Business Strategy Navigation 2009
June 25, 2009
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Let us Consider:
Our corporate strategy research has determined that firms that lack acceptable profitable growth are driven by one or more of these five issues:
1.Lack of Profitable orientation
2.Not enough focus on customers to drive the competitive advantage
3.Lack of cross-functional, cross-border, intra-hierarchical teamwork
4.Lack of sense of urgency
5.No shared vision or common strategy planning
This business strategy report expresses a solution for the strategic planner to solve these problems.
Every American third-grader is taught to chase her dreams—if not by Oprah, then (surprisingly) through the oft-dreaded academic discipline of social studies. Textbooks regale children with stories of the great explorers (Cortés, Drake, Erickson), whose adventures are celebrated with pomp and circumstance. When Columbus Day meant a class popcorn party, the explorers’ heady determination was the stuff of heroic myth. As Columbus Day became less important—coincided with the high school marketing test or, later, the marketing managers’ meeting—so did the explorers. Our new heroes are successful entrepreneurs who command wealth from mahogany desks instead of wresting it from foreign mud. Upon reflection, though, it becomes apparent that in a New Economy as vast and exhilaratingly uncertain as the (old) New World, today’s successful manager more resembles explorers half a millennium away than s/he does the CEOs of two decades ago.
Consider Ferdinand Magellan, who piloted the first global circumnavigation. Magellan’s ambition drove him to forsake his unsupportive Portuguese government, relinquish military titles, and bargain for patronage with the king of rival Spain. Having found support, Magellan set his sights on reaching the Spice Islands, a globally coveted commodity, via a circuitous and uncertain route around South America. In September of 1519, Magellan left Spain with five ships, 250 men, broad sailing experience, a general plan, and a fistful of chutzpah. While at sea, he encountered and over-came mutiny, debilitating storms, malnutrition and scurvy, the loss of ships and theft of supplies, and ambi-guous direction. In order to discover and navigate the now-famous (and globally indispensable) Strait of Magellan, the crew tried inlet after inlet without success. 38 backbreaking days after its discovery, the icy-cold Strait coughed them into the Pacific Ocean, a vast field of adventurous potential. Magellan’s navi- gational strategy was simple: goal in sight, he set off with a general master plan—and trusted his knowledge and intuition to guide him through waves of uncertainty.
The New Economy and the New World may not be physically identical—but in an age when knowledge is gold and markets depend on the windy whims of innovation, a comparison between managers and Renaissance explorers is apt. It was the explorers’ well-defined missions and plans, combined with capitalization on uncertainty, which facilitated profitable serendipity. Like Magellan, every company needs a strategic navigational tool that’s strong but flexible; that impels, inspires, and self-enforces; and that encourages creativity, adaptability, and surprise. Next week we will discuss the State of the Environment and How to Get Started.
Future Readiness Strategies
June 25, 2009
No one really knows when or if we’ll return to normalcy. I say, normalcy for the future will not be defined until after we have reached it.
However, there are several elements we should consider –
We must survive in the short term, be agile and be ready for the future.
We must identify the external trends that will potentially have a positive and negative impact on our business outcomes.
Management must take the time to define not only the element, but also define the potential impact on the business.
We know that we are entering a time of significantly less financial leverages. Our business model changes will rely on productivity improvements; the government – globally – will have an expanded role, and monetary policies may have both a positive and negative impact.
So, what do you do?
Tip #1: Categories
Using internal and external resources, determine the categories of trend s occurring in your external environment:
-
Distributors
- Customers
- End Users
- Technology
- Policy Makers
- Competitors
- Suppliers
- The Media
Tip #2: Data Base
Using internal and external experts, conduct a workshop to list all those industry trends. This data base should be segmented by the categories you defined in Step 1. You should create a data base that includes 250-350 trends. If market research is needed, go get the data and integrate into the lists.
Tip #3: Convergence
Now, that you have 12-15 categories with 250-350 Industry Trends in total, your goal is to converge this list into 6-8 mega trends. Studying trends in each category, start to list the trends together by integrating the outcomes of multiple trends occurring.
Competitive Advantage
June 22, 2009
Long gone are the days of reticence in the public display of knowledge. To the contrary, corporate strategy takes into account the technological trappings of the Information Age (see the Gates estate) have placed knowledge at a premium. Paparazzi-plagued computer programmers and $150,000 college degrees render the materials-oriented Industrial Age as obsolete as a decorously hidden pocket watch. In a world sliding toward Silicon Valley, time is not money, physical resources are not money—money itself, even, isn’t money. Knowledge is money, and knowledge is king. This is not unique to the sprawling IT industry. Every corner of the business strategy belongs to the knowledge culture. Every savvy strategic planner must learn to manage the world’s best wealth-creating resource—which happens to be almost inaccessible to traditional management.
Definitions
Two behemoth catchphrases—and industries in their own right—have grown from our obsession with knowledge. Each is central in
strategy management for any twenty-first-century enterprise.
Intellectual capital is “intellectual material that has been formalized, captured, and leveraged to produce a higher-valued asset,”i or “proprietary information and knowledge that lowers costs or increases customer value.”ii Intellectual capital, analogous to physical or structural capital, is any intellectual resource in your company that already is or could become an asset. This includes, but is certainly not limited to, employees’ personal knowledge; human-technology interfaces; databases; patents; archived information; and industry secrets.
Knowledge management is how intellectual capital is assessed, stored, maintained, and put to good use.
It begins as a mindset; it is first “the conceptualizing of an organization as an integrated knowledge system,” and then “the management of the organization for effective use of that knowledge” (emphasis added).iii Notice: knowledge management is management of the organization—not of the knowledge itself. It is not Orwellian invasiveness. It ystematically recognizes the personal nature of knowledge and encourages knowledgeable people to use their energies well. Next weeks we’ll continue with ‘Why intellectual capital’?
