Quick takes

Citation

Gorrell, C. (2010), "Quick takes", Strategy & Leadership, Vol. 38 No. 1. https://doi.org/10.1108/sl.2010.26138aae.001

Quick takes

Article Type: Quick takes From: Strategy & Leadership, Volume 38, Issue 1

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

Scenario planning for economic recovery: short-term decision making in a recessionPatrick B. Marren and Peter J. Kennedy Jr

Last year’s near-collapse of the global financial system and the ensuing economic trauma have corporate leaders looking for alternative methods of dealing with future uncertainty. CEOs are suddenly painfully aware that spreadsheet models that offer a detailed single vision of the future are almost certain to be wrong in many critical respects, so corporate leaders are casting about for alternative methods of managing future uncertainty that actually help a business prepare for a number of alternative possibilities.

One of these tools is scenario planning, which when done correctly, involves the anticipation of plausible future events that might happen, and which would have significant effects upon an organization.

A properly designed set of alternative scenarios is based upon a handful of large-scale external variables that determine survival or oblivion, success or failure, for the context in question. If future survival and success depend upon some large-scale, uncontrollable external quantity or condition, then no matter how unchangeable that condition may seem, scenarios should seek to vary it.

Once scenarios are laid out, defining the strategies that work (or are at least innocuous) across all of the scenarios are those that the organization ought to pursue; other strategies that may be absolutely necessary in one or more worlds, but poison in others, are set aside as contingent strategies, to be pursued only as events demand.

Short-term scenariosUsually, scenario planning is used to develop comprehensive, high-level, long-term strategy. But scenario planning can also be used to make more tactical-level decisions. Customizable platform scenarios have been shown to be extremely effective, at a far more affordable cost in both time and money. Four platforms are offered, using as their key drivers growth, price and inflation, regulations, and global affairs.

ConclusionThe mindset that created the current financial and economic crisis was one of excessive reliance upon deceptively “precise” mathematical modeling. Only inductive imagination can get us out of this mess, and scenarios are simply tools to assist the imagination to come up with alternative ways of looking at the problem. It’s precisely now, when management is bogged down in “the tyranny of the present”, that scenario planning is especially crucial.

Five tools to prepare for future discontinuitiesJim Singer and Jeff Piluso

A seemingly simple business idea may ultimately disrupt the way a whole business sector operates. It may come from any direction. What will tomorrow’s game-changing discontinuities be? They could be technologies that disrupt an industry or political events that alter the business environment. The important question is not what the exact parameters of the future will be, but knowing how you might react to various futures. Developing a discontinuous mindset can help you move from “thinking that constrains” to “thinking that liberates”. So when the first hints of the next discontinuity appear, you’ll be ready.

The problem for modern day discontinuity-watchers is that almost all the forecasting that businesses perform today involves some permutation of “the continuity theme”: extrapolating the past over time will show us the future. Managers spend a great deal of time mapping out trends that, while important, typically have merely incremental impacts on businesses. By contrast, most companies pay precious little attention to events that may be less likely to happen – but would have far bigger impact if they did.

There is a need to rebalance the perspectives on potential future events to make certain that, given a discontinuity, they can benefit rather than suffer in surprise. Operating with this discontinuous mindset need not require a dramatic increase in resources. What it requires is some altered thought processes and five simple management tools for achieving a discontinuous mindset:

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  Tool #1 An open mind – encouraging open mindedness through learning and unlearning ideas to take advantage of the new developments, for example the value of physical stores versus online stores.

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  Tool #2 Innovative planning techniques – these include scenario planning, diversity planning, culture-based planning, longer term (25 years) planning, and/or reverse-engineering the future.

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  Tool #3 Alternative sources of input – discontinuities are by their very nature unexpected and so, to prepare for them, you need to get away from the conventional wisdom sources and seek a slightly different “take” on events.

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  Tool #4 Creative-ideation processes –a discontinuous mindset celebrates unconventional thinking. To be truly successful a creative ideation process should be careful not to automatically eliminate “outliers,” people or groups with unusual ideas. The organization could consider running an “unconventional thinker audit” to search them out.

