Miles and Snow's Organizational Strategies

In their 1978 book Organization Strategy, Structure, and Process, Raymond E. Miles and Charles C. Snow argued that different company strategies arise from the way companies decide to address three fundamental problems: entrepreneurial, engineering (or operational), and administrative problems. The entrepreneurial problem is how a company should manage its market share. The engineering problem involves how a company should implement its solution to the entrepreneurial problem. The administrative problem considers how a company should structure itself to manage the implementation of the solutions to the first two problems. Although businesses choose different solutions to these problems, Miles and Snow suggested that many companies develop similar solutions. As a result, they postulated that there are four general strategic types of organizations: prospector, defender, analyzer, and reactor organizations.

Miles and Snow identify four unique strategies that are used by organizations. Below we will quickly look at each of these four, and what they say about the underlying business.

Prospector When an organization falls into the category of Prospector, they are expected to consistently be on the forefront of innovation and development. Rather than sitting still with products that have been previously developed and taken to market, prospecting organizations are always seeking to create the ‘next big thing’.

By definition, this type of organization is going to have some huge successes, and they are also likely to have some big misses as well. The goal, of course, is to have the hits outweigh the misses, so that the company can continue to afford to innovate well into the future.

Technology companies often fall into the category of Prospector, but not always. Some tech companies continue to push the envelope, trying to lead the way in new product development – which can force the competition to constantly play catch up. However, other tech companies will simply rest on what they have done and ride it out for maximum profits until the market moves on to something else.

Defender As the name would indicate, this is an organization that is satisfied with their current place in the market – and they are going to work hard to defend it as the years go by. Instead of investing time and money into trying to develop new products to take to the market, this kind of an organization is going to sit back and reap the rewards of what they have already created.

Of course, no one can stay in business by sitting still, so it will be necessary to make at least modest improvements along the way to remain relevant and competitive. Often, these developments come ‘behind the scenes’ in the form of manufacturing improvements, cost savings, etc.

It should be noted that a firm does not have to remain in just one of these strategy categories for its entire existence. It is quite common for firms to shift from one to the other as markets develop. Commonly, companies that were once considered innovative in their space will slide gradually into defender territory as less and less innovation is possible in their given market. Understanding when and how to shift from one strategy to another is crucial if profits and market share are to be maintained.

Analyzer In many ways, organizations that land in the analyzer category are a blend of the first two options on the list. These tend to be some of the biggest companies around, as they have the capacity to both develop new technologies and products as well as defend the market for those they have already created.

When you think of the biggest brand names in the world, many of them are going to fit nicely under the analyzer definition.

Usually, the companies that are true analyzers will not actually be the first to create something, but they may instead improve upon the creation of another firm. Therefore, they are innovators to a degree, but not in the truest sense of the word. This type of firm will generally sit back, observe the market and its demands, and then seek to fill those demands as successfully as possible. Thanks to their typically large size, this type of company can be late to the market with a specific product and still be successful in the end.

Reactor The final category on the list, those firms that land in the reactor category really have no one specific approach to their business. It should go without saying that organizations generally do not want to fall into the reactor class, as this means that they are simply trying to catch up with the market as things change over time.

Taking a reactive approach to business is how many large companies wind up losing market share over time. Even businesses with great ideas, products, and employees can wind up lagging behind if their management team takes a reactive approach to their decision making. It is nearly inevitable that companies who react to the market are going to be passed up by the organizations who innovate, defend, or analyze successfully.