Strategic Planning Harnessing Chaos
June 22, 2009
Perhaps there’s no hope for the hall closet, but take the thought experiment to another arena—your business strategy, or your market. Naïve is the executive who claims to control her company’s smallest details; a degree of uncontrollable uncertainty exists in every people-dependent system. In the last fifty years, that common-sense statement has become quantified in the form of chaos theory and its daughter, complexity theory. The business relevance of these two models demands an active and adaptive response from forward-thinking strategic planning executives and managers.
The world is chaotic and complex. What’s new?
Chaos theory endeavors to explain any system whose end results are “sensitive to [the system’s] initial conditions.” This sort of system, though mathematically regular, seems random. Chaos science made its public debut when meteorologist Edward Lorenz serendipitously failed in his attempt to predict the weather by computer; the pattern the program produced became the model for chaotic behavior. The chaos theory phenomenon itself exploded from its starting point and has appeared in myriad arenas, revealing patterns in everything from family dynamics to dripping faucets. Theorists famously claim that a Japanese butterfly’s slightest flutter can wreak weather havoc in Iowa.
Chaos theory’s application to the business world depends on its close relative, complexity theory. Complexity theory offers an apparently anti-scientific approach to science: it rejects the investigative methods of breakdown and categorization. Instead, complexity theorists examine a system at its macro level, focusing attention on the interactions among individuals—not the individuals themselves. The theory assumes that a complex system—like a company—is only a bundle of interactive simple systems.
Stemming from complex-ity theory, and vital to business, is the biological concept of emergent properties. According to this theory, some of a system’s macro-characteristics are not shared by the system’s individual members. (None of the molecules in your body, for instance, becomes nervous—but you do; an individual raccoon cannot exhibit a birth rate, but a community of raccoons does.) Emergent properties do not violate principles that operate at lower levels of organization,” states one college biology textbook; “however, emergent properties usually cannot be detected or even suspected by studying lower levels.” The apparently random macro-properties of any system stem from interactions, not from individuals.
Most complex biological systems, left alone, adapt fluidly to their environments. If a herd’s life-or-death success depended on one antelope, one ill-timed rainstorm could be catastrophic. But the interactions of the herd’s members—not the members themselves—drive its success; mistakes are diffused and triumphs shared.
Why chaos and complexity matter in business?
Businesses are chaotic. Obviously, life in business is chaotic: employees are uncontrollable, shareholders seldom pleased, the market up one day and down the next. But “chaos” in the colloquial sense—craziness, unmanageability—isn’t chaos theory’s final frontier in business. And chaos’s application to business is not metaphorical. “It’s not about saying let’s look at business organizations as if they are complex systems,” says Roger Lewin, co-author of The Soul at Work: Embracing Complexity Science for Business Success. “They are complex systems.”
Any company is comprised of “parts”: business units, branches, hierarchical levels. The company depends on individual people and individuals’ individual projects. In theory, if all of these elements work together, the system functions perfectly: Accounting’s numbers agree with managers’ demands, and each department earns its keep. But it doesn’t take a chaos scientist to observe the results of one interaction—between departments, or even between individual people—gone awry. It is these unquantifiable, uncontrollable interactions that actually determine the dynamic of any company.
Markets are chaotic.
Markets are also complex systems, but they are not—nor can they be—top-controlled like individual companies. They are fluid and allow for change, and this keeps them afloat. According to Foster and Kaplan, markets generally “perform better than corporations because markets allow new companies to enter more freely.” In order for a company to perform well in a given industry, it must simultaneously mirror and lead that industry as often as possible. Only a company cognizant of the important interactions between its members can gain market-like flexibility. A corporation emphasizing rigid microcontrol is quickly shattered by industry’s chaotic elasticity.
Customer Satisfaction
June 11, 2009
Does your business strategy created in your strategic planning process create competitive advantage and therefore customer satisfaction?
You skipped dinner last night to apply the final touches, and you’re not
disappointed. The frame is a masterpiece, the mounting ingenious. You
imagine the customer blinking madly to check his tears, solemnly promising
his eternal loyalty to you and your business. When he arrives and you show
him his treasure, his face changes, indeed: he crinkles his eyes and tilts
his head momentarily before slapping his Visa on the counter, mumbling “thank you,” and stalking out the door. You spend the next few hours lamely playing the same guessing game you used as a child to divine your mother’s mood: what did that face mean? Was he thrilled? Touched? Unpleasantly surprised?
Will you be hearing in three days from his attorney?
Customers – not you – ultimately make or break your business.
Far too often, we find ourselves here: running our businesses according to our expertise and intuition, celebrating our successes, swallowing our
obvious failures, and hoping against hope that most of our customers will be
back. This guesswork, though, is both needless and detrimental. There
exists a reliable method to ensure and increase your customers’ satisfaction
with your work: study it.
Power in small business has slowly shifted from those with the expertise to
those with the credit card; your customers —not you— ultimately make or break your business. Tom Friedman of The New York Times explains this shift in terms of the “democratization of information,” the availability of myriad alternatives to every contemporary customer. Whereas in an industrial economy the average person knew only of the framing shop or bookstore down the street, our present era of globalization gives the average Joe access to your shop and three others in the area, as well as an infinite number of Internet solutions. Customer loyalty, then, has eroded: a customer may love the work you did for him last month, but if he finds a lower price or faster turnaround with your (local or global) competitor, he’ll likely have no compunction about taking his business elsewhere. (Consider your own purchasing behavior. To how many businesses do you truly consider yourself loyal—regardless of price increases, occasional mistakes, and idiosyncratic service?)
