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Strategy in the media
Article Type: CEO advisory From: Strategy & Leadership, Volume 42, Issue 1
Why strategic execution gets short-shrift
When it comes to executing strategy, the old saying “the devil is in the details holds true for many companies, according to Wharton emeritus management professor Lawrence G. Hrebiniak (https://mgmt.wharton.upenn.edu/profile/1329//). While executives may readily participate in the development of new strategies, execution tends to get short shrift, because it is often viewed as a lower-level task or concern, he notes. In the following interview, Hrebiniak – who just published the second edition of his book, Making Strategy Work: Leading Effective Execution and Change – explains why it is critical for firms to create a “culture of execution in order to succeed.
Knowledge@Wharton: Why do firms tend to focus much more energy on strategy and less on execution?
Lawrence G. Hrebiniak: Strategy execution takes longer, involves more people, demands the consideration and integration of many key variables or activities, and requires an effective feedback or control system to keep a needed focus on the process of execution over time. The strategic planning stage is usually more concentrated and of shorter duration than the execution stage. It often deals with interesting conceptual issues that appeal to many managers. The longer execution time horizon results in developments and changes that must be addressed over time – for example, manager turnover, competitors reactions to a companys strategy, changing economic and competitive conditions, a changing industry structure and forces, etc. – suggesting the importance and difficulty of organizational adaptation during the execution process.
Keeping managers and functional specialists involved in and committed to the execution requirements over a long time period can be difficult. Some managers simply give up or turn to other developing problems and opportunities, reducing the energy expended on implementation plans and activities … .
“Got a new strategy? Dont forget the execution part, Knowledge@Wharton, 31 July 2013, http://knowledge.wharton.upenn.edu/article.cfm?articleid=3316
The power of the pivot
In recent years, pivot has become a buzzword in Silicon Valley, California. Pivot refers to the action of adjusting quickly to market situations and new information by changing products – in many cases, changing entire business models – fundamentally. An entrepreneurs initial market target and strategy are only starting points for further development and refinement.
Companies having the flexibility, adaptability, and willingness to question existing business models is now a competitive necessity, not just a competitive advantage.
Groupon (Chicago, Illinois) started out as The Point, which provided a platform for online activism; however, a lack of success led the companys founders to offer a promotion for another business in the same building. The promising response to the promotion convinced The Points founders to focus on regional promotional services, and Groupon was born. Twitter (San Francisco, California) emerged as an idea-generation workshop at a podcasting-platform provider, and Instagram (San Francisco, California) began as Burbn, a provider of a social check-in service. Pivots happen when entrepreneurs redirect energy and resources toward a new model by adapting to customer needs uncovered by previous market approaches that were unsuccessful.
Pivoting can also occur when innovative ideas surface from an entrepreneurs intended customer base. For example, when Twitter founder Jack Dorsey found that his customers had little need for a podcast-organizing service, he discovered a way to change the concept of podcasting fundamentally to address their needs. Users wanted brief, shareable bits of information and self-expression, and that need gave birth to the idea of the tweet – a short message (no more than 140 characters) that users post on Twitters social network. For entrepreneurs with an existing innovation or idea, pivoting affords business-model flexibility. Often, pivoting simply relates to targeting a new customer base. Meraki (San Francisco, California), a provider of cloud-controlled networking solutions, pivoted from targeting consumers to targeting enterprises before Cisco (San Jose, California) acquired the company for $1.2 billion in November 2012 …
But in a business environment marked by complexity and unpredictability, pivoting is becoming a necessary adaptive strategy in many industries. Analysts now assert that businesses need to accept that cannibalizing existing product lines will become an important strategic element.
Michelle Shevin and Martin Schwirn, “Strategic flexibility by any other name, Strategic Business Insights, July 2013, http://www.strategicbusinessinsights.com/about/featured/2013/2013-07-strategic-flexibility.shtml
Consultants face disruptive innovation
After years of debate and study, in 2007 McKinsey & Company initiated a series of business model innovations that could reshape the way the global consulting firm engages with clients. One of the most intriguing of these is McKinsey Solutions, software and technology-based analytics and tools that can be embedded at a client, providing ongoing engagement outside the traditional project-based model. McKinsey Solutions marked the first time the consultancy unbundled its offerings and focused so heavily on hard knowledge assets. Indeed, although McKinsey and other consulting firms have gone through many waves of change from generalist to functional focus, from local to global structures, from tightly structured teams to spider webs of remote experts, the launch of McKinsey Solutions is dramatically different because it is not grounded in deploying human capital. Why would a firm whose primary value proposition is judgment-based and bespoke diagnoses invest in such a departure when its core business was thriving?
