The success of companies such as Yahoo!, eBay, Google, and (while it lasted) Enron don’t appear to be well explained by traditional approaches to competitive strategy. Rather than steadfastly pursuing a clear positioning-based or resource-based strategy, companies such as these have excelled at changing to keep in tune with the demands of shifting markets. Despite operating in markets previously considered difficult, these businesses flourished by allowing their strategies to continually evolve. In their January 2001 Harvard Business Review article, “Strategy as Simple Rules,” Kathleen Eisenhardt and Donald Sull argued that the secret of success in rapidly shifting markets lies in strategy as simple rules.
Two of the major schools of strategic thought locate competitive advantage in the exploitation of resources or stable market positions. Strategy as simple rules locates competitive advantage in the dynamic process of seizing fleeting opportunities. Eisenhardt and Sull explain that companies use key strategic processes to navigate to where the flow of opportunities is greatest. Simple rules help stabilize the corporate vessel in the raging seas of commerce by guiding managers as they pursue these opportunities. To develop and execute strategy as simple rules effectively, executives need to understand what those rules are, where they come from, what they are not, how many rules is the right number, how rules are created, and when they should be changed.
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