Quick takes

Citation

Gorrell, C. (2005), "Quick takes", Strategy & Leadership, Vol. 33 No. 3. https://doi.org/10.1108/sl.2005.26133cae.003

Quick takes

4The networked idealist’s advantageAlex Lowy and Philip Hood

A new type of innovator is revolutionizing marketplaces around the world. Called networked idealists (NIs), they combine the rascal-like idealism of Robin Hood with the network-based business models of early Internet businesses like Priceline and Netscape. These innovators are initially non-profit entrepreneurs who develop organic, cellular, distributed network structures to accomplish their work. They use financial, transportation and communications networks in novel ways to circumvent normal barriers to market entry. With the proliferation of networks, Networked Idealism is on the rise.

Why be concerned?

No matter which course an incumbent takes, it’s crucial to have a strategy once a Robin Hood arrives on your patch of the market and defines you as evil or irrelevant. Even NIs that fail can sow chaos that benefits competitors. Firms such as Microsoft and RealAudio spent hundreds of millions of dollars trying to make a go of it in the digital audio market. But then Napster, Kazaa, Gnutella and other peer-to-peer file sharing projects threw the whole digital downloads market into chaos. Apple moved into this unstable situation with integrated software and hardware solutions, plus Hollywood connections, and grabbed more than 80 percent market share, an outcome no one could have foreseen three years earlier.

Incumbent options

The best defense against NIs is to improve your own strategic responsiveness. Even firms who score well on customer satisfaction surveys might ask themselves, “What makes my customers passionately unhappy?” Becoming aligned with the needs of your constituency at an organizational and process level makes you better able to adapt. Organizations that listen to input from inside and outside the core, and are prepared to accept the facts as they are and move on, have far more success adjusting to challenges.

An Incumbent Options matrix describes four strategies available in response to NI competition: eliminate, join, barricade, align.

NIs are a growth industry

As society shifts from an economy based on choices limited by the time and resource constraints of a manufacturing system to one based on meeting instantaneous needs, customers feel entitled to more input and control. They seek to support companies, and politicians, who reflect their ideals. They become perfect targets for NIs. Are you prepared for the next generation of NIs?

11Transformational innovation: a journey by narrativeStephen Denning

Long-term survival of a business requires a commitment to ongoing innovation that results in its becoming different, not just merely better. ‘Disruptive growth’ has been lauded in business strategy text for several years, but the implementation task is daunting: how to lead the organization through transformative metamorphosis. So leadership must use a combination of narrative tools, grounded in analysis, that can persuade people to change, work together, transfer knowledge, and create a compelling image of the future. It is by narrative that leaders persuade others to believe in, and act on, a vision.

The first key to leading a company through transformational innovation is to recognize that the narrative is not just a single story, crafted at one point in time. Transformational innovation requires leadership that continuously looks at the world so as to understand the story that is emerging, and is constantly on the lookout for the possibility of creating a new narrative that can successfully guide the organization into the future. This persistent openness to story is necessary because innovation is unlikely to appear according to some management timetable, at the strategic planning committee, in the orderly “stage gates” of innovation theory or in the confines of a scenario planning exercise. Innovation can be encountered when it is least expected. The idea that could change your organization’s future could come from a heretic, an odd duck, a prodigy, or business unit on the periphery. The role of narrative in the stages of transformational innovation will change at key pivot points.

The second key to leading transformational innovation is the integration of analysis with narrative. Narrative and analysis should be married. The leader uses narrative to explore the future and persuade others to believe in it, after analyzing the idea to see whether it will fly. Thus, there are two tests for any radically new business model: does it create new customer value and is the underlying story logical.

Interactive leadership, that combines consistent use of narrative tools, smarts and analysis, and courage and passion, offers the best way to tacking the most difficult leadership challenge facing management today.

17From breakthrough to value creation: mastering profitable discoveryRobert McKinnon, Chris Gowland and Ken Worzel

Innovation is a dominant value driver in pharmaceuticals and other high-tech industries and is becoming a more important factor in almost all industries. Increasingly, executives are looking for ways to improve innovation through closer alignment with business priorities, better resource allocation, and a stronger performance-oriented culture. But R&D innovation has proved a hard process to manage efficiently.

The first question to ask is “should a company fund development innovation (trying to satisfy customer needs with improved versions of existing products) or research innovation (seeking fundamental breakthroughs), or both? Example: If customer-facing activity is the most powerful value driver, then innovation means “development.”

A challenge with funding both discovery and development is that commercial approaches to development do not transfer to discovery – in fact, they can prove counter-productive when the goal is fundamental innovation, discovery that is powerful enough to transform the competitive landscape. One lesson the pharmaceutical industry has learned is that managers must see discovery as a unique commercialization challenge. Another is that discovery and development should be connected but not integrated.

Attempts to strengthen the links between researchers and commercial managers can backfire when the goal is fundamental innovation (versus development innovation). The trick is to be more commercially disciplined when allocating resources, but without de-motivating the discoverers. Results that lead to failure on one project may sow the seeds of success for the next. The principle of “funding strategies, not projects” is as valid in the lab as it is in the boardroom.

Three-part approach to profitable discovery:

1. 1.

   run discovery as a separate business, not as part of a business;

2. 2.

   focus on the economics of the process, not of the project; and

3. 3.

   focus on decision-making effectiveness, not functional efficiency.

Executives who fail to master the discovery challenge will weaken their market position and destroy intrinsic value, either by spending too much on the wrong projects or by spending so little on the right ones that they fail to match their industry’s appropriate innovation speed. This will require resisting the temptation to extend the models meant for development and adopting instead a system that both recognizes the specific dynamics of discovery and balances the need for creativity with the need for commercial impact.

