Framework 197 — MADStrat Framework

Introduction

Most organizations know that they need to change, but they often struggle with how much to change and what exactly to change.

This framework examines how organisations can build effective strategy amid constant change.

MADStrat stands for the 3 distinct types of strategic change:

1. Magnitude

“Do better what we’re already doing.”

• Definition: Improve performance along the existing strategic path.
• Example: Optimizing supply chain efficiency, improving customer service, reducing costs, increasing marketing ROI.
• When to use: The strategy is still well-aligned with stakeholder needs and the company remains competitively differentiated.
• Leadership style: Focused on execution excellence and incremental improvements.

2. Activity

 “Do differently what we’re doing.”

• Definition: Change the methods, tools, or processes used to achieve the current strategic goals.
• Example: Adopting new technologies, switching from in-store to online delivery, using AI for decision-making, building new partnerships.
• When to use: The strategy (direction) remains sound, but the way it's implemented needs modernization or innovation.
• Leadership style: Encourages experimentation, agility, cross-functional collaboration.

3. Direction

“Do something different entirely.”

• Definition: Pivot to a new strategic path, market, product, or purpose.
• Example: Entering new industries, serving different customer segments, redefining the business model (e.g., Netflix shifting from DVDs to streaming).
• When to use: The current strategy is no longer aligned with stakeholder needs or is competitively disadvantaged.
• Leadership style: Visionary, bold, often requiring cultural transformation and top-level sponsorship.

Two Guiding Questions

The right type of strategic change (Magnitude, Activity, Direction) depends on your diagnosis along 2 critical dimensions:

1. Fit for Purpose

Does our value proposition meet the evolving needs of our stakeholders (customers, employees, regulators, community, etc.)?

• High Fit for Purpose: Our strategy is still relevant and valuable.
• Low Fit for Purpose: Market or stakeholder needs have shifted.

1. Relative Advantage

Is our position defensible and distinctive compared to alternatives?

• High Relative Advantage: We’re better than substitutes or competitors.
• Low Relative Advantage: Our competitors are catching up or outperforming.

Key Themes:

1. Changing How We Think About Change

• Introduces the MADStrat framework, defining 3 distinct types of strategic adaptation:
• Magnitude (enhancing execution of the current path);
• Activity (adopting new ways to pursue that path);
• Direction Strategy (shifting to a completely new strategic.)
• Which path is appropriate depends on 2 dimensions:
• Fit for Purpose (how closely the offering aligns with stakeholder needs now and in the future);
• Relative Advantage (how distinct and resilient a company’s value proposition is over competitors and substitutes.)

2. The Essence of Strategy Is Now How to Change

• Argues that adaptability, not inflexible strategic planning, is now the essence of strategy.
• The old assumptions of stable industry structure and shareholder primacy no longer hold in today's fast-moving world.
• Strategy should focus on both shifting trends and multiple stakeholders beyond just staff, investors and customers to the broader community

3. Most Businesses Should Neither “Pivot” nor “Double Down”

• Most firms are better served by reimagining activities, ie, innovating how they achieve existing goals, rather than radically overhauling strategy or doubling down on success

4. Great Strategy Considers More Than Customers and Investors

• Emphasizes extending strategy to include employees, partners and communities.
• Integrating non-traditional stakeholders can enhance both fit for purpose (eg, expand addressable markets) and relative advantage (eg, differentiation or cost reduction)

5. Leading Change Means Changing How You Lead

• Proposes that effective leadership in change requires mastering 3 interlinked tasks:
• Map (anticipate shifts in the external environment and set a clear, prioritized vision);
• Mindset (foster shared conviction and enthusiasm for change among key leaders);
• Message (mobilize the broader organization with a compelling, coherent narrative)
• The design of map, mindset and message varies depending on whether the company is pursuing magnitude, activity, or direction change; most companies require activity-level adaptation, around 20% magnitude and ~15% direction.

Strategic Insight from MADStrat

• Most companies mistakenly default to “Direction” changes when struggling, but data shows:
• About 65% of change efforts should focus on Activity (how things are done),
• Around 20% on Magnitude (improve current operations),
• Only 15% require a full Direction shift.
• Organizations often fail by:
• Overreacting (making disruptive changes when not necessary), or
• Underreacting (failing to change direction when required).

Key Takeaways

• The MADStrat framework (Magnitude, Activity and Direction) gives a practical lens to assess what kind of change is needed.
• Fit to Purpose and Relative Advantage are 2 critical axes to diagnose whether change is required and what type.
• Strategy today must critically consider multiple stakeholders, not just investors and customers.
• Leaders must adopt a contextual approach (changing how they lead, depending on the change type, and focus on map, mindset and message.)
• "The question is no longer whether to change, but how much and in what way."
• MADStrat helps avoid the traps of:

• Overreacting (making drastic pivots when only a tune-up is needed)
• Underreacting (doubling down when fundamental change is required)

It’s a strategic lens that enables intentional adaptation, not reactive flailing.

An Example: Netflix

More Examples

Magnitude Change:

• A retailer with strong brand and location but poor customer experience.
• Action: Improve systems, training, marketing, etc.

Activity Change:

• A university delivering in-person degrees in a world moving to hybrid/online.
• Action: Keep educational mission, but shift to new delivery models, technologies, etc.

Direction Change:

• A taxi company facing extinction due to ride-sharing.
• Action: Abandon traditional model and embrace platforms or mobility-as-a-service.

Some Strategic Implications

Summary

This framework helps organizations break free from outdated strategy tools, such as BCG matrices or five‑forces analysis built on stable environments. It offers a richer, stakeholder‑aware, change‑focused approach that's more suited to digital disruption, social purpose demands and fast-changing industries.

The 3 Types of Strategic Change:

How to Apply MADStrat

1. Assess (Fit for Purpose and Relative Advantage.)
2. Determine the appropriate strategic change type (Magnitude, Activity or Direction).
3. Align leadership approaches accordingly:
• Map (clarify the external shifts and priorities),
• Mindset (build internal support among leaders),
• Message (mobilize the broader organization).

(main source: Tom Hunsaker et al, 2020)