Business Owner's Handbook: What Type of Business Are You Anyway?
Updated: Mar 16
I love a good graph, maybe it's the economist in me, but things always make the most sense when you can put it in a nice visual representation of less and more. If you are further to the right then you're more of this and if you are closer to the bottom then you're less of that.
Yeah, now you're starting to like graphs, too, aren't you? I'm kidding, of course.
One of my favorite graphical representations from grad school was the matrix illustrating the Miles and Snow Strategy Typology (I have a picture of it below).
We based our semester's assignment on this matrix- asking - "is your business more of an analyzer or are they more of a reactor in the marketplace?" We had debates on what type of business is better suited for this industry or that. It was all so interesting... you agree, right?
Today, we're summarizing the Miles and Snow Strategy Typologies for you - so go ahead and see where your business lies and what potential strengths / weaknesses you may face as a result.
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Without further ado, let's dive in!
Prospector
A prospector is a company that represents high explorations but low exploitation. This means that they are aggressive in their moves, but that aggressiveness can lead to inefficiencies.
Learning orientation:
There is a general culture of learning within the business. That could be with promoting continuing education for its employees or maybe active business intelligence looking for new trends within their industry.
Flexible, fluid, decentralized structure:
This is the typical "flat" organization. Especially after COVID changes things up for the business world. This is the organization that can easily work from home indefinitely. Power structures are more of a suggestion than a hard core fact.
Values creativity, risk-taking and innovation:
This is going to typically be your start-ups or tech companies mostly, but not always. This could be an organization that empowers its employees to try new things without fear of reprisal.
Summary
These organizations are innovators and developers. They are always seeking to create the 'next big thing,' rather than sitting still with products that have been previously been developed and released in the market. These companies may have big wins, but also risk big losses.
Defender
A defender organization is pretty much the opposite of the prospector. They are high in exploitation and low in exploration.
Efficiency orientation:
A defender will utilize their time in the market and / or other efficiencies to maintain the status quo. These are established brands that do not try to branch out into other areas.
Centralized authority and tight cost control:
These are the traditional corporate types. The layer upon layer of middle management moving upwards towards a top that maintains supreme control of the business.
Emphasis on production efficiency and low waste:
High usage of economies of scale are used to ensure profitability. Think along the lines of Wal-Mart etc. They make sure that everything runs at tight as possible and there is little room for error.
Summary:
These businesses are often found in mature marketplaces where there is less of a chance to innovate, so they primarily seek profits or revenue. Instead of investing money in new developments, this kind of an organization is going to relish in the rewards of what they have already created. This particular strategy is typically one that a business shifts to over time as the market matures.
Analyzer
An analyzer is like the best of both worlds. They operate in high exploitation and exploration.
Balances efficiency and learning:
These organizations are always adapting and improving within their marketplace. They might not always do new things, but they will at least do old things in a new way. Automobile companies often fall into this category.
Tight cost control with flexibility and adaptability:
This type of organization is very frugal with its spending while at the same time willing to invest in new projects or activities as long as they are highly planned and justified. Willing to take risks, but only if there is low likelihood of failure.
Emphasis on creativity, research, and innovation:
They are willing to make changes and innovate. However, their reason for doing so is more to keep hold of the market and stay ahead of competition as opposed to revolutionizing the industry.
Summary:
They are usually market leaders, often large organizations that will build upon others' innovations and develop new products periodically. This type of firm will generally observe the market and then seek to meet its demands as successfully as possible. Due to their large size, this type of company can be late to the market and still prove successful in the end.
Reactor
To be blunt, Reactors are organizations on the pathway to failure. These are the businesses are your typical "We've always done it this way" types. Low on innovations and efficiencies.
No clear organizational structure:
This one isn't so literal in terms of titles, but more so in terms of cohesion or leadership. Something along the lines of having a Captain of the boat, but they have never sailed a ship before.
Design characteristics may shift abruptly depending on current needs:
They are as their name implies, reactionary. They do not possess the ability or willingness to predict market trends. They only move when it is absolutely forced upon them to do so.
Entrenched in policy, design, operations, and structure:
These organizations have zero willingness to move. In most cases they think that they already know and have solved all market problems for their business. They are the "best" in their minds, market be damned.
Summary:
A reactor is just what it sounds like, they react. Companies who react to the market are almost always going to be surpassed by organizations who are able to innovate, defend, or analyze successfully. If your business is in this zone, you should start looking for other work.
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Determining where your business lies on this fun graph can help you have a better compass on where to go. You may be comfortable as a Defender, Analyzer, or Prospector, but maybe you need to make a shift. If you're a Reactor, you MUST make a change as soon as you can!
Did you figure out which one of these matches your business the closest? Do you want to figure out how to shift or change your strategy? No worries, Out of the Box Advisors has your back!
We offer specialized consultation and business advice to help you build a strong, thriving organization - let's grab a coffee and chat about it!