For starters, McKinsey Solutions might enable shorter projects that provide clearer ROI and protect revenue and market share during economic downturns. And embedding proprietary analytics at a client can help the firm stay “top of mind between projects and generate leads for future engagements. While these commercial benefits were most likely factors in McKinseys decision, we believe that the driving force is almost certainly larger: McKinsey Solutions is intended to provide a strong hedge against potential disruption …
Early signs of this pattern in the consulting industry include increasingly sophisticated competitors with nontraditional business models that are gaining acceptance. Although these upstarts are as yet nowhere near the size and influence of big-name consultancies like McKinsey, Bain, and Boston Consulting Group (BCG), the incumbents are showing vulnerability. For example, at traditional strategy-consulting firms, the share of work that is classic strategy has been steadily decreasing and is now about 20 percent, down from 60 percent to 70 percent some 30 years ago, according to Tom Rodenhauser, the managing director of advisory services at Kennedy Consulting Research & Advisory.
Big consulting is also questioning its sacred cows: we spoke to a partner at one large firm who anticipates that the percentage of projects employing value-based pricing instead of per diem billing will go from the high single digits to a third of the business within 20 years. Even McKinsey, as we have seen, is pursuing innovation with unusual speed and vigor. Though the full effects of disruption have yet to hit consulting, our observations suggest that it is just a matter of time.
Clayton M. Christensen, Dina Wang, and Derek van Bever, “Consulting on the cusp of disruption, Harvard Business Review, October 2013.
Advertisings new world
For most of the past 100 years, if a marketer said he needed a new advertising campaign, everybody knew what that meant. The machine turned on. The marketer called the agency of records account team. The account team composed a brief capturing the strategy and called in the wild and wooly creatives to bring it to life. The writers and designers applied their art to one or more of these four finite canvases: the television commercial, full-page print ad, radio ad or billboard. Maybe they would sprinkle in a few coupons. The public played along, too; with no ad blockers or DVRs, they just consumed advertising (or ignored it) en masse. It all just worked.
But it does not anymore. Now, there is no machine or even consensus on the basic definition of advertising. And that is the source of both opportunity and crisis.
Todays media landscape keeps getting more diverse – it is broadcast, cable and streaming; it is online, tablet and smartphone; it is video, rich media, social media, branded content, banners, apps, in-app advertising and interactive technology products like Sherwin-Williams Chip It. It is even physical interactive gear, like Nike+ Fuelband. Pushed an inch farther, the new Google Chromecast dongle could fit under that marketing classification, and the smart watches on the horizon will be yet another platform.
Meanwhile, what we might term the ideological landscape of advertising has become so varied it is downright contradictory, even contentious. There are those who insist advertising is and must be social – absent social connectivity a message can no longer be heard. There are those who say advertising is and must be mobile – without a connection to place, it is irrelevant to the sales process. Others say advertising is and must be a utility – it must serve a consumers needs, and not just inform. Still others say advertising is and must be liquid – it must create experiences that cross media platform barriers, or else it will barely cross consumers awareness threshold.
These perspectives are not only divergent from each other, but each also shapes a particular way of thinking – not just about communications products, but about what advertising and marketing do, how they relate to consumers, and how (if at all) they influence consumers attitudes and behaviors.
Randall Rothenberg, “The definition of advertising has never been more unclear, AdWeek, 16 September 2013.
Open competition can spur breakthrough innovations
Even the most successful companies have trouble developing breakthroughs. R&D road maps, as helpful as they can be at accelerating progress in known areas, are not particularly effective at spotting new opportunities outside a companys experience base. Resource allocation mechanisms tend to be biased in favor of innovations that reinforce existing business models. Executives obsess about tying R&D tightly to production and grounding new ideas in reality. And marketing groups often focus on the needs of current customers instead of identifying new market needs, discovering new solutions or identifying new business models. As one executive told us, “We ruthlessly weed out research that doesnt fit the existing model – those projects last only six months inside our labs. The immune system of the core business is so strong.
Traditional approaches to generating new ideas – most notably large corporate R&D labs staffed with world-class talent – are expensive and often produce disappointing results. In response, companies are searching for better ways to identify and exploit novel solutions. Increasingly, they are discovering that many of the very best ideas lie outside their organizations, in an ecosystem of potential innovators who possess wide-ranging skills and knowledge. To discover and attract these contributors, organizations are launching competitions and offering prizes … .
