The A.T. Kearney Strategic Chessboard is a framework designed to help companies navigate through the complexities of strategy development in different market and competitive contexts. It's a tool for determining the most appropriate strategic direction based on the company's ability to shape or adapt to its industry and the predictability of the industry environment. The Chessboard has two axes: vertical, representing the company's desire, need, and ability (DNA) to shape or adapt to the industry; and horizontal, representing industry predictability for a relevant time horizon, which ranges from high to low.

Shaping the Industry

Companies capable of shaping the industry are those that have the resources, capabilities, and desire to redefine the terms of competition. Strategies here may involve:

1. Pursuing global slice industry endgame consolidation: This strategy suggests that companies look for global dominance by acquiring or merging with other companies, effectively consolidating their position and shaping the industry on a global scale.

2. Converging or slicing industry opportunities: Here, the strategy involves finding ways to blend or segment the industry to create new market spaces or redefine existing ones.

3. Creating “Blue Ocean” opportunities: Inspired by W. Chan Kim and Renée Mauborgne's Blue Ocean Strategy, this approach involves venturing into uncontested market spaces ('blue oceans') where competition is irrelevant, thus shaping a new industry dynamic.

4. Creating and pursuing “preferred future”: This approach involves envisioning a desired future state for the industry and actively working towards making that vision a reality.

Changing Industry Conduct

These strategies involve redefining the rules of competition without necessarily consolidating the industry:

1. Reconfiguring industry value chains: According to Michael Porter's ideas, this strategy looks at redesigning the value chain to create new forms of competitive advantage.

2. Crossing the “chasm” with innovative products: Referencing Geoffrey Moore’s concept, this strategy is about pushing through the critical transition from early adopters to the early majority, often through innovative products.

3. Thinking big and lateral: This encourages companies to think beyond traditional boundaries and consider radical ideas to change industry conduct.

Adapting "Within" the Industry

For companies that need to adapt to the industry, strategies include:

1. Position to build competitive advantage: Here, the focus is on using classic strategic approaches, such as Porter's models, to build a strong competitive position.

2. Grow in core, adjacent business, and step out: This involves focusing on core strengths, exploring adjacent opportunities, and cautiously expanding beyond the core.

3. Pursuing dynamic strategies: This approach embraces flexibility and the ability to rapidly adapt to changing market conditions, as advocated by various strategy scholars.

4. Preparing for multiple scenarios: This strategy is about anticipating different possible futures and developing plans to respond to them.

Deploy Battle Strategies

These strategies are relevant in unpredictable industries where companies must constantly adapt:

1. Identify and adapt to profit patterns: This is based on Slywotzky’s concepts, which suggest that companies should identify where profits are being made in the industry and adapt their strategies accordingly.

2. Deploy real options-based strategies: This involves investing in a way that preserves flexibility and options for future strategic moves, much like financial options work in the stock market.

3. Implement an evolutionary strategic process: This is about allowing strategies to evolve in a more organic way, responding to changes as they happen, rather than through rigid planning.

Overall, the A.T. Kearney Strategic Chessboard is a versatile framework that allows firms to map out strategic options across different market scenarios, reflecting both their internal capabilities and the external market environment. By considering where they stand on the Chessboard, companies can better understand the strategic options available to th

________

The A.T. Kearney Strategic Chessboard is a framework for corporate strategy that guides companies in selecting the most appropriate strategies based on two dimensions: the company's ability to change the industry (which I will refer to as "Influence on Industry") and the predictability of the industry environment ("Industry Predictability"). Here's a detailed breakdown of the framework:

1. Influence on Industry

This axis represents a company's desire, need, and ability to shape or adapt within its industry, which can be categorized as:

• Shape the Industry: Companies here actively lead and transform their industry through innovation, redefining market boundaries, or consolidation.

• Adapt Within the Industry: Companies in this category react and adapt to existing industry conditions, optimizing their operations and aligning with market trends.

