This document discusses four cornerstones of successful strategy renewal: 1) Developing a broad external view of changes in the relevant environment and emerging opportunities and threats. 2) Taking a deep internal view to understand the company's strengths, weaknesses, and "center of gravity". 3) Making bold decisions by translating the diagnosis into clear priorities, resource allocations, and go/no-go decisions. 4) Adjusting culture and capabilities to ensure actions are coherently building on each other and the company can achieve its new strategic objectives. Developing strategic capabilities and strengthening culture requires a long-term, systematic approach.

1. FIND YOUR
CENTER OF
GRAVITY
Four cornerstones
of successful strategy renewal

2. AUGUST WHITE PAPER: STRATEGY RENEWAL JANUARY 2016 2
Most Finnish companies today find that maintaining their
advantage keeps getting harder. Long-successful strategies
suddenly sputter and fail. New competitors emerge out
of nowhere and transform an industry overnight – often
destroying the whole sector’s profitability in the process.
Even in long-sheltered markets, many once-solid companies
now face rapid, nonlinear and disruptive change.
Such brutal shifts can be disorienting. As the boxer Mike Tyson once
noted, everybody has a plan until they get punched in the face. To regain
their footing, many executives now seek not just to fine-tune their game
plan but to develop a new way of doing business. They want to renew their
strategy so they can not only meet today’s challenges but better position
themselves to capture tomorrow’s opportunities.
This isn’t easy, but it’s not impossible. As we have learned by assisting a
number of clients faced with these challenges, a disciplined program of
observation, introspection, and action can revitalize a company and prepare
it for the next round.
In this article we share a set of practical lessons from these engagements.
Although every strategy renewal is different and the strategic challenges
companies face are different, we believe that a successful strategy renewal
always includes four key elements: a broad external view, a deep internal
view, bold decisions, and cultural underscoring.
These four cornerstones might sound simple, but they are not easy to master.
They call for a balanced approach to strategy development that combines
analytical methodologies with significant effort dedicated to intellectual
– even philosophical – considerations. They depend on developing a deep
understanding of the company’s defining characteristics. A company that
doesn’t know itself can’t really know what it can become.
As the boxer Mike Tyson
once noted, everybody
has a plan until they get
punched in the face.
Broad
external
view
Deep
internal
view
Bold
decisions
Addressing
also the soft
and slow
• Understand the direction and pace of change in relevant environment
• Distill the key emerging strategies and business models
• Develop a view of the major opportunities and threats to be faced
• Analyze the relative attractiveness of your current businesses
• Define what it takes to win in each line of the offering
• Develop a deep understanding of the company’s “center of gravity”
• Translate the diagnosis into bold choices
• Understand the role of the current ‘center of gravity’ in the renewal
• Refocus the company’s resources on set priorities
• Build needed new capabilities and leverage existing strengths
• Acknowledge the role of leadership and culture in driving change
• Ensure that actions build coherently on each other
1. Understand how the
external environment
is changing
2. Develop a realistic
view on yourself
3. Move the big
blocks and set
priorities
4. Adjust culture
and capabilities
Conclusion Conclude a target state and diagnose the magnitude of required change

3. AUGUST WHITE PAPER: STRATEGY RENEWAL JANUARY 2016 3
Until they find themselves under pressure, executives often stick to ‘strategy
updates’ that involve tweaking parts of their business plans annually, and
adjusting their long-term financial projections on the fly. The core strategy
may go unquestioned for years, even when a major shift in the external
environment is clearly underway.
To stay more aware of changes in the environment, management needs
to broaden its traditional perspective and periodically challenge even its
most fundamental assumptions about the business, the offering, and the
customers.
CORNERSTONE 1
UNDERSTAND HOW THE
EXTERNAL ENVIRONMENT
IS CHANGING
Core strategy may go
unquestioned for years,
even when a major shift in
the external environment
is clearly underway.
In addition to the evolving needs of customers (and customers’ customers),
managers should watch out for potentially disruptive trends that could hurt
their business. Taking a broader view early can give strategists more time
to identify emerging pockets of value and find new ways to leverage what
could be external threats as opportunities.
We find that Finnish companies are getting better at conducting this kind
of outside-in assessment. Today, even in industries considered mature and
stable for decades, such as retail, consumer goods, and transportation, a
number of companies conduct this kind of broad analysis as a standard
part of their strategy work. Executives spend a significant amount of time
and effort staying abreast of larger trends and reviewing case studies from
different industries.
Where many strategy exercises still fall short, however, is in generating a
truly insightful synthesis based on this external view. At worst this out-
side-in perspective ends up as a disconnected appendix to a lengthy strategy
document. When leaders don’t make it a priority, an outside-in review can
turn into a list of disparate trends followed by a superficial assessment of
customer needs and obvious observations about direct competitors. Instead,
executives should try to develop a concrete view of emerging business
models and strategies – and their implications for the company playbook.
WHAT TO ADDRESS
• Megatrends and industry specific
trends
• Evolving customer needs
• Changes in the competitive
landscape
WHAT TO AVOID
• Failing to broaden traditional
perspective
• Settling on a superficial synthesis
which remains disconnected to
decisions