Consider what Netflix, the on-demand video and DVD rental company, did when it wanted to improve its method of recommending movies to customers. Instead of just investing large amounts of time and effort to revamp its algorithm, Netflix set up a $1 million prize to encourage outside teams to improve upon its own recommendation capability by 10 percent … Among the participants were graduate students from China, researchers at Bell Labs and retired management consultants. Between October 2006 and July 2009, when the winning solution was submitted, the company received more than 44,000 entries from more than 5,000 teams … . The top 90 or so entries beat the benchmark by 5 percent, and the best outperformed the benchmark by 7 percent. What is more, the entry that eventually won the competition beat the benchmark by more than 10 percent. Ultimately, Netflix received a nonexclusive license to apply the ideas embodied in the winning entry.
Alan MacCormack, Fiona Murray and Erika Wagner, “Spurring innovation through competitions, Sloan Management Review, Fall 2013.
Why Facebook is no Google
I expect that, within a few years, my Tesla electric car will drive by itself, using Google software. Yes, I am talking about the self-driving, autonomous vehicles that we have seen in science-fiction movies: Google is making these a reality. Its autonomous cars have already driven half a million miles on California roads – without a single accident – and will soon transform transportation in cities all over the world. (I am not so sure about India, however; only God can tame its drivers).
Thanks to Google Fiber, my house may one day have 1,000 gigabit internet. Googles Wi-Fi balloons, called Google Loon, could provide me with connectivity when I go hiking in the mountains. I expect that a successor to Google Glass will replace my laptop, iPad, and TV; incorporate voice recognition and gestures; and provide me with an immersive 3D-viewing experience.
Google already reads my e-mails before I do, and, by analyzing what I search for on the internet and which Web sites I visit, knows what I am thinking. It “knows what other people think about me. If my friend and noted futurist Ray Kurzweil succeeds in his mission at Google, it will understand my wants and needs too. It will predict what I want to search for, where I want to go to, and what I want to eat. It will understand how my brain thinks and become my personal assistant.
Yes, these are technologies that Google will likely deliver during this decade. It is doing the type of research that Xerox PARC was famous for. It is thinking even bigger than Apple.
Contrast this with what we can expect from Facebook: more ads, more annoying sponsored posts, more intrusions of privacy. Maybe Facebook will continue to jazz up its timeline and improve its search capabilities. It will, for sure, buy or copy more hot products such as Instagram, Pinterest, and Foursquare. But it will not develop any earth-shattering technologies, because it does not do Google-style “moonshots – it just does not have the culture and DNA. It is still the social network that the kid in the dormroom built.
Vivek Wadhwa “Facebook is doomed, Economic Times (India), 17 September 2013, http://economictimes.indiatimes.com/tech/internet/why-google-will-be-the-facebook-of-the-future/articleshow/22637929.cms
The threat and promise of smart (green) mobs
As the business world becomes increasingly aware of its social responsibilities, stakeholder trust is essential to staying competitive. Now more than ever, organizations face government, shareholder and consumer pressures to offer innovative, responsibly made products and services. Failing to do so can be destructive.
Globalization and the advent of the internet have enabled transnational companies to maintain relationships with stakeholders and expanding supply chains all over the world. But it is not just businesses that are tapping into knowledge sharing. Individual and civil society groups, community action groups, social entrepreneurs, lobbyists, activists and any number of the worlds 50,000 NGOs are forming coalitions, better known as “smart mobs – groups on the fringe that are highly connected and eager to keep government and corporate giants honest.
These fringe organizations – farmers, consumer groups and NGOs – brought down Monsantos multi-billion dollar agricultural biotechnology empire with public outcries of human health impacts and concerns about impoverished farmers rights. How did such a powerful and thriving company with a highly innovative business model come to fall so hard? This is the power the smart mobs have.
Fear them not; they may be an invaluable resource.
Smart mobs not only possess custom skill sets and unique insight that businesses can learn from, they also have well thought-out concerns about and opinions on important systemic issues. Reaching out to bridge new communities of stakeholders and finding creative ways to voice those concerns and share ideas can confer competitive advantage, leading to meaningful, long-lasting organizational change.
Firms can engage fringe stakeholders by extending search activities into unfamiliar fields. Metaphors such as “using peripheral vision or “searching for weak signals emphasize that such searching extends beyond conventional market intelligence and activities. In other words, relying solely on known or powerful stakeholders concerning existing businesses detracts from organizational transformation and creates tunnel vision. Weak signals, which are precursors to significant trends and change mechanisms, emanate from diverse sources, including the activist groups, social entrepreneurs and NGOs … .
What Unilever and Monsanto learned about engaging smart mobs.
