Citation
Gorrell, C. (2013), "Quick takes", Strategy & Leadership, Vol. 41 No. 6. https://doi.org/10.1108/SL-08-2013-0063
Publisher
:Emerald Group Publishing Limited
Quick takes
Article Type:
Quick takes
From:
Strategy & Leadership, Volume 41, Issue 6
These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.
Strategy and co-creation thinkingVenkat Ramaswamy and Kerimcan Ozcan
Over three decades there has been a dramatic shift in the corporate perspective on resources, opportunities and value creation. Going forward, the enterprises that embrace this shift will be positioned to tap global resources and talent to co-create unique offerings of high value with customers and other stakeholders.
Past value creation models
In the industrial era, resources – cash, plants, labor – were limited to what the firm owned. In the 1990s, corporations expanded their view of resources to include intellectual resources, and acted to leverage them across allied businesses. The shift was from resource allocation to resource leverage. But in both models, it was the company that designed and controlled the customer experience.
Co-creation model
Consumers today want to influence how they will be served and want to be involved in a range of activities, including those typically thought of as internal to the firm. Thus, the process of value creation shifts away from a product centric approach to a stakeholding-individual and experience-based perspective. And resources now include the collective intelligence in the whole global system (Local Motors and LEGO examples). As companies experiment, they are best guided by new underlying principles of competition that are here to stay:
* The shift from firm-controlled value creation to experience-based networks.
* The view of customer talent and knowledge as resources.
* The centrality of individual co-creation experiences as the basis of joint value creation.
Building new capabilities
IT innovations have given individual consumers unprecedented power and freedom to "customize" their own lives. Thus in the world of co-creation, every employee, at any level, who has the ability to directly influence the consumer experience can facilitate co-creation via an engagement platform. To do this, companies need to build IT infrastructures that are:
* More flexible than the current norm so that line managers throughout the organization can access and activate the right resources and knowledge at the right time.
* More "event-based" so that all line managers are constantly tuned into context-rich customer information.
* The central mechanism for aligning information flows with the social infrastructure of a company and its strategic and operational objectives.
Bottomline
The new watchwords for strategy should be "engage and discover" not "command and cascade." And discovery needs to be continuous, involving not just customer and employees, but all stakeholders who can have an impact on the value the company delivers.
Within corporations, the challenge is to push managers out of their comfort zones and into the zone of new opportunities. Co-creation has arrived and it is the future of strategy and innovation.
Interview: Venkat Ramaswamy – a ten-year perspective on how the value co-creation revolution is transforming competitionBrian Leavy
The Future of Competition, published by C.K. Prahalad and Venkat Ramaswamy in 2004, is now widely accepted as one of the strategy fields landmark books. Its fundamental idea was that value will be co-created interactively by firms and consumers, rather than merely exchanged between them. In this interview with Prof. Ramaswamy, Strategy & Leadership reviews the progress of this "co-creation transformation" on its tenth anniversary. His forthcoming book is The Co-Creation Paradigm, co-authored with Kerimcan Ozcan (Stanford University Press, 2014).
Theme 1: the co-creation idea – origins and progress to date
The evolution of the web was instrumental in challenging a "firm-centric" view of the world of value creation. It allowed a dual shift: the involvement of consumers in the process of value creation and a change in perspective from just goods and services to customer experiences and needs.
Early examples of value co-creation in practice involved consumers in designing and developing goods and services and their personalization. This was what mass-customization was initially about, but value creation remained very much a firm-centric activity.
The next step takes co-creation beyond firms to an even larger view of stakeholder engagement with private-public-social sector enterprises in creating wealth, welfare and well-being across the economy and society as a whole.
Theme 2: the new co-creation playbook – a primer for busy executives
1. The guiding principle underlying the transformation of enterprises towards co-creation is "engaging people to create valuable experiences together while enhancing network economics." The three main components of co-creation are:
* Engagement platforms.
* Experience domains.
* Capability ecosystems.
2. Leaders must be the orchestrators of co-creative platforms everywhere in the ecosystem of the enterprise. The co-creative enterprise is not so much about "build it and they will come," but much more about "build it with them, and they are already there."
3. Leading companies recognize that the goods and services they provide are valued by their customers as means to an end and that product and service variety does not translate automatically into meaningful human experiences. Design thinking helps. But co-creation goes a step further to engage individuals in originating their own meaningful experiences. Consider the example of NikePlus Running.
