The Normative Imperative: Managing for Enterprise Value

This chapter lays out the normative imperative for the conceptualization of dynamic strategy as sequential economic actions—that map onto discrete investments and continuous investments—intended to continuously increase the firms’ enterprise value. The impetus for the [normative] conceptualization of dynamic strategy must be understood independently of the motive for a [descriptive] theory of dynamic strategy. The need for a normative concept of dynamic strategy is rooted among practitioners who constantly find themselves competing in dynamic business environments where the recipe for success is continuously changing. This chapter first explains the normative distinction of ‘dynamic strategy’ from three main types of temporal changes in strategy that manifest as new strategic actions: conventional long-term strategy, strategic change, and strategic renewal. Additionally, it focuses on the shortcomings of conventional forward-looking strategy with regards to managing [for] future profits wherein dynamic consistency of actions often leads to dynamically inconsistent returns. Further, it explains how the concept of dynamic strategy violates the consistency requirement of conventional long-term strategy. The dynamic inconsistency of the elemental actions of dynamic strategy is intended to generate dynamically consistent returns. Finally, it explains the challenge of formulating an implementable dynamic strategy that must first generate superior performance in today’s environment and yet be flexible so that it can adjust to the unanticipated circumstances of tomorrow’s environment.