Lauren Turner, “What Unilever and Monsanto learned about engaging smart mobs, Green Biz blog, 17 September 2013, http://www.greenbiz.com/blog/2013/09/17/what-unilever-and-monsanto-learned-about-engaging-smart-mobs
Why brainstorming fails
Brainstorming is great fun, good for team building and a self-esteem builder. However, it does fail in one rather important way. It is not very good at providing you with creative ideas. It is even worse if you want a highly creative idea to implement … .
Criticism enhances creativity
The fundamental rule of brainstorming, of course, is that there is to be no criticism of ideas … . This assumption sounds really good. But it is also flawed. Some researchers at University of California, Berkeley set up some brainstorming teams in three sets. One set was given no instructions. The second set was given traditional brainstorming instructions and specifically told not to criticize ideas during idea generation. The third set was given brainstorming instructions with difference. This set was specifically encouraged to criticize ideas during the idea generation phase. Most of the teams in the set given traditional brainstorming instructions moderately outperformed the teams in the set given no instructions. But the teams specifically told to criticize ideas came up with the best results by far!
… Frankly, I am not surprised by the results. When I think about my artistic collaborations, the idea generation process was never like traditional brainstorming. It was an argumentative debated. Ideas were criticized, discussed in detail and thrown away if they were not good enough. Seemingly silly ideas, once defended became core ideas to the project.
I have also discussed this with scientists working on cutting-edge research. Their response has been the same. When collaborating on creative projects, criticism, debate and discussion is the norm.
Jeffrey Baumgartner, “Brainstorming is not very creative, Innovation Excellence, 20 September 2013, http://www.innovationexcellence.com/blog/2013/09/20/brainstorming-is-not-very-creative/
Second thoughts about shareholder value
In the recent history of management ideas, few have had a more profound – or pernicious – effect than the one that says corporations should be run in a manner that “maximizes shareholder value.
Indeed, you could argue that much of what Americans perceive to be wrong with the economy these days – the slow growth and rising inequality; the recurring scandals; the wild swings from boom to bust; the inadequate investment in R&D, worker training and public goods – has its roots in this ideology.
The funny thing is that this supposed imperative to “maximize a companys share price has no foundation in history or in law. Nor is there any empirical evidence that it makes the economy or the society better off. What began in the 1970s and 1980s as a useful corrective to self-satisfied managerial mediocrity has become a corrupting, self-interested dogma peddled by finance professors, money managers and over-compensated corporate executives.
The earliest American corporations were generally chartered for public purposes, such as building canals or transit systems, and well into the 1960s were widely viewed as owing something in return to a society that provided them with legal protections and an economic ecosystem in which to grow and thrive. In 1953, carmaker Charlie Wilson famously spoke for a generation of chief executives about the link between business and the larger society when he told a Senate committee that “what is good for the country is good for General Motors, and vice versa.
There are no statutes that put the shareholder at the top of the corporate priority list. In most states, corporations can be formed for any lawful purpose. Cornell University law professor Lynn Stout has been looking for years for a corporate charter that even mentions maximizing profits or share price. She has not found one.
Nor does the law require, as many believe, that executives and directors owe a special fiduciary duty to shareholders. The fiduciary duty, in fact, is owed simply to the corporation, which is owned by no one, just as you and I are owned by no one – we are all “persons in the eyes of the law. Shareholders, however, have a contractual claim to the “residual value of the corporation once all its other obligations have been satisfied – and even then directors are given wide latitude to make whatever use of that residual value they choose, as long they are not stealing it for themselves.
It is true that only shareholders have the power to select a corporations directors. But it requires the peculiar imagination of a corporate lawyer to leap from that to a broad mandate that those directors have a duty to put the interests of shareholders above all others.
Steven Pearlstein, “How the cult of shareholder value wrecked American business, Washington Post, 9 September 2013.
Capitalism 2.0 and the European model
One facet of the European system is the Central-European economic model of “hidden champions. Hermann Simon, a German management thinker, coined the term. He recognized the fact that the German speaking part of Europe has an unusually large share of companies that are world market leaders in a specific market niche. Although the success story for each of these “hidden champions is very different, they do have two factors in common.
Firstly, hidden champions “create the customer, as Peter Drucker would have said. They focus on solutions for specific problems of specific customers, worldwide. Therewith they have created new and highly innovative products and services. Secondly, hidden champions pursuit system-oriented management approaches. They work with clear values, goals and strategies and with open communication. Often, they base their activities on self-organized units or teams. This allows effective customer feedback, iterative and network-based approaches, and highly sophisticated forms of organization.
