Miles and Snow Typology
Key Thought Leaders: Raymond Miles and Charles Snow, 1978
Another extremely well-known product-market view of business strategy was developed by Miles and Snow6 and identified four major strategic types of organizations: defenders, prospectors, analyzers, and reactors. Miles and Snow observed that every organization tends to predominantly fit into one of these four classifications and contend that understanding these categorical profiles can shed insight into how organizations are structured and the patterns by which they adapt to their competitive environments over time.
A defender strategy is focused on stability of an existing core set of products served to a relatively narrow set of markets. The defender's priority is maintaining market strength and preventing competitors from eroding their customer base, and therefore operational efficiency is of critical importance to defenders. But the emphasis on stability means that a defender organization may be seriously challenged when unpredictable changes, such as major shifts created by new technologies, are introduced into the competitive environment.
Whereas the defender strategy is focused on maintaining stability, the prospector strategy is characterized by maximizing flexibility. A prospector organization develops the skills and processes associated with innovation, the ability to continually identify, create, and leverage new business opportunities. Prospectors are willing to forego operational efficiency, organizational stability, and even profit consistency in exchange for an expertise and comfort with change.
Miles and Snow point out that when tomorrow's environment is generally similar to today's, the defender strategy can have an advantage, but the prospector's strong change orientation can be more effective when tomorrow's challenges are distinctly different from today's. For this reason, many organizations pursue a hybrid approach and adopt an analyzer strategy. Analyzer organizations attempt to balance the maintenance of a stable, core set of profit-maximizing products and customers while simultaneously pursuing select new product-market opportunities. The concept of balance is important to the analyzer and represents key trade-offs: the analyzer will never be as efficient as a pure defender, or as innovative as a prospector. Establishing a viable balance is the primary challenge for organizations pursuing an analyzer strategy.
Whereas the other three organizational profiles in the Miles and Snow typology represent proactive and deliberate business strategies, the reactor approach is characterized by instability and the general lack of a consistent strategy, a series of reactive, ad hoc responses to external events. Whether due to management failings to successfully articulate or institutionalize a proactive strategy or due to lack of adequate response to significant environmental changes in the market, the reactor strategy is not seen as sustainable over the long term.
Limitations of Product-Market-Based Views of Business Strategy
Although the product-market-based business strategy views have the benefit of being parsimoniousness, their very simplicity may also be their primary limitation. The typologies provide a useful framework for analysis, but they are not necessarily strongly theoretically grounded. Good theory both explains causal relationships and provides predictive insights,7 and these typologies are not predictive tools.
Subsequent research has sought to understand how product-market typologies hold up under empirical scrutiny in determining specific conditions under which particular product-market strategies may drive superior performance. For example, Hambrick- investigated whether the different strategic types in the Miles and Snow typology were really equally viable in different industries as Miles and Snow posit. He found that the effectiveness of the strategic types was dependent on both the nature of the environment (e.g., industry maturity, new product innovation rates) as well as the specific measures of performance that the firm is targeting (e.g., ROI versus market share change). This led to the insights that when ROI is the performance measure sought, prospectors in general are less effective than defenders, though in less mature and less-innovative industries either a prospector or a defender organization is expected to perform better than an analyzer. However, if firms wish to improve their market share in industries with high rates of new product innovation, prospectors are expected to outperform defenders. Research such as this helps emphasize that the industry characteristics can have a significant impact on the effectiveness of a product-market-based business strategy.