2. Industry Predictability

This axis measures how well companies can anticipate future industry conditions over a relevant time horizon, categorized as:

• High Analytical Predictability: The future can be forecasted with a reasonable level of accuracy based on existing data and trends.

• Low Analytical Predictability: The industry is subject to rapid and often unpredictable changes, making long-term forecasts highly speculative.

The Chessboard Quadrants

Combining these two dimensions results in four quadrants with distinct strategic imperatives:

Quadrant 1: Active Shaping in a Predictable Industry

• Strategies:

  • Pursue global industry slice consolidation through M&A to achieve scale and influence.

  • Reconfigure value chains to establish dominance and set industry standards.

  • Position to leverage competitive advantages in well-understood markets.

Quadrant 2: Active Shaping in an Unpredictable Industry

• Strategies:

  • Create and pursue "Blue Ocean" strategies to redefine the industry and create new market spaces.

  • Cross the “chasm” with innovative products to capture the early majority in emerging markets.

  • Deploy options-based strategies, maintaining flexibility to pivot as new information emerges.

Quadrant 3: Reactive Adaptation in a Predictable Industry

• Strategies:

  • Grow in the core business and seek out adjacent opportunities to leverage existing strengths.

  • Identify and adapt to profit patterns that emerge within the stable industry framework.

  • Prepare for multiple scenarios, ensuring readiness for predictable market shifts.

Quadrant 4: Reactive Adaptation in an Unpredictable Industry

• Strategies:

  • Deploy battle strategies to quickly respond to industry changes and competitor moves.

  • Implement an evolutionary approach to strategy, allowing flexible and responsive changes.

  • Think big and lateral, considering non-traditional approaches and diversification to mitigate risks.

Using the Chessboard

To apply the Strategic Chessboard, a company should:

1. Assess Position: Determine where it currently stands on the Chessboard.

2. Choose Strategy: Select the appropriate strategic imperatives from the relevant quadrant.

3. Execute Plans: Develop and implement detailed action plans based on the chosen strategy.

4. Review and Adapt: Continuously monitor the industry and internal capabilities to reassess the company's position on the Chessboard and adapt strategies accordingly.

This framework assists leaders in making strategic decisions by offering a structured approach to navigating complex industry landscapes. It prompts consideration of whether a company should be a market shaper or a market adapter and helps in anticipating the degree of predictability in market dynamics. By applying this chessboard, companies can better align their strategies with their capabilities and the market environment, aiming for a strategic fit that is both effective and sustainable.

________

Applying the A.T. Kearney Strategic Chessboard to Apple’s product line management involves a detailed analysis across the two axes: the company's DNA to shape or adapt within the industry, and the predictability of the industry.

Shaping the Industry: Apple’s DNA

Apple has a storied history of shaping industries. Its introduction of the iPod, iPhone, and iPad were classic "Create 'Blue Ocean'" strategies where Apple created new market spaces that were uncontested. The iPhone, for instance, effectively defined the modern smartphone industry.

1. Converging or slicing industry opportunities: Apple has consistently sought to converge technologies and slice market opportunities. The Apple Watch, for example, converges health and fitness tracking with traditional wristwatch functionality, carving out a substantial niche in wearable technology.

2. Reconfiguring industry value chains: Apple controls its hardware, software, and services, an approach that allows for a high level of quality and integration. This vertical integration has been crucial in reconfiguring the industry’s value chain.

3. Creating and pursuing “preferred future”: Apple invests heavily in R&D, evidenced by its expenditure of $18.75 billion in 2020 alone, aiming to shape future tech landscapes with AR, AI, and autonomous systems.

Adapting "Within" the Industry: Responding to High Analytical Predictability

Despite its ability to shape industries, Apple also adapts within the highly predictable segments of the consumer electronics industry.

1. Position to build competitive advantage: Apple maintains a competitive advantage through continuous innovation and a focus on customer experience, which is supported by a powerful brand and a loyal customer base.