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  Tool #5 Customized rewards and incentives –to encourage a discontinuous mindset, companies must have a reward structure that does not eliminate unconventional thinkers.

The smarter supply chain of the futureKaren Butner

It’s no longer enough to build supply chains that are efficient, demand-driven, or even transparent. They must also be smart. Here are the five key findings of the state of supply-chain management today:

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  Cost containment – Rapid, constant change is continually challenging supply-chain executives’ ability to adapt.

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  Visibility – Flooded with more information than ever, supply-chain executives still struggle to see and act on the right information.

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  Risk – Risk-management ranks remarkably high on the supply-chain agenda.

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  Customer intimacy – Despite recognizing the need to be demand-driven, companies continue to be better connected to their suppliers than their customers.

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  Globalization – Counter intuitively, globalization has proven to be more about revenue growth than about cost savings.

These findings evidence that supply chains – and the executives charged with managing them – are under severe pressure. Hence, to deal effectively with risk and meet business objectives, supply chains must evolve.

The digital and physical infrastructures of our world are converging. Thanks to falling prices and rising reliability of sensor technologies, practically any activity or process can now be measured. Entire systems can be connected – not just supply chains with other supply chains, but also with transportation systems, financial markets, electric-power grids, and even natural systems like rivers and weather patterns.

Every insight derived from more accurate measurements can lead to action – and more value. With so much embedded intelligence, supply-chain management can progress from supporting decisions to delegating them and, ultimately, to predicting which ones need to be made.

As the world begins to work differently, we see a different kind of supply chain emerging – a smarter supply chain with three core characteristics:

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  Instrumented.

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  Interconnected.

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  Intelligent.

In addition, smarter supply chains design must be inherently flexible. Simulations would allow supply-chain managers to see the cost, service level, time, and quality impacts of the alternatives being considered. They must have visibility. And – because risk comes in many forms – there must be contingency plans that recognize risk as a systemic issue.

How to explore for innovation on your organization’s strategic frontierJ. Douglas Bate

Unhappy with the financial return on investment of your company’s innovation efforts? If yes, then join the majority of corporate executives surveyed on this topic. Their reasons included long development times, risk averse corporate culture, difficulty choosing the right products, and lack of coordination within the company.

The problem and solutionAt the root of this problem is that there is no alignment on the goals of the innovation programs. When great business ideas for the future are presented to an organization that is focused on the present, a mismatch regularly occurs.

The solution, therefore, requires an agreement among the senior leaders and the innovation team on the suitable innovation focus. This defined area is known as the “strategic frontier” for the corporation. It is an area of potential growth that is within the strategic scope that senior executives have identified for the business. The scope of a strategic frontier results from assessing the company’s tolerance for risk, its willingness to make resource commitments, and the company’s strategic intent for the innovation results to be incremental or breakthrough.

How to define the “strategic intent”The “strategic intent” lays out a future direction for the company, one that inspires and engages employees by appealing to their hearts, not their heads. There are two components defining the company’s strategic intent. The first is the company’s passionate core. When distilled to a few words, a company’s passionate core is the organization values, what it finds most important, and the motivation for employees to go the extra mile. It can be found in the stories that people tell about the company.

The second component is a consideration of the most important future changes that are likely to affect how your organization conducts its business in the next five years.

Identifying a firm’s strategic intent involves looking at the intersection of these two components – the passionate core and major coming market and business practice changes. It is a creative process, not an analytical one. Example stimulative questions are: what could happen when the passionate core meets the future? How might business be different?

Important distinctionThe mingling of the passionate core with future change is a crucial creative endeavor. In many corporations there is a tendency to just “add on” the capability of your future change to the capability of your passionate core, so you get “core + future.” But that is not innovation. Innovation happens when you consider what it means to be “core/future.” It requires the redefining of your core so that it is better adapted to the changing future.