4. Any enterprise can start and sustain a transformation to value creation as a co-creation process. The paths to transformation are many, representing a strategic choice to be made depending upon its prevailing culture, management outlook, initiatives, aspirations and leadership. Success is a function of the active involvement of managers and employees at all levels.
Ten drivers of radical management in the "creative economy"Stephen Denning
A new kind of business environment is emerging: the "creative economy." At its core is the need for organizations to engage in continuous innovation and adaption. Successful businesses will respond with a paradigm shift in their leadership and management perspective from product-centric to customer-stakeholder centric.
The ten drivers for the creative economy are:
1. From maximizing shareholder value to profitable customer delight.
2. From sustainable competitive advantage to continuous strategic adaptation.
3. From a pre-occupation with efficiency to co-creating value with stakeholders.
4. From uni-directional value chains to multi-directional value networks.
5. From steep hierarchies to shared responsibilities.
6. From control and bureaucracy to disciplined innovation.
7. From economic value to values that grow the firm.
8. From command to conversation.
9. From managing the corporate machine to stewardship of stakeholders.
10.From episodic improvements to a paradigm shift in management.
Radical management
The dynamic changes required of business leaders are collectively integrated under an umbrella called "radical management." This is a different mental model of how the business works, and to make it work requires management to learn a different way of thinking, speaking and acting in the world. It is a rejection of management approaches such as sustainable competitive advantage, hierarchical management, maximizing shareholder value, large manufacturing off-shoring.
Acknowledging, understanding and embracing the new paradigm – enabling participation by customers and other stakeholders in the process of innovation – requires a wholehearted change in business leaders point-of-view. Management "tweaks" will not be enough. For example, to accomplish the transition to the creative economy, and accommodate the shift in the balance of power in the marketplace from seller to buyer, firms must change from an inside-out mindset implicit in the value chain ("we make it and you take it") to an outside-in mindset ("we seek to understand your problems and will surprise you by solving them").
Presented are charts that compare and contrast the approach of "traditional management" with "radical management" in terms of the ten drivers in the creative economy.
Going forward
Absorbing all the changes and acquiring the skills and attitudes necessary to implement them, will not be easy or quick. To achieve the transition, leaders need to raise their game. They need to be leading the way towards a different way of running organizations. It is no longer enough to get things done "within the system" or "despite the system." Leaders – wherever they are located throughout the organization – need to be agents of transformation.
Extreme trust: the new competitive advantageDon Peppers and Martha Rogers
In the past decade, the shift from being accepted as a company that just followed rules and norms to competing by offering customers a trustable relationship supported by sophisticated information systems has become increasingly apparent. Leading companies are learning that they can achieve competitive advantage by going out of their way to protect each customers interest proactively, using IT systems to ensure transaction satisfaction.
What is "extreme trust"?
* Seeing opportunities to create value from the perspective of the customer.
* Taking extra steps, like designing special IT programs, to ensure that a customer does not make a mistake, or overlook some benefit or service.
* Not failing to do something that would have significant benefit for the customer.
Whats the payoff from extreme trust?
In a society increasingly connected through social media, betraying customer interests will cost more than it has in the past. And trustability is financially attractive: many of its economic benefits come over time, as returning customers buy more and as a companys reputation grows via social media and generates more new business. Quantifying these benefits – including the value of increased customer loyalty, referrals and additional sales – requires a robust customer analytics capability, as well as a financial perspective that fairly balances short-term and long-term results.
Genuine transformation
As with all disruptive change, it will be the new companies and start-ups that lead the charge against the established order. These rebels will be wielding honesty as a potent competitive weapon to steal customers from their more established but less trustable rivals. By contrast, the firms that have already enjoyed the most success and profitability are the ones that will find it hardest to adapt. Some will try to become more trustable, but will only grudgingly relinquish the significant cash flows generated by untrustable business practices. The change will likely be painful and difficult but necessary for ultimate success.
Succeed in a more transparent, hyper-interactive world
* Do things right. Manage the functions, processes, and details right in order to make it easy for customers to do business with you. Be attentive to the customers experience, not just the companys financial performance.
* Do the right thing. Align your organization with the needs and best interests of your customers. Customer relationships link short-term actions to long-term value.
* Be proactive. Knowing that a customers interest is not being well served and doing nothing about it is untrustable. Not knowing is incompetent.