2. Grow in core, adjacent business, and step out: Apple’s product line expansion into services such as Apple Music, Apple Pay, and Apple TV+ demonstrates growth in adjacent businesses, leveraging their core strengths to step out into new areas.

3. Preparing for multiple scenarios: Apple’s significant cash reserves (over $190 billion in cash and marketable securities as of Q1 2021) allow it to be well-prepared for various market scenarios, including acquisitions and investments in new technology.

Deploy Battle Strategies: Adapting to Low Analytical Predictability

In more unpredictable segments, Apple deploys battle strategies.

1. Identify and adapt to profit patterns: Apple swiftly adapts to changing profit patterns. For instance, it has transitioned focus toward high-margin services as the smartphone market matures.

2. Deploy real options-based strategies: Apple's diversified product line allows for real options in strategic decision-making. Its investment in different product lines (e.g., the HomePod mini after the less successful HomePod) shows the flexibility of its strategies.

3. Implement an evolutionary strategic process: Apple’s software updates and iterative product releases, such as the annual iPhone updates, represent an evolutionary approach, where products are refined and improved over time in response to market feedback and technological advancements.

Apple's financial results reflect the success of its strategic approach. In Q1 2021, Apple posted an all-time revenue record of $111.4 billion, a 21% increase year over year, with international sales accounting for 64% of the quarter’s revenue. Its gross margin stood at 39.8%.

In conclusion, Apple's product line management showcases a sophisticated blend of shaping the industry and adapting within it, guided by the A.T. Kearney Strategic Chessboard. By continuously innovating and redefining markets, while also responding to the predictable and unpredictable elements of the industry, Apple has maintained its position as a leader in the tech world. The company's financials underscore its effective strategy implementation, driven by a deep understanding of market dynamics and an unparalleled ability to both shape and respond to the industry landscape.

________

Applying the A.T. Kearney Strategic Chessboard to Tesla’s product line management involves considering how Tesla either shapes the automotive and energy industries or adapts within them, in addition to looking at the predictability of these industries. Let's examine how Tesla aligns with the different strategies laid out by the Chessboard.

Shaping the Industry

Tesla's strategy primarily falls into the "Shape the industry" quadrant, where the company's innovative approach has significantly influenced the automotive and energy sectors.

1. Pursue global slice industry endgame consolidation: Tesla has not pursued endgame consolidation through acquisitions. Instead, it has focused on organic growth and scaling up production to dominate the electric vehicle (EV) market. With a market capitalization that surpassed the combined value of several traditional automakers, Tesla has signaled a market consolidation around EVs and sustainable energy.

2. Converging or slicing industry opportunities: Tesla's strategy includes converging automotive with technology and energy, creating a new market for high-performance electric cars and sustainable energy products. For instance, the integration of Tesla's vehicles with its solar products and energy storage solutions creates an ecosystem that's more than just about cars.

3. Creating “Blue Ocean” opportunities: Tesla has created a "Blue Ocean" by introducing high-performance, long-range electric cars at a time when EVs were largely seen as unfeasible or low-performance. This strategy has allowed it to capture a significant share of the market with little to no direct competition initially.

4. Creating and pursuing “preferred future”: Tesla's mission to accelerate the world's transition to sustainable energy reflects this strategy. Its product development, including vehicles and battery technology, aims to create a future where renewable energy and electric transport are the norm.

Adapting "Within" the Industry

Despite being a market shaper, Tesla also demonstrates an ability to adapt within the highly predictable automotive industry.

1. Position to build competitive advantage: Tesla has built a competitive advantage with its proprietary technology, including its battery technology and software, which other automakers are striving to match.

2. Grow in core, adjacent business, and step out: Tesla has grown its core business of electric cars while expanding into adjacent areas, such as energy storage (Powerwall) and solar energy solutions (Solar Roof). It has also stepped out into new areas like insurance and proprietary charging networks.

3. Preparing for multiple scenarios: Tesla has invested in multiple technologies that could be dominant in the future, such as battery technology for energy storage and solar power. Its Gigafactories are designed to scale battery production, anticipating various future scenarios for energy consumption and storage.

