Quick takes

Citation

Gorrell, C. (2006), "Quick takes", Strategy & Leadership, Vol. 34 No. 3. https://doi.org/10.1108/sl.2006.26134cae.002

Quick takes

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

The troubled strategic-business-advice industry: why it’s failing decision makersStan Abraham and Robert J. Allio

There’s rising consumer dissatisfaction with much of the “strategic-business-advice industry” – the institutions and thinkers that publish the business journals, do corporate consulting, edit the business books, teach the MBAs, perform the business research, and write the journal articles relating to strategy. Astute critics charge that the purveyors of business advice don’t deliver what the consumers of business advice really need.

The general business model for the strategic-business-advice industry is flawed

The learning cycle should be achingly simple: business research gets done, communicated, disseminated, read, and used; from greater use comes greater learning, and the cycle begins again. But as with any ideal social system – for that’s what this is, really –its manifestation in the real world is dramatically different and frequently dysfunctional:

• •

  Companies and organizations do not effectively communicate their needs to those producing original advice and research or they are “sold” services they don’t need.

• •

  Academic researchers, seeking professional advancement, put methodological rigor and peer approval ahead of creating value for business leaders and organizations.

• •

  B-schools reward research that peer reviewers assert is scientifically rigorous and that other specialists often cite –without measuring its usefulness to managers or organizations.

• •

  Academic research is usually communicated exclusively to its own constituency – instead of to the world of business. And the results often take years to evolve from draft to publication. Their peer group does not reward academics who publish in practitioner-oriented journals.

• •

  The consultants pitch is, “hire us, we have the skills and unique tools to solve your problem.” But their corporate clients plead, “teach us what we need to do and help us develop the skills so we can solve our own problems.”

Some specific recommendations for each of the constituents in the system:

1. 1.

   Business schools:

2. 2.
   • •

     Collaborate with corporations to identify critical issues and priorities as a guide for faculty research.

   • •

     Reward faculty who publish applied research, write articles for practitioner journals, and write articles that make theoretical findings or breakthroughs understandable to corporate readers.

3. 3.

   Consultants:

4. 4.
   • •

     Become more client-centered and less sales-oriented, focusing on what the client really needs and how that differs from what the consultant has to sell.

   • •

     Create more value by transferring process skills to clients.

   • •

     Share more responsibility for implementation, creating value with their clients.

   • •

     Invest in research that addresses critical business issues.

5. 5.

   Corporations:

6. 6.
   • •

     Collaborate actively with business schools in the design of curricula and the establishment of research priorities.

   • •

     Link consultants’ compensation to results.

7. 7.

   Journal publishers:

8. 8.
   • •

     Accelerate the review process; slash the cycle time and get their information out quickly.

   • •

     Focus on content that is useful to practitioners and decision-makers rather than just other researchers.

   • •

     Promote online forums for dialog on important management issues.

Managing webmavens: relationships with sophisticated customers via the Internet can transform marketing and speed innovationAlistair Davidson and Jonathan Copulsky

Empowered by the Internet, a new player has emerged to significantly influence the buying behavior of customers – the webmaven. This is a person or collection of people/users who are experts about an area or product category, and can be relied upon for advice for the latest and greatest information. Examples are computer and digital camera experts. The consuming public is turning to webmavens to solve their problem of rapid technological changes and product proliferation, which has made buying the best value exceedingly complex.

Webmavens have created specialized web sites, blogs, and newsletters. They range from web sites that collect user ratings, offer in-depth reviews, or track the amount of interest in particular products/services to blogs of users’ ideas for product/service improvements. These specialized web information sources can be found extremely easily via search engines. The existence of so many third party evaluations of products and services is a dramatic change for both consumers and marketers. Consequently, many markets today are experiencing the Webmaven Effects:

1. 1.

   Information about individual customer’s actual experience with a product or service is now generally available on a real (or near-real) time basis and is directly or indirectly a significant influence on other consumers’ purchase and referral decisions.

2. 2.

   Companies that use real time information from webmavens to speed up their product/service quality improvements are likely to gain market share and create greater customer loyalty.

3. 3.

   The availability of free webmaven reviews and ratings increases the usage of these infomediaries by consumers.

Implications and opportunities

For marketers and product managers, the rise of webmavens is an issue that must be addressed:

• •

  Lesson: Informed customers are valuable ones. Heavy users of search engines, tend to be more sophisticated and have higher incomes. This valuable consumer group is keenly influenced by webmavens.