4. AUGUST WHITE PAPER: STRATEGY RENEWAL JANUARY 2016 4
A second, related obstacle to renewal is an unrealistic, under-defined sense
of the company’s strengths and weaknesses. A solid strategy depends on
developing a deep understanding of a company’s defining characteristics,
attractiveness of its different businesses, and key aspects of competition.
To achieve this second goal, executives should take a critical view of the
current state and historical journey of their company. In practice this
requires engaging in both traditional forms of business analysis as well as
considerations on less easily quantifiable topics.
CORNERSTONE 2
DEVELOP A REALISTIC
VIEW OF SELF
A strong strategy depends
on a robust understanding
of current business and
what gives a company
the ‘right to win’ in their
markets
A strong strategy depends on a robust understanding of current businesses
and what gives a company the ‘right to win’ in their markets. A classical
portfolio assessment is a proven methodology to build this picture. (See
case example, page 6)
In addition to establishing a strong analytical understanding of a company’s
current situation, a more philosophical view of the ‘inner self’ of a compa-
ny should also be developed. Only by accompanying the analytical view
with less tangible but more in-depth assessment can a management team
truly understand the magnitude of change it faces if it decides to pursue
a significant renewal, and to ensure it builds on the inherent strengths of
the organization.
One concept that can help further clarify this matter is to identify the
company’s ‘center of gravity’. The ‘center of gravity’, is a concept from
physics adapted by Carl von Clausewitz, a 19th-century military strategist
to describe vectors of power on the battlefield. It was von Clausewitz’s
term for the focal point of a force’s strength – the point that gives the force
enough unity to form an overarching structure.
Every profitable company has one or more centers of gravity. Typically it
lies where the resources are most concentrated, refers to the reason they
are concentrated, and gives them purpose and direction. Commonly the
‘center of gravity’ is a capability, but this is by no means always the case.
It can also be a geographic or marketing advantage.
WHAT TO ADDRESS
• Robustness of current
business portfolio
• Competitive edge and ‘right
to win’
• Defining characteristic:
‘center of gravity’
WHAT TO AVOID
• Addressing only quantifiable
factors
• Sugarcoating view of yourself
• Failing to produce a true diagnosis

5. AUGUST WHITE PAPER: STRATEGY RENEWAL JANUARY 2016 5
To begin to understand your ‘center of gravity’ a good question to ask is
“what truly unique resources and capabilities do we have?” When you’ve
listed a number of them, then ask, “which of these is such that removing
it from the equation would make this company completely different?”
When working on strategy, the current ‘center of gravity’ must be identi-
fied and understood as a basis for renewal. As a characteristic, capability,
or locality, it can be a highly powerful enabler for a winning strategy and
accomplishing the desired objectives. But equally, the current ‘center of
gravity’ can be an obstruction and work against the desired objectives, in
which case it will need to be changed. This is what makes ‘center of grav-
ity’ such an essential concept in any renewal strategy: It is never neutral
in relation to a company’s strategic objectives. (See case example, page 8)
Sum up the external and internal views
Now the external and internal view need to be summed up in a compelling
target state that combines a solid diagnosis on the need for renewal with a
realistic assessment of how difficult achieving that target state might be.
At this stage of the strategy renewal process, the management team needs
a very concrete view of the main challenges and opportunities the business
faces and a clear vision of the future. Without a persuasive conclusion
shared by a management team, making the major decisions demanded by
a strategy renewal and then acting on those decisions becomes difficult,
if not impossible.
“Current ‘center of
gravity’ can either be a
highly powerful enabler
for a winning strategy
or a major obstacle
– but never neutral in
relation to a company’s
strategic objectives.

