Business Strategy Navigation – Part 4

Set Objectives

Having adequately assessed the present, embark on the adventure of the future. The most unpredictable and chaotic market environment is navigable with skill and control. A clear vision of your ideal future allows for well-defined, progressive movement.

The elements of a proactive future focus are simple:

  • In general terms, the purpose of any business is to satisfy its stakeholders (this group includes shareholders, customers, executives/ partners, and the community).
  • Your business’ mission is its objective goal, the peak toward which you propel yourself. A mission may be purely financial (“we will achieve billion-dollar annual sales”), product-oriented (“we will develop the most fuel-efficient compact car on the market”), or customer-focused (“we will attain 99% customer retention”). If purpose is your reason for existing in your eyes, mission is your reason for existing in consumers’ eyes.
  • A vision is exactly as it sounds: a mental picture of the way your business will look, feel, and appear once you have fulfilled your mission.

A caveat: Though definition of these terms is necessary, the key to successful navigation of an unpredictable environment is adaptability. Vision can easily change since, as part of the system, it is largely subject to the whims of the environment. According to the Columbia School of Business, strategy should actually serve to “build flexibility into your system…some way of keeping uncertainty alive and kicking.”[i] This requires creativity: the vision must entail and encourage originality.

Next Time We’ll begin part one of “The Ride: The future Trends and Strategy.”

  1. [i] Lawrence M. Fisher, “The State of Strategy, 2001,” strategy + business Online (1Q 2001).

Competitive Advantage: Building and Managing Intellectual Property – Part 4

What to Do With it Now

The true beauty of intellectual capital management lies in its implementation. First and foremost, recognize that—unlike structural, physical, and monetary capital—intellectual capital is people-dependent. Brook Manville and Nathaniel Foote note that “executing a knowledge-based strategy is not about managing knowledge; it’s about nurturing people with knowledge.”[i] The first step toward “nurturing” management is trust of employees and of their knowledge-building practices. Encourage collaboration and group innovation among employees. In order to make this work (among humans, who tend toward selfish hoarding), create a culture of sharing, not of competition. Knowledge silos are deadly:

Knowledge, unlike information, grows healthily only when it is debated, massaged, and passed around.

Stewart’s basic intellectual capital policy closely mirrors Strategy International’s fundamental strategic concept. Stewart encourages executives to DNA:1

  • Define. Why does your business exist? (See the white paper “Strategic Navigation” for descriptions of purpose, mission, and vision, which together comprise a business’s self-definition.)
  • Nurture. What intellectual resources are necessary to fulfill that definition? To whom do these resources belong, and how do those people best use their talents? What ensures an innovation-friendly environment?
  • Allocate. Where should resources be funneled for the greatest innovation and new knowledge generation? How can knowledgeable people be managed well?

Like anything, intellectual capital is fragile; it is by no means a panacea. The implosion perfectly illustrates the need to combine this new resource with extant ones—to ensure teamwork among intellectual capital and structural, physical, monetary, and relationship capital. The key is to make the most of your company’s every facet, without needless and ineffective overlap. Allow people to do what they do best and technology to do its job, as well. Yogesh Malhotra of explains this idea:[ii]

“Knowledge management caters to the critical issues of organizational adaptation, survival, and competence in the face of increasingly discontinuous environmental change. Essentially, it embodies organizational processes that seek synergistic combination of data and information-processing capacity of information technologies, and the creative and innovative capacity of human beings.”

The strategic planner of the future will create competitive strategy through strategic planning that uses this “creative and innovative capacity” that too often hides untapped, even unnoticed, by otherwise brilliant and successful companies. Experience has shown, though, that true business brilliance is a dazzling, eminently flagrant display of knowledge, creativity, and innovation.

[i] Brook Manville and Nathaniel Foote, “Strategy as if Knowledge Mattered,” Fast Company (2: 1996).

[ii] Yogesh Malhotra, “Knowledge Management for the New World of Business,” BizTech Network. (1998).