The sharing imperativeBala Chakravarthy

The notion that corporations grow and prosper by leveraging their core competencies is a well-accepted idea. However, a company’s distinct competencies are often dispersed in its many divisions and business units. In order for the firm to effectively leverage these competencies, they have to be freely available to all divisions and business units. But this is not always the case. Instead, the multidivisional structure of the organization often creates organizational silos in which knowledge and competencies are trapped or “imprisoned.”

There are many contributing factors that act to inhibit the business units pooling their resources. More specifically, to fight the growing insularity of the firm’s businesses and promote better sharing among them four trends must be reversed.

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   The creation of centralized global organizations has extended the organizational distance between parallel business units. It is very easy for employees to become isolated from the broader picture. Unit accountability is important, but it has to be complemented by a teamwork that keeps the interests of the enterprise paramount.

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   Sharing between two business units is improved if at least one of them has a boundary spanner who acts as the bridge. The trust they enjoy personally with managers in both units helps compensate for the lack of trust that might exist between the units themselves. This is defeated if HR systems kill job rotation and expat assignments in the name of cost savings.

3. 3.

   The drive to meet performance targets is so intense that business managers seldom look beyond their own silos. There are often too many ‘vertical’ scorecards that measure and reward performance on the basis of an isolated margin-profit concept. The setting of scorecards without sufficient cross-business understanding has led to behavioral drivers contrary to win-win solutions despite the best intent and attempts of individuals.

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   Nurturing the informal organization is very important for sharing. Too often, in the rush to save costs, valuable networks—created by contacts at the company cafeteria, picnics and social events– are being compromised, reducing the organizations to all work and no play.

Curative actionsTo further healthy cross business sharing, senior executives should:

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  Reinforce the company’s shared purpose and values. These are the glues that promote “enterprise first” behaviors.

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  Nurture boundary spanners. These are the catalysts who can encourage cross business cooperation

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  Provide scorecards that are more balanced towards horizontal contributions and not just on vertical contributions within a business or region.

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  Support the informal organization by retaining sufficient slack in the system for interactions – social get-togethers, for example – that are not strictly task related.

Seven lessons for building a winning brand in ChinaPaul F. Nunes, Susan A. Piotroski, Lay Lim Teo and R. Michael Matheis

What do China’s consumers want today? Data about Chinese consumers’ expectations translate into seven core lessons for marketers. Three of the lessons offer ways to shape brand image and four suggest how to best communicate the brand message.

Shaping the messageLesson 1. Seek to build trust. Chinese consumers rated trustworthiness the single most important factor in choosing a brand. Trustworthiness can be injected into marketing messages in myriad ways, including references to the long life of the company or product, where appropriate, and through the testimonials of trusted sources.

Lesson 2. Connect to what Chinese consumers value in a brand. Brand messaging needs to convince Chinese consumers that the brand matches their personal needs. There are six consumer segments, which have particular differences in their set of brand values.

Lesson 3. Show you care about the Chinese, not just their money. Marketing should convey the message that the company behind the brand cares about the Chinese people

Delivering the messageLesson 4. Broaden your advertising mix. The Chinese show an extraordinary curiosity about the new world of consumer choice that’s enveloped them. China ranks first in the use of five of nine kinds of media and also near the top in using websites. That means marketing and advertising executives have their pick of ways to boost brand familiarity.

Lesson 5. Turn product reviews into PR opportunities. One of the most effective ways to build a reputation for dependability and quality doesn’t have to cost a single yuan: a positive product review.

Lesson 6. Provide Chinese consumers with something good to say about your brand. The study found 67 percent of Chinese consumers learn about brands through friends and coworkers, more than any other source.

Lesson 7. Make the brand tangible. It’s vital to place products in front of Chinese consumers so they can see, try and buy them. In a market where word of mouth is so important, inducing trial is not just a way to make a sale, but also a way to turn a consumer into a salesperson.

Going forwardAlthough most Chinese consumers favor domestic brands, it’s not too late for new or even struggling foreign brands to succeed in China – provided they build their brand around quality, dependability and trustworthiness. But building a brand’s standing for trustworthiness, reliability and quality takes time and the opportunity cost of delay is enormous. So foreign firms need to get started practicing these seven lessons about shaping and communicating brand image.

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