Hidden champions – Europes contribution to globalization
The (Central) European customer-oriented model of hidden champions leads the way to a qualitatively greater degree of governance in economic processes because it has its entry point at company level (as opposed to state capitalism) with “customer value as the main driver (as opposed to shareholder value capitalism). An economy built on hidden champions automatically builds on strong self-organization. As “customer value is the main driver for a company, customer feedback drives innovation and development. And as customer orientation remains in the focus of economic activities, the management of a greater degree of complexity and long-term-oriented societal value creation is enabled.
Hans Stoisser, “Hidden Champions-Europes hidden contribution to the globalized world, The Drucker Forum, 10 September 2013, http://www.druckerforum.org/blog/?p=525
Can Jeff Bezos Amazon the news business?
The conventional wisdom about the impact of digitization upon content businesses is that the music business is the model. Digitization makes illegal copying easier; revenues from digital advertising is lower than traditional advertising. Newspapers have had difficulty replacing both subscription revenue and advertising in a world where customers have become accustomed to getting their news for free.
But there is another interpretation. In digital businesses, the impact of scale is dramatic. After you have covered your fixed costs, the incremental profitability of an additional customer is high, verging upon 100 percent.
The reason scale is important is that traditionally newspaper brands, particularly in the US, have tended to be regional. But there is no intrinsic reason why newspaper should not be national in a world unconstrained by the need to deliver physical papers. We already have examples of national newspaper brands, the Wall Street Journal, the New York Times, and USA Today are the three leading examples of newspapers with national audiences. These newspaper superbrands, to which we can anticipate that the Washington Post will be added, represent a reordering of an industry. Old assumptions about scale and business models go out the window in a world of national newspaper brands vs local newspapers.
As evidence of this, consider the following. The NY Times divested itself of the Boston Globe. Boston can be serviced with NY Times content plus some regionalization. The NY Times, the Wall Street Journal and the Washington Post all now have firewalls. Only Gannetts USA Today lacks a firewall, perhaps because it has a different demographic and a head start as a national paper. The Economist, admittedly a weekly newspaper, represents another example of the value of a national or international brand as does the Financial Times of London.
Most commentators about the acquisition have tended to focus upon the opportunities for synergy with Amazon and Kindle devices. There may well be opportunities but these opportunities will require a national newspaper with a wide range of content as a device for attracting the attention of Amazon buyers. It is a scale game. You cannot create great content without high quality, diverse and local editorial content.
You can think of a consumers attention as being equivalent to the shelf space in a supermarket. Owning one of the major national newspaper brands will likely prove a cost effective way of reaching customers and giving them more reasons to make Amazon a central part of their life.
The predictions from this conclusion are straightforward – a change in the scope of competition and dramatic competitive pressures on smaller newspapers. If you run a smaller newspaper, it is time to rethink your strategy and operating model.
Alistair Davidson, “Jeff Bezos and The Washington Post, 20 August 2013, http://alistairdavidson.blogspot.com/2013/08/jeff-bezos-and-washington-post.html
Why do some breakthrough ideas catch on slowly?
In the 1860s, the Edinburgh surgeon Joseph Lister read a paper by Louis Pasteur laying out his evidence that spoiling and fermentation were the consequence of microorganisms. Lister became convinced that the same process accounted for wound sepsis …
During the next few years, he perfected ways to use carbolic acid for cleansing hands and wounds and destroying any germs that might enter the operating field. The result was strikingly lower rates of sepsis and death. You would have thought that, when he published his observations in a groundbreaking series of reports in The Lancet, in 1867, his antiseptic method would have spread as rapidly as anesthesia.
Far from it … . It was a generation before Listers recommendations became routine and the next steps were taken toward the modern standard of asepsis – that is, entirely excluding germs from the surgical field, using heat-sterilized instruments and surgical teams clad in sterile gowns and gloves.
In our era of electronic communications, we have come to expect that important innovations will spread quickly. Plenty do: think of in-vitro fertilization, genomics, and communications technologies themselves. But there is an equally long list of vital innovations that have failed to catch on. The puzzle is why … .
This has been the pattern of many important but stalled ideas. They attack problems that are big but, to most people, invisible; and making them work can be tedious, if not outright painful. The global destruction wrought by a warming climate, the health damage from our over-sugared modern diet, the economic and social disaster of our trillion dollars in unpaid student debt – these things worsen imperceptibly every day. Meanwhile, the carbolic-acid remedies to them, all requiring individual sacrifice of one kind or another, struggle to get anywhere.
Atul Gawande, “Slow ideas, The New Yorker, 29 July 2013.
Strategy & Leaderships intrepid media explorer, collected these examples of novel strategic management concepts and practices and impending environmental discontinuity from various news media. A marketing and strategy consultant based in Carlisle, Pennsylvania, he welcomes your contributions and suggestions (Craighenry@aol.com).