24Leadership: experience is the best teacherRobert J. Thomas and Peter Cheese

The challenge to companies aspiring to sustained high performance is both breathtakingly simple and daunting: they must grow more leaders over a larger terrain and faster than ever before. Competitive turbulence, market turmoil, and geopolitical instability demand it. So what are the hurdles to overcome?

First: mindset shift is required

Applying the law of diminishing returns to leadership is a mistake. Leadership generates increasing returns – the more you use, the more you have. Leaders who demonstrate integrity and conviction, who strive in earnest to develop people and create a shared vision, and who unleash energy around them produce superior results. Not only that: they stimulate more leadership from the people in their orbit. In other words, effective leadership has a multiplier effect.

Second: new approach is beneficial

Advances in learning models, information technology, and leadership research strongly suggest that new approaches hold strong promise in helping companies meet the high performance challenge.

Research has shown that experience is the best teacher of leadership. Yet companies approach leadership development through formal education programs. Although the courses do help individuals become more competent technically, they do little to help them learn fundamental leadership lessons or how to extract wisdom from experience. A better approach is a methodology called “experience-based leadership development.” This approach blends formal training, e-learning, coaching, and knowledge sharing, in three major processes—preparing, developing, and preserving.

Succinct comparison

Most corporate leadership-development programs overlook the opportunity to prepare people to learn from experience. They focus on skills and tactics, and organizational rules and regulations. The experience-based approach, by contrast, links the leadership development activities an organization already has in place – classroom training, assessment centers, career development, succession planning, performance management, and the like – with real work assignments and with innovative uses of information and communication technology. Examples are presented in exhibits.

30Consumer decision process modeling: how leaders can better understand buyers’ choicesTodd Gurley, Spencer Lin and Steve Ballou

Knowing both the “why” and “why not” of customers’ buying decisions is essential if leaders are to wisely allocate resources and support actions that will have an expedient impact on growth. In this article, the authors present a new tool called the consumer decision process (CDP) modeling to address this need.

Why a new tool?

There are hundreds of elements that comprise a consumer’s purchasing decision. Knowing which element will determine whether you do or do not win the next consumer purchase is key to driving revenue growth. Traditional qualitative research does not quantify the motivation details while traditional quantitative research misses hundreds of elements that constitute the “why” in a consumer’s decision-making process. Knowledge of both is what is needed.

A new method

CDP modeling, an innovative hybrid of qualitative research and quantitative modeling can show companies “why” consumers buy, and what actions they can take to quickly increase revenue and market share. This is accomplished in five integrated phases:

1. 1.

   Phase 1. Conduct one-on-one in-depth interviews to identify elements of how consumers work through purchase decisions.

2. 2.

   Phase 2. Create consumer process maps (the hundreds of elements from each individual consumer decision interview), and then organize the elements into consumer decisions stages.

3. 3.

   Phase 3. Validate individual consumer decisions with the use of a quantitative market survey.

4. 4.

   Phase 4. Develop a quantitative model to prioritize the impact of thousands of elements on the purchase decision.

5. 5.

   Phase 5. Leverage the CDP insights, along with other consumer and business strategy information, to drive revenue opportunities.

CDP modeling aims to provide much needed answers to critical questions:

• •

  Why do we win the business of certain consumers and lose others?

• •

  Are we getting the right products in the right places for our consumers? When we aren’t, what is the impact?

• •

  Who will be the highest value consumers in the future? Are we capable of adapting to their needs?

• •

  Are our employees focused on the right value propositions for our consumers? What needs to change in the future?

• •

  How will we improve the consumer experience? Do we have the necessary operational or technology infrastructure to make these changes?

• •

  What are the turning points in consumers’ purchase decisions? Are our competitors doing a better job of managing these turning points?

Achieving the benefits of CDP requires starting with strategic issues (e.g. market share growth, competitive gaps), selecting consumer decisions that provide the best information for your issue (e.g. why consumers choose a particular channel or retailer), leveraging the technique and, finally, implementing changes based on insights discovered.

41How the balanced scorecard complements the McKinsey 7-S modelRobert S. Kaplan

One of the key questions of in-house strategists is how to compare, contrast and select the use of tools offered by various consultancy firms. The ideal is to harvest the best of their ideas. In this article two widely used strategy methodologies are compared and shown to be in alignment, thus allowing an integrated use of both.

The McKinsey 7-S model posits that organizations are successful when they achieve an integrated harmony among three “hard” “S’s” of strategy, structure, and systems, and four “soft” “S’s” of skills, staff, style, and super-ordinate goals (now referred to as shared values). This 7-S model has been used since the 1980s in practice and in business school teaching as a diagnostic and prescriptive framework for organizational alignment.

The balanced scorecard (BSC) model offers a strategy implementation approach that organizes performance objectives and measures in four perspectives: financial, customer, internal process, and learning and growth. An overview is offered in the exhibits.

Even though the two strategy implementation frameworks were developed independently from each other, the 7-S model and the balanced scorecard align remarkably well. Table II succinctly maps one to the other. The application of the BSC to diverse organizational units aligns companies’ structure to business unit and corporate strategy. The learning and growth objectives integrate staff, style, and shared values to enhance organizational skills and critical processes in the internal perspective. Thus, one can view the BSC as the contemporary manifestation of the 7-S model, helping to explain its popularity as a practical and effective tool for aligning all the organizational variables and processes that lead to successful strategy execution.

Both are proven tools for successful strategy management. When strategy and systems are tightly integrated, the odds for successful strategy implementation are raised substantially.

Catherine GorrellPresident of Formac, Inc., a Dallas-based strategy consulting organization (formac@mindspring.com) and a contributing editor of Strategy & Leadership.

These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.