How CEOs, CIOs and CMOs see the technology future of corporate openness, customer individualization and innovation partnershipsLinda Ban and Anthony Marshall
Surveyed CEOs are strategically focusing on three technology-driven areas that can help their organizations become more competitive:
* managing openness across the organization;
* individualizing customer relationships; and
* investing in the partnership ecosystem for innovation.
Manage openness
Openness and transparency are becoming powerful sources of competitive advantage. Growing demands for information access and collaboration have emerged, enabled by technology – encompassing the growing variety of capabilities including social, mobile, data, analytics and cloud. To deal with these new realities, leading CEOs are examining – and perhaps redefining – the imperative for organizational openness.
* How: define openness before it defines you; de-silo your firm; truly make people the critical priority.
Engage customers
To achieve the objective of knowing and engaging customers, big data is getting increasing attention. But "knowing the customer" is no longer confined to segmentation, statistical averages and historical inferences. Individualization of customer interactions is the wave of the future. And transactional relationships are transforming into experiential ones.
* How: marry insights from unstructured sources such as social media, e-mail, sentiment analysis and blogs with structured systems of record for essential input into business strategy, customer interaction and engagement. And, put "data officer" in everyones job description.
Expand the partnership ecosystem
In the future, external partnerships will most likely become even more critical to CEOs operating strategies. This includes differentiation through expanded innovation, recognizing that many of the most dynamic ideas come from other organizations or entire ecosystems. Increasingly partners are non-traditional communities of interest, academic institutions or other types of organizations.
* How: convert "me, me, me" into "we, we, we"; explode the dimensions of collaboration to enable it across your partnership network.
Implementing leading practices
CEOs, CMOs, and CIOs can align priorities to realize a shared vision by each "owning" specific elements:
* CEOs can act to understand, demonstrate and enable organizational openness by establishing collaborations across the enterprise, recognizing and rewarding those who embrace collaboration.
* CMOs can jump-start efforts related to data: identifying requirements, advocating for data fulfillment and monitoring organizational openness and sharing with partners.
* CIOs can reduce the number of impediments to collaboration and actively introduce tools for more creative collaboration.
Career advisory: Avoiding onboarding and promotion trapsMichael Watkins
Are you considering a change in your job or position? The good news is that there are systematic methods you can employ to both lessen the likelihood of failure and begin adding value faster. Though the specific business situations that confront transitioning leaders vary, there are fundamental principles that underpin success in all transitions at all levels.
More than a decades worth of research and practice has shown that you can dramatically accelerate your transition into your new role. Do the right things – the essential transition tasks listed – and you can create momentum that is essential for success.
The right actions
Here is a framework for making transitions that has been distilled from many leaders experiences, facing a diverse range of situations:
1. Prepare yourself – this includes making a mental break from your old job.
2. Accelerate your learning – be systematic and focused about deciding what you need to learn and how you will learn it most efficiently.
3. Identify the specific situation you will be leading – startup, turnaround, sustain success, accelerate growth or realignment – and match your action imperatives to it; examples provided.
4. Secure early wins – in the first few weeks identify several opportunities to build personal credibility.
5. Negotiate success – develop and gain consensus on your 90-day plan.
6. Achieve alignment – assess the firms direction, then bring your structure, processes, and skill bases into support of the intent.
7. Build your team – be both systematic and strategic to evaluate, align and mobilize your inherited team.
8. Create coalitions – supportive alliances, both internal and external, are necessary to achieve your goals. Start right away to identify colleagues whose support is essential for your success and to figure out how to line them up on your side.
9. Keep your balance – the risks of losing perspective, becoming isolated and making bad calls are ever present during transitions; the right advice-and-counsel network is an indispensable resource.
10. Accelerate everyone – the quicker you can get your new direct reports up to speed, the more you will help your own performance.
The wrong actions
There are also specific, wrong actions to avoid. Seven traps are cited that can enmesh its victims in a vicious cycle
Bottomline
The root causes of transition failure always lie in the interaction between the new role with its opportunities and pitfalls and the strengths and vulnerabilities of the individual. Transition failures happen because new leaders either misunderstand the essential demands of the situation or lack the skill and flexibility to adapt to them.
Catherine Gorrell
President of Formac, Inc., a Dallas-based strategy consulting organization (formacplus@gmail.com) and a contributing editor of Strategy & Leadership.