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Emerald Group Publishing Limited
Article Type: Quick takes From: Strategy & Leadership, Volume 42, Issue 4
These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.
Masterclass: Strategy, organization and leadership in a new "transient-advantage" world
Three recent books offer game-changing advice about how to strategize and manage in tumultuous markets and industries and new tools for the new jobs to be done. Together they promote the growing dialogue among the corporate strategy, innovation, leadership and entrepreneurship functions.
Strategy in the world of "transient advantage"
In The End of Competitive Advantage, Rita Gunther McGrath argues that virtually all current strategy frameworks and tools are based on one idea: the purpose of strategy is to achieve a sustainable competitive advantage. But this fundamental concept is no longer relevant for companies operating in volatile and uncertain environments. So instead, executives need to learn how to exploit short-lived opportunities with speed and decisiveness. Advantage now has to be created and recreated more or less continuously in "wave after wave." Professor McGrath offers a more effective strategy playbook for what she calls the new "transient advantage economy." Her "secret sauce" for continuous reconfiguration, which she calls "shape shifting," is developing three core capabilities:
* Making innovation an everyday proficiency.
* Practicing healthy disengagement as a normal, regular activity.
* Continuously reconfiguring resources and activities to achieve a dynamic balance between stability and agility.
Organizational change accelerator model
In Accelerate, John Kotter makes the case for developing a new "strategy operating system" to run in tandem with the traditional "performance operating system," so that renewal can become continuous rather than episodic. As Professor Kotter sees it, now most well-established companies are "optimized much more for efficiency than strategic agility," but the "hierarchical structures and organizational processes that we have used for decades to run and improve our enterprises are no longer up to the task of winning in this faster-moving world." Something else is needed. Kotter’s solution is a dual system combining "a management-driven hierarchy" and a "strategy acceleration network." He offers five principles for a new network.
Value code for leading responsibly amid "recombinant" capitalism
In The Good Struggle, Joseph Badaracco poses five enduring questions that help define responsible leadership. He then considers the answers that might offer the most valuable guidance for leaders engaged in what he calls, "the good struggle." This is the modern effort of engaged leadership, which demands perseverance and courage to make good on serious but profoundly fallible commitments required in an uncertain and often unforgiving world.
In the end, as Professor Badaracco points out, "none of these enduring questions is ever answered finally and permanently," but "thinking hard" about them can "help leaders raise the odds of working successfully and responsibly in the exciting, uncertain, recombinant, market-driven world" that now surrounds us all.
An economy of access is opening for business: five strategies for success
The commercial Internet’s ubiquitous usage has set off three market waves creating a new economy of access. Together they bring significant economic and social changes, the implications of which are only beginning to be glimpsed.
* Wave 1 – the shredding of vertical value chains by eliminating the middlemen, markups and margins of the traditional vertical value chains. Think of the books, music, video and other physical things purchased via the Internet.
* Wave 2 – the creation of vast new horizontal value chains, a new person-to-person marketplace. Think of the uses of Craigslist, eBay, Amazon – allowing almost anyone to become a retailer. Think of Airbnb instead of Motel6 or Hyatt; Urban ride-sharing apps like Lyft vs. taxis or mass transit.
* Wave 3 – the opening for social change allows people to choose access rather than ownership. Don’t buy a car, use your smart phone to get rides from Lyft.com. Don’t rent commercial space, borrow a pop-up store from Storefront.com. Don’t acquire stuff; click for access to what you need.
New competitive rules in an economy of access
For businesses, the issues posed by an "economy of access" are very real and very hard. How do businesses compete in this new economy, where the marginal cost of producing additional units of many things – such as local transportation (Uber), tourist accommodations (Airbnb) and temporary retail outlets (Storefront.com) – is moving close to zero? Here are five possible strategies:
* Strategy #1. Don’t over-react. Concerns that large corporations aren’t agile enough to handle customer intimacy may be misplaced. Keep reinforcing the brand. Furthermore, horizontal supply chains still need vertical managed platforms if they are to scale.
* Strategy #2. Attempt to compete with new rivals with delaying tactics that employ legal and regulatory initiatives.
* Strategy #3. Don’t fight them: join them. Given the new realities of consumer choice and preference, seek to prosper by competing effectively in this new economy, not fighting it. Example maneuvers: Innovate (Apple); Partner (Amazon); Buy (Avis – Zipcar); Imitate (Storefront.com copying Airbnb).
