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The Bamboo Strategy: Practical New Tools To Replace Porter And Blue Ocean


The world has changed considerably since the 1980’s but for business leaders the dominant paradigm in strategy remains Michael Porter’s 1985 competitive advantage theory encouraging companies “to establish a difference and preserve it”. In the early 2000’s, Kim & Mauborgne proposed a different perspective with their Blue Ocean strategy calling for the creation of “uncontested market space”. However, both approaches suffer from the same shortcoming. They equally assume a relatively stable environment, with changes of low magnitude, which do not disrupt the fundamentals of the industry.

It seems more and more difficult to hold this restrictive assumption. No one can deny that we are undergoing a deep transformation of our societies and economies. From whatever angle you look at it - technological, geopolitical, climatic, macroeconomic, societal - the idea of a lasting phenomenon, such as a “sustainable competitive advantage” or “a blue ocean where competition is irrelevant” appears to be more an illusion conjured by a short-sighted mind than a reality supported by facts. These strategic ideals have been inferred from observations that have a limited period of validity (a few years or at best a few decades). Far from being eternal attributes of the companies enjoying them, they characterize a specific moment of affluence, doomed to be stymied by either the imitation of the competitive advantage, regulation, the arrival of new entrants in the blue ocean, technological progress or shifting customer preferences.

Illusions Of Stability

When we zoom out of the turmoil of the most recent years and take a long-term perspective, most industries undergo a life cycle of expansion and decline, where any source of economic advantage is being undermined. In the intense period of transition that we are currently experiencing, it is no longer possible to ignore this predictable pattern of obsolescence and continue to maintain the fallacy of relative stability. The passage of time and the resulting vulnerability of any lucrative position is the blind spot of the dominant paradigm in strategy. That’s why strategists need new frameworks to anticipate and overcome the inevitable changes and redefinitions of their playing field.

It has been our ambition to design some practical tools which tackle the progressive evaporation of economic rents. We call this the Bamboo Strategy, which we’ve mapped out in the past. By reference to the bamboo - this invasive and resilient plant that keeps growing back when uprooted - the Bamboo Strategy is a pragmatic approach to deal with the challenges of disruption and self-reinvention. To achieve this, we leverage the successes of the past and present, in order to prepare the successes of the future.

We use bamboos to provide a metaphorical representation of the firm with, on the one hand, horizontal and underground roots encapsulating the distinctive capabilities (within the meaning of Coyne, Hall and Clifford) and strategic assets of the firm; and on the other, vertical stems symbolizing its different business models. The roots propagate themselves into the soil, recombining themselves to incorporate new competences and assets (by assimilation, partnership or acquisition). From there, they form new roots, from which new stems will emerge, that may become the future core of the firm.

How Bamboo Companies Take Off… And Suffocate

The bamboo may be used as a model of what happens during a successful transformation, where one of the small stems of the bamboo, a marginal and fledgling activity, built around a few core capabilities and assets, manages to take precedence over the legacy business model to become the main source of profits and cash flows. In the turnaround of IBM, software and services replaced the hardware branches. This holds true for Apple (iPads and smartphones vs computers), Netflix (streaming and content producing vs DVDs by postal services), Microsoft (operating systems for PCs vs cloud computing), Schneider Electric (energy saving systems vs electric appliances), and other firms, with their respective turnarounds.

In our research, we have thoroughly examined the successful trajectories of companies - faced with the challenge of commoditization or erosion - which seek to take advantage of growth opportunities in businesses not immediately related to their core activity. We have uncovered a pattern of three phases and labelled them “take root”, “proliferate” and “stifle”.

Bamboo’s Long-term Vision

For new stems to be successful, they need to be built on scarce, if not unique, world class competencies and assets. Before venturing into a new business, you need to excel in a few capabilities (step 1, “take root”) that you will redeploy and recombine in a different context. To find the fertile ground on which you may thrive, you need to find a multitude of clients’ frustrations and dissatisfactions, and conscious and unconscious aspirations. You will address them with minimal offerings to identify which ones have the biggest potential (step 2, “proliferate”). Then, once a promising niche has been identified, the offering needs to be refined and scaled up to exclude competitors from the newfound promising territory (step 3, “conquer/stifle”).

Bamboo strategies require a broad and deep mindset, that runs against the short-term imperative of shareholder value’s maximization. To survive and thrive in the long term, you must be willing to dissipate a few resources to build up strong capabilities and assets (step 1), as well to try out different offerings (step 2). To paraphrase a well-known proverb, to reap the harvest, you need to sow the seeds!

Veronique Nguyen is Adjunct Professor of Strategic Management at HEC Paris.

Alain Bloch is HEC Affiliate Professor and Scientific Director of HEC Entrepreneurs MSc.

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