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The new corporate strategy playing field

Corporate strategy is being upended by new stakeholders, competitors and the need to quickly add differentiating capabilities.

In brief

  • Corporate strategy is evolving; its goal is now to deliver value to a broad range of stakeholders and outpace new, nontraditional competitors.
  • Corporate strategy likely needs to focus not just on traditional elements, such as which markets to play in, but also on quickly building new capabilities to compete.
  • Buying or partnering can add these data, digital and innovation capabilities more quickly, and capabilities-led acquisitions have been showing strong returns.

The field of corporate strategy has for years been honed around two core questions: where to play? and, how to win? It has been measured in its ability to drive growth and return on capital. These elements of strategy are no less fundamental now, but they have become engrained in planning and processes so they are no longer enough to be differentiating.

The EY-Parthenon 2022 Realizing Strategy Survey of 1,000 C-suite executives reveals a shift to a new playing field of corporate strategy: one where speed and capability are often the differentiators and where the definition of success is rapidly evolving to a broader focus on stakeholder capitalism. The game is changing, but not all companies are ready for the competition. Winning requires:

1. Resetting your corporate strategy goals 

The conversation around stakeholder capitalism and a broader definition of long-term value is not new. But our research confirms that the past several years have seen a major change in how executives embrace these ideas. It’s not surprising to see 53% of C-suite executives rate customers as more important to strategy than shareholders (and 95% rate them as at least equally important). What is more stark is that since we asked this same question two years ago, every stakeholder group has seen a marked rise in importance vis-à-vis shareholders (see Figure 1).

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In our strategy work with companies, however, what we often find is that the embrace of stakeholder capitalism — increasingly under the banner of ESG and sustainability — is sincerely felt but immature in execution. It is one thing to recognize the relative importance of a multi-stakeholder approach; it is another to actually know what to do about it when it comes time to set corporate strategy.

Have you engaged with your key stakeholders to determine which elements matter the most to them? Have the metrics and scorecards that guide the company’s investment prioritization evolved to incorporate the impact on these stakeholders? Does your strategic planning process have equal weight from executives who have a pulse on these stakeholders (e.g., head of supply chain)? These are questions that chief strategy officers (CSO) and C-suite executives can reflect on to have a clear view of how well their processes are evolving in line with the new objective function of corporate strategy.

Addressing new competitors with your corporate strategy

Who an organization needs to win against is also rapidly changing:

  • 68% of the C-suite say the biggest competitive threats last year came from adjacent and unrelated markets.
  • 84% indicate that these competitors will be the biggest threat in the next three years.

In fact, the threat of new, unknown competitors has shifted rapidly from being theoretical to a present-day reality. When we asked the same question in 2020, only 39% of the C-suite said the biggest competitive threat was coming from these nontraditional competitors.

What has not shifted quickly enough is how companies are adjusting their planning process to address this new competition. These new competitors come with different capabilities, models and cultures, changing a company’s strategic calculus. Yet many organizations are not planning for this disruption: Only 19% of executives rank the rapid growth of nontraditional competitors as a top focus area. This could be an important blind spot that the CSO can help address by integrating the impact of such competitors into risk and scenario planning.

The new competition...
of CXOs say competitors from adjacent and unrelated markets will be the biggest threat in the next three years.
...and a blind spot
of executives rank the rapid growth of nontraditional competitors as a top focus area.

CSOs can also help identify these threats by conducting a thorough scan of the ecosystem as part of a broader definition of competitive intelligence. Nontraditional competitors taking equity stakes in an organization’s sector, venture capitalists acquiring assets in the sector, and traditional competitors deploying capital in new areas such as emerging technologies could all be warning signs.

2. Embracing new elements of corporate strategy 

Selecting the right markets, products and channels continues to be critical for corporate strategy. However, this is now table stakes and not sufficient to be differentiated, resilient and win in the market. When asked what elements are fundamental for corporate strategy to address going forward, C-suite executives are pushing into new domains, such as data, innovation, digital, sustainability, human capital and others. In fact, they are ranking these elements as bigger focus areas than traditional strategy elements (see Figure 2). 

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A first step for any CSO is to define which elements will be critical and a competitive differentiator going forward. Consumer experience is on top of the list (75% of executives say it’s more important than traditional elements of strategy), and across many organizations, the strategy function has had a substantial role already in developing a distinctive consumer experience. New elements that rank high but historically have not been in the mandate of corporate strategy include data strategy, innovation strategy, digital strategy and human capital strategy, among others.

For each element that matters going forward, a second step that the CSO can take is to conduct a thorough benchmark study of the company position in relation to current or new competitors. If in the past corporate strategy had a clear view on the product portfolio compared with competitors’, now it needs to supplement that with a clear view on the digital capability, or other core capability, vs. competitors’ as well.

Do you have a clear, fact-based benchmark of your digital capabilities? Is your data and analytics strength superior to competitors? How strong is your innovation pipeline vs. the market?

These are questions that CSOs need to help answer in an objective and strategic manner. The mapping, benchmarking, competitive analysis and evaluation of relative strength is something the corporate strategy function must own, regardless of whether it is evaluating products, markets and channels or evaluating digital, data, human capital and other elements that are critical going forward.