Deploy Battle Strategies

In areas where the industry is less predictable, Tesla deploys battle strategies.

1. Identify and adapt to profit patterns: Tesla has identified that the long-term profitability of EVs hinges on battery costs. It has focused on innovating battery technology to reduce costs and improve performance, which is key to maintaining its profit margins.

2. Deploy real options-based strategies: Tesla has made significant investments in different technologies and manufacturing processes, such as the development of its own batteries and the construction of new production plants globally. These serve as "real options" for scaling production or entering new markets.

3. Implement an evolutionary strategic process: Tesla's over-the-air software updates allow the company to iteratively improve its vehicles after sale, a unique approach in the automotive industry.

Financials and Practices

Tesla's financials reflect the effectiveness of its strategic approach. For example, in 2020, Tesla achieved its first full year of profitability, reporting $721 million in net income on revenues of $31.54 billion. Tesla's strategic decisions, such as constructing Gigafactories for battery production and diversifying into solar and energy storage, are practices that have shaped the industry while enabling it to adapt to different market conditions.

Tesla’s approach demonstrates an integration of strategies across the Chessboard, with a predominant focus on shaping the industry through innovation and vision for a sustainable energy future, underpinned by significant financial investments and a keen eye on market dynamics.

________

To help students consolidate their understanding of the A.T. Kearney Strategic Chessboard into long-term memory, you can encourage active recall and critical thinking by posing questions that span comprehension, application, and analysis. Here's a list of questions designed to facilitate this:

Comprehension Questions

1. What are the two primary dimensions of the A.T. Kearney Strategic Chessboard, and what do they represent?

2. Can you explain the concept of a company's 'DNA' in the context of the Chessboard?

3. How does the Chessboard help companies understand their strategic options?

4. What is meant by "shaping" versus "adapting" within an industry according to the Chessboard?

5. Describe what is meant by "high analytical predictability" and "low analytical predictability" in industry environments.

Application Questions

6. How would you apply the Chessboard framework to a company that is entering a highly predictable industry with the intention to adapt rather than shape?

7. Can you provide an example of a "Blue Ocean" opportunity that a company has successfully pursued?

8. How might a company that traditionally shapes the industry find itself needing to adapt within the industry instead?

9. Identify a real-world business and position it on the Strategic Chessboard, explaining your reasoning.

10. What strategies from the Chessboard might a company employ to handle sudden changes in industry predictability?

Analysis Questions

11. Why might a company choose to pursue a strategy of consolidating the global industry slice as opposed to creating a "Blue Ocean"?

12. What are the potential risks and benefits of deploying real options-based strategies in unpredictable industries?

13. Discuss how a company can maintain a balance between shaping the industry and adapting within it.

14. Analyze how changes in technology or consumer behavior can shift a company’s position on the Chessboard.

15. Critique the Strategic Chessboard model – what are its strengths and potential limitations?

Evaluation Questions

16. What strategic approach would you recommend for a company with strong R&D capabilities in a highly unpredictable market? Use the Chessboard to support your answer.

17. Evaluate how a merger or acquisition can change a company's approach on the Chessboard.

18. How would you assess the relevance of the Chessboard framework in rapidly evolving industries like biotechnology or artificial intelligence?

19. If a company has to pivot its strategy due to external factors, how might this shift its position on the Chessboard?

Synthesis Questions

20. Design a strategic plan for a hypothetical company using the Chessboard, taking into account both the industry predictability and the company’s DNA.

21. How would you integrate the principles from the Chessboard with other strategic management theories?

22. Propose modifications to the Chessboard that could accommodate digital transformation and the rise of platform businesses.

23. Devise a case study that demonstrates a company transitioning through different quadrants of the Chessboard over time.

These questions require students to engage with the material in various ways, from recalling facts to applying concepts and evaluating strategies in different business scenarios. By regularly reviewing these questions and discussing them, students can deepen their understanding and retention of the A.T. Kearney Strategic Chessboard.