6. We recently helped an international FMCG com-
pany assess its business portfolio as part of its
strategy renewal process. Building a solid fact-base
to position each business area (and its offering)
on the basis of its market attractiveness and its
own segment rank enabled executives to define
the roles and development priorities of different
businesses (see illustration below). This fact-pack
also helped the business units with their strategic
planning as it yielded new insights about the busi-
ness environment, including the market outlook
and competitor performance.
Examples of evaluation criteria for
market attractiveness
• Market size, historical growth and future
outlook
• Typical profitability levels in the market
• Level of competition
Portfolio assessment
in renewal context
CASE EXAMPLE 1
Examples of evaluation criteria for
strength of own position
• Market share and its development
• Own profitability relative to market
• Own ability to drive/develop the market
Having a portfolio view based on shared and ac-
cepted facts helped the group management and
business unit management start a strategic dia-
logue. Through this discussion, they defined the
roles of different business areas (growth engine,
cash engine, etc.) and identified key questions for
each business unit’s strategic planning. In some
cases, these questions related to identifying pock-
ets of potentially profitable growth and in other
cases, to divesting or streamlining certain slow-
er-growing parts of the business.
Business portfolio assessment: business area-level summary on the left;
on the right, each business area is broken down to its underlying businesses.
Explore for
opportunities
Turnaround / exit
Invest for
sustainable growth
Maintain
or free capital
MARKETATTRACTIVENESS
OWN POSITIONWEAK STRONG WEAK STRONG
MARKETATTRACTIVENESS
OWN POSITION
LOWHIGH
BA 2
BA 1
BA 3 Segment 1
S 2 S 5
S 3
S 4
Explore for
opportunities
Turnaround / exit
Invest for
sustainable growth
Maintain
or free capital
BA 4
LOWHIGH
6AUGUST WHITE PAPER: STRATEGY RENEWAL JANUARY 2016

7. AUGUST WHITE PAPER: STRATEGY RENEWAL JANUARY 2016 7
At this point, the diagnosis of the company’s situation must be translated
into bold choices and clear priorities, including specific decisions on what
the company will and won’t do in the future.
With luck, the introspective and observational work of steps 1 and 2 will
make the way forward crystal-clear. However, even when the path is clear,
following through on this conclusion may not be easy.
Logitech, for instance, recently made a dramatic decision to exit the sur-
veillance camera business and a bunch of other legacy businesses with little
future opportunity, and to stay in PC peripherals, mobility, and video
conferencing. The new CEO launched a business portfolio review that
revealed the future opportunities the company decided to pursue. One
prioritized area of focus was PC peripherals, a big and profitable product
segment still associated with attractive growth pockets. Given the category’s
growth rate and Logitech’s current position, mobility was defined as the
single biggest opportunity, a segment with room to grow.
Often, the right answers are not obvious and decision can be difficult to
execute – particularly the “no” decisions – whether that means sticking by
a current business or building a new one. As resources are almost always
constrained, a company must let go of something old before it creates some-
thing new – or drop a new idea if it decides to reinvest in a legacy program.
A right go/no go decision can do more for a company more quickly than
any other single step. Unfortunately, it’s not a low-risk proposition: a wrong
move can be fatal, and even the right move made too soon can have terrible
consequences. The difference between amputation and pruning is often
a matter of time, after all, and investors may be unwilling to wait for the
board to be proven right. Plus, right or wrong, any decisive move typically
creates enemies. It is no wonder, then, that few executives pursue bold
decisions even after considerable analysis. As the economist John Maynard
Keynes quipped, “Worldly wisdom teaches that it is better for reputation
to fail conventionally than to succeed unconventionally.”
Of course, brave leadership becomes easier the clearer the management
team’s diagnosis of the situation is and the better the understanding of the
company itself and its industry. Often, companies proceed without much
of a holistic view of themselves. Business unit management teams’ tunnel
vision in setting priorities and focusing resources often shape development
agendas without regard for the overall business portfolio. Companies
often have exhaustive development agendas with programs and projects
that all make sense individually but paralyze the delivery capability of the
organization as a whole.
CORNERSTONE 3
MOVE THE BIG BLOCKS
AND SET PRIORITIES
As resources are almost
always constrained, a
company must let go of
something old before it
creates something new
– or drop a new idea if it
decides to reinvest in a
legacy program.
WHAT TO ADDRESS
• Implications of the ‘center of
gravity’
• Target portfolio and value chain
position
• Optimal allocation of resources
WHAT TO AVOID
• Failing to take concrete decisions
based on the diagnosis
• Disregarding the importance of
saying ‘no’ – trying to follow all
attractive paths