• •

  Lesson: It is critical to understand who are these new influencers of attitudes, reputations, and purchase patterns, and to provide improved information and better product access to the key mavens.

• •

  Lesson: The quality of products/services and measurement of customers’ usage experience will become even more important than it is today. Gradual changes in the market place have created a tipping point where new brands, offering different quality and value propositions can suddenly become successful, if they are heralded by endorsements from webmavens.

• •

  Lesson: Companies need to take action to inventory, review, prioritize, and measure their allocation of resources, messaging, and accessibility to the newer sources of influence of “infomediaries.”

The pricing opportunity: discovering what customers actually valueKrishnakumar “KK” Davey, Paul Markowitz, and Nagi Jonnalagadda

At root, pricing is about capturing value. Yet most pricing mechanisms today focus primarily on information and process – sales force discounts, win-loss analyses, and so on – rather than on what customers’ value most. A sharp focus on customers’ perspectives is the biggest lever for profitable pricing, and the tools and techniques such as discrete choice modeling are the best way to assess value.

Best-practice companies are already moving in those directions. They can point with growing certainty to the levers and organization designs that can best support a sharp focus on the customer. In effect, pricing approaches are one of the last links in the value chain. The product or service has been designed, sourced, staffed and created; many capable teams have already worked hard to build value into the product from the start. Now it is the turn of those who control the pricing levers to do their best work.

First step: change in perspective. Pricing is the sick man of sales and marketing. That’s not how most business leaders see it, but it’s how it should be viewed. The fundamental flaw in the pricing approach taken by most companies is that what marketers think their customers’ value most is often different from what the customers really do value. Using price optimization software alone does not solve this. The core questions about what customers value above all – what they will actually pay for as opposed to what they say they’ll pay for – are answered with rigorous econometric techniques collectively called discrete choice modeling.

Second step: employ discrete choice modeling. This article offers a primer on this. Econometric techniques transcend less precise and less useful methods such as market research that capture only consumers’ stated interests. Econometrics help bring concrete answers to executives who want to be able to tell investors that the product will indeed be chosen with a predictable frequency by customers.

There are opportunities for fact-based modeling techniques to improve five areas of pricing strategy:

1. 1.

   Price cuts strategy. Price is often not the driver that instinct or history or a manager’s whim might indicate it is. Learn what customers really care about.

2. 2.

   Product portfolios strategy. Ensuring profits without cannibalization is doable.

3. 3.

   New product introduction. Price it correctly from the start.

4. 4.

   Market segmentation. Match the price to the customer set.

5. 5.

   Package pricing. Making the most of add-ons.

Creating strategic advantage with dynamic scenariosAudrey Schriefer and Michael Sales

The Dynamic Scenario Learning Process™ (DSLP) is a tool executives can use to take a structured approach to analyzing the emerging trends that weave the future. This approach surfaces explicit and implicit assumptions, unconsidered myths, and unexplored possibilities. Its end product is sets of usable narratives that guide business decision-making regardless of how the future unfolds.

This article outlines the structure of the DSLP and then applies it to a composite case in the financial services industry. The authors demonstrate how dynamic scenarios yield insights that may be counterintuitive but position the companies to take advantage of trends and uncertainties that competitors may be missing.

The Dynamic Scenario Learning Process (DSLP) consists of four interrelated phases:

1. 1.

   Analysis – Examining the organizational context to identify and articulate a decision issue around which DSLP will be focused.

2. 2.

   Scenarios – Gathering and assessing data, which are rigorously debated and crafted into scenarios. We do this by identifying critical uncertainties, defining relevant trends over time and then examining the causal relationships between these key variables.

3. 3.

   Dynamic Scenario Generator – Integrating causal relationships into a Dynamic Scenario Generator (DSG). Using the DSG to identify key leverage points and generate scenario logics for plausibility and consistency. Applying the DSG in the Strategy phase to understand clearly the dynamic impact of proposed actions by the company and its competitors.

4. 4.

   Strategies – Articulating and testing possible strategic actions within the context of the scenarios having the greatest potential for shaping a desired future and robustness in a wide range of future conditions.

A composite case study of several actual financial services industry projects illustrates how the Dynamic Scenario Learning Process works in practice.

Futuring and visioning: complementary approaches to strategic decision-makingStephen M. Millett

Though a critical role of leadership is to provide a vision for operations in long term, relatively few executives have experience identifying still emerging market opportunities and threats and aligning them with internal capabilities, a best practice referred to as futuring. The purpose of this article is to clarify the difference between futuring and visioning and to suggest how they may be better implemented as complementary approaches to strategic decision-making.