Developing new capabilities 

Another key step where corporate strategy has a vital role is in building a portfolio of initiatives to develop new capabilities. Investments in these capabilities need to be treated with the same rigor, metrics and accountabilities as any other strategic investments. What is the expected return on the digital investments? What are the specific business impacts on data and analytics capabilities? Where is the highest impact and usage of innovation across the portfolio? These are additional questions that CSOs need to help answer in an objective manner, maintaining a strong discipline in measuring and tracking the results from these investments in capabilities.

Corporate strategy can use a governance structure to drive co-accountability between each relevant function (e.g., chief digital officer, head of analytics, chief innovation officer) and the rest of the organization that extracts value from those functions. For example, in our work with clients, when we see a digital program being boxed as an “IT project” without the connecting elements to the business and the rest of the organization, we typically see those programs fail to deliver strong commercial benefit. Establishing the appropriate governance (e.g., digital strategy steering committee), confirming the dots are connected across departments and linking back each of these elements to the fundamental corporate strategy of the company are key actions where CSOs can drive value.

3. Accelerating to strengthen emerging capabilities

Companies need to strengthen their capabilities quickly, particularly in digital, data and analytics, and innovation, as well as add people with skills to support these capabilities. However, these capabilities can be difficult to build organically, both from a talent and cost perspective. In fact, in our survey, C-suite executives prefer to buy or partner, rather than build organically, for most of these capabilities, particularly digital, data, talent and innovation (see Figure 3). 

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M&A data supports this view of C-suite preference to close the capabilities gap. In 2021, 35% of deals were focused on capabilities rather than scale, up from only 18% five years earlier. And the capital deployed in these capability deals has also grown substantially, representing 35% of the transaction value across all M&A in 2021 vs. less than 5% five years earlier. While five years ago companies were only able to invest and risk small dollars in these unfamiliar transactions such as a digital or data company, we now see the average transaction being five times higher in 2021 and there is a willingness to invest billions of dollars in assets rather than millions.

Data also indicates that capabilities deals are more lucrative in the long term. EY-Parthenon analysis of Capital IQ data shows that for companies focusing on capability-led acquisitions, total excess shareholder returns averaged 44.8% over five years compared with 26.3% for those deals that focused on acquiring scale.

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In an example of using an acquisition to scale up fast, a generator manufacturer saw a growing need to make its equipment “smart” and allow customers to connect to the equipment via software. The company did not have enough in-house developers with a modern skill set and was experiencing trouble scaling up its team. EY-Parthenon teams helped the client acquire a startup company with intellectual property in the energy business, in large part to acquire the software development team. This team became the core of a new R&D hub. The deal enabled the company to quickly scale up its software R&D capabilities and build cloud-based software that enabled its customers to monitor usage trends and become more cost efficient.

An expanded role for the CSO 

CSOs can help improve acquisition success by making the M&A process more effective in identifying, assessing, valuing and extricating value in capability-led acquisitions. They also need to keep a balanced view of the portfolio and continuously identify areas for deprioritization and potential divestment. Almost two-thirds (65%) of CEOs expect the CSO to lead an annual divestment assessment, identifying opportunities to free up funds and executive attention to focus on new core capabilities.

While steering buy/build/partner decisions is an area CSOs can lead to develop key capabilities, C-suite executives have new requirements for CSOs to take more of a lead role to speed change and improve agility. 

Areas CSOs are expected to play a leading role 

  • Setting the ESG strategy (66%)
  • Championing operating model changes (65%)
  • Driving consensus on capital allocation needs across business units (64%)
  • Steering buy/build/partner decisions (62%)
  • Defining the talent strategy for strategic areas (61%)
  • Driving the shift in the organization’s approach to resiliency (60%)

Some may need to completely redefine their role within the organization, moving beyond designing the roadmap for change and driving business agility, helping bring in the talent to support new capabilities and breaking down silos to achieve competitive advantage more quickly. In fact, in many organizations, we see CSOs expanding their roles already, either implicitly or with an expanded title, reflecting the ask from the C-suite to drive change across the organization. Nearly half of the Fortune 500 companies have a CSO or EVP/SVP/VP of strategy and, across these strategy executives, more than 100 have additional responsibilities beyond strategy. While, clearly, corporate development or business development is a typical add to the CSO remit, we are seeing an expanded mandate in areas such as innovation, transformation technology/digital, or data and analytics.

What’s next for your differentiated corporate strategy

Corporate strategy is being shaped by many changes: new stakeholders, new metrics, new competitors and new capabilities. And our survey shows a step change in what CEOs expect from CSOs. While in many organizations, CEOs expect CSOs to take a leading role in developing core capabilities, CSOs are often also expected to help transform the operating model and culture across the enterprise. Interestingly, in our survey, CEOs had more ambitious expectations of CSOs to drive these domains than the CSOs themselves — perhaps because they’re wary of expanding their remit beyond their traditional scope. To lead, CSOs will have to be prepared to drive change.

Organizations generally always strive to build a distinctive and differentiated strategy. To do this, companies will need to focus beyond where to play and how to win. Adding new capabilities and the speed by which you do that are now the key differentiators. CSOs play a fundamental role in these changes, while also making sure the strategy serves a broader set of stakeholders.

A special thank you to Ghassan Khoury, Ranjan Rath and Sumedha Agarwal who contributed to this article.


CEOs and chief strategy officers need to evolve their corporate strategies beyond traditional elements, such as what markets to play in, and traditional goals such as financial returns. Today’s strategy may need to address a wide range of stakeholders and help differentiate against nontraditional competitors. Organizations may need to be able to quickly add new capabilities to differentiate themselves in rapidly changing markets.