the strategic innovation school include Hamel and Prahalad,
(1994), and Hamel (2000). While most of these scholars emanate from the traditional
corporate strategy domain, their work is highly customer centric, addresses issues related to
segmentation and positioning, and includes discussions on various aspects of the marketing
mix. In the wider context of the discipline, these ideas have contributed to the blurring of
boundaries between corporate and marketing strategy in both academic and managerial
contexts.

The theoretical foundations underpinning this new approach to strategy come from two
sources. The first is the resource-based theory of the firm, with its origins in the writing of
Edith Penrose (1959), and more recently Barney (1991). This view argues that firms should
build and leverage their internal resource base to generate competitive advantage. This based
on the assumption that firm related factors explain performance more so than industry factors
(as the traditional industrial organisation view advocates). Evidence for this position can be
found in the work of Rumelt (1991).

The second source is the work of the economist Schumpeter (1949, 1950), and his concept of
‘creative destruction’. Schumpeter suggested that, “In capitalist reality...it is…competition
from the new commodity, the new technology, the new source of supply, the new type of
organization (the largest-scale unit of control, for instance) – competition which commands a
decisive cost or quality advantage and which strikes not at the margins or profits and the
outputs of the existing firms but at their very foundations and their very lives.” (1950, p.84-
85). Hamel and Prahalad in the 1990s picked up this theme and called for strategy to be more
about “reshaping industries” and “breaking rules”, than competing within existing industry
paradigms and being “rule-takers”.

Thus, the core elements of the strategic innovation approach can be summarized as follows:
• The firm is seen as a pool of resources that are leveraged via a particular business
model
• Orthodoxy should be challenged and industries ‘disrupted’
• Firms should tap into latent customer needs and lead consumers rather than follow
them
• Radical, discontinuous change creates more value than incremental improvement
• Strategy focuses on shaping the future

A number of concepts, tools and techniques are associated with these ideas. For example,
business model analysis and design, contrarian and lateral thinking, scenario planning,
competitive analysis – of current and future rivals, customer understanding, brainstorming,
performance measurement and direction setting. The challenge in teaching this view of
strategy has been how to integrate these disparate ideas within a single framework.

Action Learning as a Teaching Philosophy

The underlying teaching philosophy being followed is an ‘action-learning’ model adapted

from organizational behaviour (Argyris and Schön, 1978; Kolb, 1976; Miller and Chen, 1994;
see Pawlowsky, 2001 for a review). This model emphasises ‘learning by doing’, and
encompasses problem-solving and problem-orientated approaches to learning which recognise

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that it is the desired outcome that defines behaviour change (Ambler and Styles, 2001). This
contrasts with a purely cognitive model. Thus, learning strategy – and in particular learning
how to ‘do’ strategy – is achieved by using the process rather than being taught the process or
reading about it.

The Strategy Wheel Framework

The Wheel is derived from a 2 x 2 matrix, with the two dimensions being: i) internal, or ‘in
here’ (firm and its resources) vs. external, or ‘out there’ (market place); and ii) today (current
operating environment) vs. tomorrow (environment approximately five years out into the
future). Each cell is then further split into two segments to which consist of the key strategic
questions that need to be addressed at each stage. This is graphically presented as the
Strategy Wheel in Figure 1, with the shape of the framework suggesting the active process i.e.
giving the Wheel one complete ‘spin’ represents one pass at developing a strategy for a firm
or brand.

Figure 1 – Strategy Wheel

Today Tomorrow

Which beliefs unite the How might the world change

industry? over the next 5 years?

Who do we see as the 4 5 How will the new world impact

competition? customer priorities and industry
landscape?
Out there 3 6
(markets) Out there
In here In here
(resources) 2 7
What strategic opportunity has
What is the winning the greatest potential for value
formula? 1 8 creation over the next 5 years?

What strategic business design

How well is the business
is needed to realise this
performing?
opportunity?
Today Tomorrow
(2002) (2007) © Jules Goddard, Chris Styles, PricewaterhouseCoopers

Summary of Steps

1. Performance measurement: Performance measurement focuses on notions of value

creation, both from a customer point of view, and from the viewpoint of shareholders.
Accounting measures are seen as unhelpful and misleading. This approach to
performance is consistent the recent call to go beyond marketing measures to link
marketing actions with shareholder value (Srivastava, Shervani and Fahey, 1998;