Futuring

Futuring – future-oriented leadership – is a systematic process of thinking about the future in order to frame reasonable expectations, to identify emerging opportunities and threats to the company or organization, and to anticipate actions that will promote desired outcomes.

One important application of futuring is the identification of the emerging but unarticulated voice of the customer and an emerging customer value zone. A company may identify the trends and develop products to fit the value zone in anticipation of future customer demand ahead of the competition.

Visioning

Visioning is more than a vision statement. It is a process of assessing how fit the company may be to grow and compete in the future. Visioning should be participatory, because the people involved in the process of developing it must be committed to its implementation. Leadership requires a vision of the future that inspires followers.

A very important benefit that leadership provides is managing the alignment of the enterprise (or organization or government entity) with the external environment. The leader must manage continuous change, but in an orderly, effective, and profitable way. The leader manages change by continuously adjusting corporate culture, assets, competencies, and operations to keep in alignment with the external world.

Methods and tools of futuring and visioning

Much of the confusion that occurs between futuring and visioning stems from the fact that both approaches use many of the same methods and tools. These methods and tools fall into three major categories: trend analysis, expert judgment, and alternative futures.

Guidance for leadership

The four following points provide guidance for leadership in futuring and visioning:

1. 1.

   Recognize the difference between futuring and visioning, and do both in a complementary way. Encourage, if not require, people to think about the future of both customers and products. Set up a futuring unit to prepare trend monitoring and scanning, trend analysis, build forecasting models, and prepare narrations on the future of the external business environment for the entire company. The manager of the futuring unit should report directly to senior leadership.

2. 2.

   Set up a program whereby employees have opportunities to participate in visioning exercises, especially when the topic question involves visioning at their own operational levels Use the products of futuring as a frame of reference for visioning exercises.

3. 3.

   Develop a vision for the company based upon wide participation and using both futuring and visioning. Consistently articulate the vision for both external and internal audiences. This vision may provide as much motivation for customers and business partners as it does for employees.

4. 4.

   Continuously re-enforce the importance of futuring and visioning by requiring that periodic presentations on business strategies and investment include components that address external emerging environments and internal visioning. Be a thought leader by developing a well-articulated point of view about the future. Be prepared to support your point of view with information and solid logic, and encourage others with different points of view to similarly defend their expectations for the future.

Banking 2015: a classic strategy battle – scale vs focusKimberly Hedley, John White, Cormac Petit dit de la Roche, and Sunny Banerjea

Through market research and interviews with industry executives, the IBM Institute for Business Value identified a number of significant industry trends that will impact the retail banking industry by 2015.

The two mega trends – increasingly powerful customers and intensifying competition – stand out as the most significant forces that will drive industry change over the next decade. In a nutshell, the industry is confronted with a classic strategic issue; banks must choose between the relative merits of scale and focus or face the danger of doing neither.

Three other important trends – changes in managing human capital, regulations and technologies – will strongly contribute to and reinforce the effects of intensifying competition and customer empowerment on banks’ strategic choices.

Innovation is the path to success, but particular attention should be paid to these five key areas to fuel enormous growth for the retail banking industry: retail payments, mortgage loans, account and product integration, global expansion and the customer experience.

And to optimize the results of innovation initiatives, banks will need to focus upon four strategies to position themselves for sustainable growth:

1. 1.

   Focus on core strengths and partner for everything else. Leading banks will optimize their performance by becoming specialized enterprises, managing only strategic, differentiating business components internally and partnering with best-in-class specialists for those capabilities that do not drive competitive advantage.

2. 2.

   Optimize the potential of each customer relationship. Rather than attempting to be all things to all people, industry leaders will use superior customer insights to offer the most appropriate and profitable products, tools and services to targeted segments.

3. 3.

   Harness the potential of the workforce through effective performance management. Banks will need to realign skills and set the right performance metrics to motivate a changing workforce to continuously pursue innovation.

4. 4.

   Recognize that technology will be a critical element of success. By making technology a central component of the strategic decision making process, banks will be able to tightly align their business and technology initiatives, and will be able to differentiate their offerings and seize market opportunities with greater agility.

Catherine GorrellPresident of Formac, Inc. a Dallas-based strategy consulting organization (mcgorrell@sbcglobal.net) and a contributing editor of Strategy & Leadership.