8. Building on center
of gravity at Valio
Valio, a cooperative owned by 7000 dairy farmers, produces about
80% of Finland’s milk. It is a market leader in various key dairy
product groups and a pioneer in innovative dairy products.
When we looked for Valio’s center of gravity, it didn’t take long to see
that it had less to do with its cows than its century-old emphasis on
research. Valio’s management has always focused on R&D, and the
company’s laboratory, once led by Artturi Ilmari Virtanen, a winner
of the Nobel Price in Chemistry, is globally recognized for several
leading innovations. Due to its focus and the unity and connectivity
of key functions, Valio’s research efforts have succeeded even with
limited resources compared to global competitors.
The R&D function is well integrated with production and commer-
cial operations, and Valio has also benefited from being a relatively
compact company in a small homogenous country. All in all, this
‘center of gravity’ is clearly a source of strength that enables Valio
to generate new innovative products that make it distinctive not just
in Finland but world-wide.
This insight helped Valio recognize that for future success it must
build on this defining characteristic. As the company turns its gaze
more strongly towards international expansion, the company’s next
strategic challenge to solve is how to turn the center of gravity to
serve this aspiration.
CASE EXAMPLE 2
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9. AUGUST WHITE PAPER: STRATEGY RENEWAL JANUARY 2016 9
In addition to bold choices and clear priorities, a successful strategy renewal
requires developing the company from within by strengthening its strategic
capabilities, leadership, and culture. Modifying these elements requires
a systematic and long-term approach that includes both straightforward
investments in new capabilities and talent as well as repetitive actions to
shape important cultural characteristics.
CORNERSTONE 4
ADJUST CULTURE
AND CAPABILITIES
Pursuing changes in
slower moving elements
does not always require
significant investments
but rather a clear vision,
patient consistent action
and leading by example.
New strategic capabilities can be built organically to an extent, but devel-
opment can often be accelerated by hiring or acquiring critical capabilities
from industries that have been through the changes you see ahead in your
own vertical. Building and buying are not the only options: leading com-
panies are also ever more aware of the power of partnerships in this realm
of capability development.
The final, and usually slowest, part of renewal is a cultural shift. For
example, companies making a transition from being product-focused to
customer-focused, must typically make substantial changes not only in
sales capabilities, but also in the company’s “inner self,” including lead-
ership practices and culture. Gaining new perspectives by, for instance,
hiring key people from more customer-focused industries, is useful but is
usually not enough. When pursuing changes in slower moving elements
such as company culture, the example that management sets is essential.
This type of change does not always require significant investments but
it does demand a clear vision of the company’s goal, constantly repeated
communications, small, consistent actions, and lots of patience. Employees
and customers need to see the strategy in every step you take.
WHAT TO ADDRESS
• Strategic capabilities
• Leadership strength
• Cultural gaps
WHAT TO AVOID
• A path inconsistent with the
diagnosis
• Focusing exclusively to tangible
and easily measurable issues

10. AUGUST WHITE PAPER: STRATEGY RENEWAL JANUARY 2016 10
Finnish companies possess many important assets. We have fantastic, highly
skilled employees. We make goods and services that are as good as any in
the world, and in some fields, even better. We have brands with excellent
reputations. But in this hyper-competitive world, good is no longer good
enough. To be great – to maintain a competitive advantage – is likely to
require a fresh view of your strategic plan and a strategy renewal program
that will demand fundamental, probably difficult changes to the business
portfolio, operational capabilities, and even the corporate culture.
CONCLUSION
Kai Koskinen is a partner at August and responsible of strategy offer-
ing development. He has a long experience of strategy formulation and
execution. He can be reached at kai.koskinen@august.fi
Tomi Ere is a partner at August. He has a long experience from strate-
gy-driven transformations. He can be reached at tomi.ere@august.fi
Toni Mikkonen is a manager at August specializing in strategy and
business planning related topics. He can be reached at
toni.mikkonen@august.fi
About August
August is a leading management consulting company in Finland. We ad-
vise our clients on a broad range of topics, including Strategy and M&A,
Operations, Sales and Marketing, and Organization. Our team of more
than 20 professionals includes a strong mix of experienced seniors with an
extensive background in consulting and young talents with outstanding
academic records from top universities.
ABOUT
THE AUTHORS