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 Doyle, 2000). The notion of ‘strategic health’ is also covered in this step, considering
measures such as ‘share of new wealth creation’, and the attractiveness of the firm’s
position in the value chain (Slywotzky, 1996).
2. Current business model: This is a mechanism to summarise the current ‘formula’ or
business design. Adapted from Day’s (1990) framework, the business model is
summarised according to the ‘5 As’: Audience - choice of served market; Appeal –
unique value proposition; Access – channels of communication and distribution;
Activities – what the firm choices to ‘make’ (do internally) and ‘buy’ (outsource,
partner); and, Antagonists – rivals targeting the same audience.
3. Competitive analysis: In this step competitors are assessed at three levels – i)
immediate rivals with similar business models; ii) firms occupying other parts of the
value chain that could potentially move further upstream or downstream; and iii)
‘oblique’ competitors, that are firms currently outside the value chain that have the
potential to satisfy the firm’s target audience through some new, innovative business
model e.g. Woolworths leveraging their customer base and retail sites to get into
banking. Collectively, these competitors are represented on a ‘radar screen’
(Slywotzky, 1996).
4. Industry orthodoxy: In this step the core assumptions held by current industry players
are identified. The task is to understand the ‘dominant logic’ of the industry and the
current ‘rules’ of the game. These then become the object of contrarian thinking,
whereby each underlying assumption is systematically challenged. Key inputs into
this stage are an examination of customer dissatisfactions, which help reveal short-
comings of current industry practice and opportunities for new business models.
5. Understanding the future – world view: This step looks into the future at a macro level
and employs scenario planning techniques (e.g. Ringland, 1998). Once various
scenarios are developed, students assess which are most likely, which are more
advantageous to the firm or brand, and which pose the biggest threat. Then, rather
than just be prepared to face whichever scenarios develops, students are encouraged to
identify actions that the firm could take in the short-term that could have multiplier
effects and move the environment more towards their favoured scenario. This draws
on some of the principles of complexity theory and ‘the butterfly effect’, whereby a
small change in the ‘initial conditions’ of a system can have substantial impact on the
end state (see Sanders, 1998 for an explanation and application of complexity and
chaos theory to strategic planning).
6. Understanding the future – industry perspective: This focuses on a micro level and
requires thinking about how both the demand and supply sides of the industry may
change as a result of the macro level scenarios developed in step 5. Students are asked
to think about the ‘customer of the future’ by developing broad ‘customer archetypes’
associated with each of the major scenarios. These archetypes are profiled along
dimensions such as: key needs and problems to solve, values held, and the kind of
value propositions that will appeal. For the supply side, students are asked to ‘draw
the industry’, that is, produce a picture to represent how the industry landscape will
‘look’ into the future. This approach builds on work by Mercer Consulting and their
representation of ‘profit patterns’ (Slywotzky, Morrison, Moser, Mundt and Quella,
1999), and is an attempt to encourage participants to draw on ‘both sides of the brain’.
7. Strategic ambition: This steps call for the development of a succinct, customer driven
statement of ambition for the firm or brand. This is to give the firm purpose, and
should represent an ambitious ‘stretch’ rather than a comfortable ‘fit’. This concept
draws on the work of Hamel and Prahalad (1994), Goshal, Bartlett and Moran (1999),
and Ambler and Styles (2000). This form of statement is in contrast with what

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 mission statements have become in practice – bland statements, stating the obvious
that are largely interchangeable between firms, and therefore not strategic in the sense
of providing a point of difference. The task in this step is to identify major
opportunities (based on the analysis of the previous steps), rank them by value
creation potential, and then encapsulate the biggest opportunity into a customer centric
statement of ambition.
8. New business design: The final step contains two tasks. The first is to design a new
business model that will achieve the strategic ambition, and the second is to reassess
the firm’s asset pool to decide what resource-base is needed to enact the new business
model. Some skills and assets will no longer be needed while others will have to be
acquired.

Teaching the Strategy Wheel

The following format has been found to work well when teaching using the Strategy Wheel:
• Sessions are run back to back over 2-3 full days.
• A single case study of a ‘live’ firm is used. Students are issued with a briefing pack
(to be pre-read before the course) that contains relevant industry and firm information
(e.g. from the business press, brokers’ notes, annual reports, market research). This
form of information is preferred over a formally written case as it is closer to ‘real
life’.
• The Strategy Wheel is ‘spun’ as follows:
o Each step is introduced with a 20-30 minute presentation by the lecturer.
o Groups of about 4 then apply a set of worksheets that reflect the core concepts
of each step to the case.
o Groups then present their completed worksheets and thinking behind their
answers to the class for comment and debate.
o Instead of presenting their work for step 8, groups prepare a final ‘boardroom’
presentation reflecting all 8 steps and their recommended strategy.

Results

The Strategy Wheel has been used in over a dozen executive education courses with a global
business advisory firm’s European practice (PricewaterhouseCoopers, Financial Advisory
Services). Cases studies have been drawn from a range of industries, including automotive,
telecommunications, fmcg, and retail. Results have been:
• higher than normal ratings for the course (6 / 7 vs. company norm of 4.5-5.0 / 7)
• attendees have sent other members of their teams on the course
• there has been a reported use of the concepts in working with clients
• new business has been won using this approach

Student feedback has also been very positive for a post-graduate university course in strategic
innovation and marketing management.

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