* Strategy #4. Cherry-pick the horizontal markets, for example by snatching the best loan opportunities on peer-to-peer lending networks.
* Strategy #5. Offer "solutions." Refocus business offerings on managing every aspect of their client’s value chain as a "solution provider."
Operating in the emerging "Economy of Access" requires looking at opportunities with a different mental model of what customers prefer and will accept. It embodies a fundamental shift in the offerings that people value and how they act in the marketplace.
No one knows how big this economy segment might get or how many industries and companies it might affect. However as marginal costs continue their steady march towards zero, and digital trust-building mechanisms for customers become more robust, it is clear that that the impact will be considerable.
Reinventing the rules of engagement: three strategies for winning the information technology race
Saul Berman and Anthony Marshall
After interviewing 875 CEOs from companies around the world last year, IBM researchers concluded that their emerging best practices for the navigating the future of information technology can be expressed in three new rules:
1. Embrace disruption.
2. Build shared value.
3. Dare to be open.
1. Embrace disruption
Every era has its breakthrough innovations. Ours has the runaway kind, fueled by ideas circulating more freely, combining in new ways and breaking through paradigms with greater frequency. As innovation jumps from one industry to the next, it brings down once formidable boundaries and radically reshapes enterprise purpose. Here are pro-active steps leaders are taking:
* Move out of bounds. Bring together people from different industries, backgrounds, regions and generations to predict and respond to new competitive threats.
* Create experimentation spaces. Innovation requires places and spaces where people can think, interact and experiment.
* Build business ecosystems. Business environments are evolving from markets to ecosystems. Technologies like cloud make possible the complex orchestration of the new business ecosystems.
2. Build shared value
As value chains increasingly fragment and industries converge, new ecosystems will be organized around activities that are meaningful to customers. Actions to take:
* Blend the virtual with the physical. Rethink everything from how to engage customers to how to deliver products and services using digital displays and mobile services.
* Learn with your customers. Use virtual events and contests to solicit and capture ideas useful to R&D and marketing divisions.
* Operationalize your customer community. Bring customers into your operations or sales and service functions.
3. Dare to be open
There are leaders in every industry and region who are not satisfied to simply catch up with their competitors or their customers. To push ahead and be the source of innovations, they’ve opened up their organizations to new ways of working, and they’re leading from a position of trust. Lessons learned:
* Customers, partners and employees who collaborate can go further, faster.
* When organizations seek customer influence, they cede absolute control in pursuit of mutual value. Inevitably, opening up to empower collaboration among individuals means moving away from command-and-control hierarchies.
* To facilitate both fact-based consensus and data-driven innovation discoveries, data must be democratized, made widely available and immediately accessible.
Studies show that the most analytically sophisticated organizations share data more freely. Once they do so, it alters the power structure, effectively flattening the organization and creating a culture of openness and transparency.
A solution for a lack of breakthrough innovation – strategic C-suite direction and involvement
Peter Skarzynski, Dave Crosswhite and Chris Jones
Innovation is a high priority for most companies, as intense competition drives a continual need to differentiate. Yet, many companies are not achieving the meaningful organic growth they expected given their innovation investments and performance goals. Why do too many innovation portfolios lean heavily toward smaller, incremental opportunities with limited potential? Why is there an institutional reluctance to strive for true breakthrough opportunities that have potential to delight customers, change the basis of competition and reshape industries?
What is the problem?
Many companies have approached the innovation initiative as if it were like TQM, Lean or Six Sigma initiatives. They have focused on establishing formalized internal resources, investing in innovation skills, processes and supporting structures. While resources are critical to success, innovation is not a capability challenge that can be addressed in this way. The disconnect between innovation goals and market success is caused by the lack of strategic direction and alignment resulting from insufficient involvement of C-Suite leaders.
The missing ingredient: C-suite involvement
If your C-Suite aspires to breakthrough innovation it must keep innovation a focus of the CEO. C-level executives in leading innovation performers such as GE, P&G and Whirlpool understand that there are two critical "responsibilities" that only they can accomplish:
1. Enabling cross-boundary cooperation – more productive places to look for untapped opportunities are in the relatively unexplored market spaces near or across internal boundaries.
2. Granting the permissions needed to pursue longer-term or other higher risk opportunities – breakthrough opportunities are likely to be more uncertain and take longer to realize in the market. These higher risk opportunities don’t generally get pursued unless there is significant C-level support.