Business Strategy Navigation – Part 3

Right Now: Confront Reality

As Magellan gazed at the mouth of the waterway to bear his name, he had a choice. He could worry himself blind about the future; turn left and take the (safe bet) long route; stab blindly into potentially vicious waters; or take stock of his situation and make an educated guess.

Fortunately, he chose the last.

The first step in business strategy is similar: Confront reality. Kaplan and Norton say it well: “Merely slapping performance measures on existing processes may drive local improvement but is unlikely to lead to breakthrough performance for the entire organization.”[i] Your “existing processes,” mindsets, and goals must be assessed before strategy can begin. Without knowledge of your company’s present situation (or “current reality”), movement from that situation is arduous, if not impossible.

Elements to consider in your confronting reality assessment include:

  • Determine the key performance metrics, knowing if you are ahead of or behind.
  • Determine where business performance is worrisome.
  • Assess where you are strong.
  • Appraise your competitive position.

Next time we’ll continue this discussion with “Setting Objectives.”

[i] Robert S. Kaplan and David P. Norton, The Balanced Scorecard: Translating Strategy into Action (Boston: Harvard, 1996).


Strategic Planning: Harness Chaos – Part 3

What You Should Do About Chaos

Number one: Recognize that it exists.

Every mom has said it: life isn’t fair, and it’s not controllable. Expecting the business environment to be anything but haphazard is foolhardy. But for all their randomness, state theorists, complex systems don’t spontaneously combust. This fact inspires our trust in gravity; it should also inspire a loosened grip on your company. A little chaos breeds creative results beyond the scope of any corporate control.

Number two: Become strategically adaptive. McKinsey’s Eric D. Beinhocker asserts that “to prosper in the long run, a company must adapt as readily as its market, or more so.”[i] As previously observed, a market is by nature highly adaptable. How to beat the market at its own game? Foster and Kaplan, critics of “cultural lock-in,” suggest supplementing convergent thought with divergent thought, which encourages a culture of inquisitiveness. Divergent and convergent thought work in synergy, turning basic business questions into opportunities for creativity. Chaos does not have to imply anarchy; the most useful chaos is planned.

Number three: Create a positive corporate culture. Intentionally focus on market-reflective flexibility. This strategy positions your company to innovate or jump onto the newest in-novation. During the 1988 wars among computer operating systems, Microsoft kept a finger in every OS pie—UNIX, DOS, OS/2—until a clear winner emerged. If Windows hadn’t become the new industry standard, Microsoft still wouldn’t have lost ground. “In the face of uncertain markets,” writes Beinhocker, “Microsoft followed the only robust strategy: betting on every horse.”[ii]

Number four: Pursue an internally chaotic culture. Eschew micromanagement in favor of self-organization, creativity, and innovation. Foster and Kaplan urge managers to “control what you must, not what you can; control when you must, not when you can. If a control procedure is not essential, eliminate it. Measure less; shorten the time, and the number of intermediaries, between measurement and action, and increase the speed with which you receive feedback.” The ultimate rationale behind this methodology? “The point is to let the market control wherever possible.”4

Number five: Be sincere. Too many employees drown in kitschy corporate slogans. The edict “Be creative!” is worthless if not backed by actual company policy. Prioritizing schedule and bottom line is any company’s default mode; continuing in that mindset while claiming innovation is not only deceitful but lethal to actual creativity. When a midlevel manager lamented that “‘Dilbert’ isn’t far off,” he spoke for all smart, stifled employees: prescribed processes and empty encouragement strangle any complex system. Genuine, chaotic creativity keeps it thriving.

Next Time we’ll wrap up chaos with “The Edge of Chaos.”

[i] Eric D. Beinhocker, “Strategy at the Edge of Chaos,” McKinsey Quarterly Online 3(2000).

[ii] Eric D. Beinhocker, “On the Origin of Strategies,” McKinsey Quarterly Online, 3 (2000).