Action to take
There is no universal formula or set of mechanisms for applying and sustaining C-level engagement. Successful companies use a range of approaches, most commonly choosing a combination of several mechanisms:
* Conducting regular C-level portfolio reviews – five hard questions are offered.
* dentifying strategic focus areas for innovation exploration.
* Using active C-level sponsorship of larger innovation opportunities.
* Creating separate incubators for developing breakthrough opportunities.
As one might suspect, the detailed implementation and management of each varies based on company and market context.
Achieving breakthrough innovation results requires continual involvement from the C-Suite, and it always will.
Interview: Harvard professor Mikolaj Piskorski’s research-based social media business development model
Social network platforms – such as online sites for matching up parties in a wide variety of transactions, personal communication sites like Facebook and Twitter and company-sponsored networks designed to increase and track interactions with users – have become mainstream marketing initiatives. However, there has been little research into how best to design social network platforms, whether to own a network or use established social networks and how social networking contributes value to corporations. Mikolaj Piskorski, Associate Professor in the Strategy Unit at Harvard Business School, is one of the first researchers to write about the strategic drivers that make social platforms important to CEOs, CIOs, CMOs. His research-based insights emphasize the importance of designing a platform that enables transactions that would not occur otherwise, transactions that increasingly benefit both companies and individuals. He found that, "Companies that did well with their social strategy did not treat social platforms as a way to broadcast to customers. Instead, they focused on building interactions between their customers or suppliers."
Here’s an excerpt from the interview.
What models have you come up with when it comes to designing online social platforms and social strategy?
There are two interconnected models in my book. The first model tells you how to build effective online social platforms, while the second tells you how to develop social strategy.
To build an effective social platform, I argue that you first need to understand the reasons why people don’t interact in the offline world, but would benefit from doing so. For example, a Cisco engineer may not be able to connect with someone who can solve a particular problem. Someone looking for a social contact may not be able to find a suitable relationship. A runner may not be able to find a regular running partner.
Then you need to figure out how to make these interactions happen. It turns out that there is a universal formula consisting of the four things you need to do. You need to have a lot of people on the platform, you need to help them display personal information about themselves, you need to help them search for and acquire information about others, and you need to help them communicate. And you have to do all four things at the same time – you miss one, and the site will not work well.
Once you understand how to build an effective social platform, you can use it to develop a social strategy. The trick here is to really think what you are going to ask your customers or suppliers to do in return for building relationships between them.
How strategists use "big data" to support internal business decisions, discovery and production
Thomas H. Davenport
From a strategic management perspective, big data differs from previous data analysis systems by offering a promising new dimension: to discover new opportunities to offer customers high-value products and services.
Instead of just creating reports or presentations that advise senior executives on internal decisions, big-data scientists commonly work on customer-facing products and services. This has important implications for the 1) organizational locus of big data and the 2) processes and pace of new product development.
Facilitating big data discovery
Discovery is most often done in business units rather than IT organizations, typically by people who are focused on innovation, product development and research. Some companies organize them into "data labs" or "analytics sandboxes" or a group with a similar name, and they are typically found within the most data-intensive business units of the organization.
The desired outcome of data discovery is an idea – a notion of a new product, service, or feature or a hypothesis – with supporting evidence – that an existing model can be improved. But note that most discoveries are relatively minor, incremental improvements, not grand breakthroughs. One might find a new factor to better identify customers who are about to leave you, or how to better target an offer. However, if you keep at it and have good people and a supportive culture, you’ll eventually find something big.
Target applications and management
Over the last 45 years, the general activity of making sense of data has evolved from decision support, to executive support, to online analytical processing, to business intelligence, to analytics and now to "big data." Several focus areas discussed are:
* Customer satisfaction
* Customer journeys
* Supply chain risk
* Competitive intelligence
* Discovery and experimentation
Whatever task it’s applied to – internal decisions, discovery or production – the return on investment from big data comes from the processing and analysis of it and the insights, products and services that emerge and become recognized as adding value. Therefore, if it’s worth investing in the collection and analysis of big data, it’s also worth thinking about how the outcome of the analysis will have an impact on decisions and actions.
The coming sweeping changes in big data technologies and management approaches need to be accompanied by similarly dramatic shifts in how data supports decisions and product/service innovation.
A veteran strategy consultant newly based in Portland, Oregon (firstname.lastname@example.org) and a contributing editor of Strategy & Leadership.