Answers in October >>
Add comment May 13th, 2007
When I work with senior executives, they express a real conflict: they know strategy is important (strategy, like IT, does matter) but they have a growing sense that traditional approaches to strategy are simply not up to the challenge of coping with increasingly uncertain business environments. What to do?
EDITOR’s NOTE: see our webinar with John Hagel on May 9th: “FAST Strategy: How to Get Results in Disruptive Markets”
My first piece of advice: throw out two basic tenets of business strategy. First, reject the notion that strategy is sequential – that detailed strategic blueprints need to be laid out before a company can proceed with operational implementation. Secondly, abandon the traditional strategy view that the relevant time frame for strategic planning is a five-year horizon.
My second piece of advice: implement a FAST approach to strategy. FAST in this case is an acronym for Focus, Accelerate, Strengthen and Tie it all together. This approach urges executives to move along parallel paths, operating on two very different time horizons: one horizon takes a five to ten year view of the business and the second horizon zooms in to a much more tactical six to twelve month view of the business. The one to five year horizon that is so loved by traditional business strategists actually receives very little attention in the FAST approach.
Focus is the key activity on the five to ten year horizon. This requires senior management to develop a common view on two key questions for their business. Five to ten years from now, what will the markets that we participate in look like? Then, what kind of business we will need to have in order to continue to create value in these markets? Unlike strategic approaches of the past, Focus does not require management to develop a detailed view of the future, but it does require management to develop a clear, high level view specific enough to help the company make important near-term choices.
To illustrate the high level nature of the view of the future, look at Microsoft. Back in the late 1970’s Bill Gates defined a Focus for Microsoft that could be summed up in two sentences. First, computing power is inexorably moving from centralized mainframes to desktop computers. Second, to be successful in the future, a computer company will need to “own” the desktop. Simple and succinct, yet specific enough that it helped Microsoft to answer the unexpected call it got from IBM to help IBM develop an operating system for a new desktop computer it was developing, rather than the twenty other calls it undoubtedly received on that same day. This Focus helped to guide the company for two decades. It only began to need retooling in the late 1990’s as the advent of the Internet set into motion fundamentally new forces.
On the six to twelve month horizon, Accelerate and Strengthen are the key requirements. By Accelerate, I mean identifying a few key operating initiatives that have the potential to significantly accelerate the movement of the company towards the long-term Focus. Once these initiatives are identified and agreed upon by senior management, the question is what can be done to help these initiatives increase their impact over the next six to twelve months? Management needs to set aggressive and measurable operating performance objectives for these initiatives over the next six to twelve months.
On the same time horizon, Strengthen also comes into play. Here, management needs to ask, what are the major organizational obstacles that are preventing us from moving even faster to achieve our operational objectives? Then the question becomes, what can be done over the next six to twelve months to “de-bottleneck” the organization and strengthen our organizational capabilities so that we can move even faster in the next six to twelve month cycle?
Tie it all together integrates these three streams of activities. The key to success with the FAST strategy is to frequently iterate back and forth across these two time horizons and refine efforts on all streams based on the results of efforts to date. The near-term operating initiatives will provide management with much more information regarding both the market place and the capabilities of the company. This should help to refine the longer-term Focus view. In turn, this refined Focus view will be helpful in selecting and shaping the next wave of near-term operating and organizational initiatives. Senior management must actively monitor progress on all three streams and play an active role in shaping initiatives and setting objectives.
The FAST strategy approach respects the need for both near-term performance and longer-term direction, learning and adaptation. It favors incrementalism but recognizes that, without direction, incrementalism will inevitably sub-optimize relative to longer-term opportunities. Properly focused, incrementalism provides significant advantages relative to more tempting “big bang” transformational initiatives:
Few companies today have adopted anything like a FAST strategy approach. You can use five questions to determine whether a company is pursuing this approach:
The FAST strategy approach provides a robust framework for incremental innovation. It offers a useful context for understanding how to create strategic advantage through sustained innovation in business practices enabled by IT capabilities. It also helps us to understand the deep business significance of the emergence of a much more flexible distributed service architecture. This new IT architecture will help businesses to accelerate their near-term operational initiatives even further. In doing so, it will provide a solid foundation for radical incrementalism.
EDITOR’s NOTE: For more on FAST Strategy, see our webinar with John Hagel on May 9th: “FAST Strategy: How to Get Results in Disruptive Markets”
Add comment April 28th, 2007
“What if everything you learned about business strategy is WRONG?”
Why, then it’s time to sign-up for John Hagel’s webinar on FAST Strategy presented by StrategyWorld.org.
In this webinar John reveals why the basic principles of traditional strategy - the principles still taught at most business schools and company executive education programs - are wrong:
· WRONG: Develop a detailed strategy before moving to operational implementation
· WRONG: Focus on a one to five year time horizon to develop robust strategies.
· WRONG: Pursue a portfolio approach to business initiatives to cope with growing uncertainty.
· WRONG: Strategy is a specialized discipline that needs to be pursued by experts.
The alternative? FAST Strategy.
John shows us how some of the most successful companies in the world maintain their advantages, and we can begin to synthesize a new approach to strategy, an approach called FAST strategy.
This approach integrates four elements in an innovative way:
· Focus - building alignment around a long term, five to ten year destination.
· Accelerate - ensuring that the highest impact operational initiatives over the next six to twelve months receive a critical mass of resources
· Strengthen - designing organizational initiatives that can be implemented over a six to twelve month period to address key bottlenecks preventing the firm from moving even more rapidly.
· Tie it together - effectively integrating the first three elements in ways that speed up learning and enhance performance.
Here’s our pitch:
Some of the world’s most successful companies use John Hagel’s thinking to guide them as they navigate the turbulent waters of business competition. Don’t you think you owe it to yourself and your company to find out how they do it? For the price of a plane ticket, you can. And you don’t have to leave the comfort of your office. Mark your calendar, hold your calls, and join our webinar.
PS- space is limited, so please sign up and reserve your seat.
Add comment April 22nd, 2007
How do you deliver and sustain profitable growth?
That’s the key challenge shared by Procter & Gamble’s A.G. Lafley and GE’s Jeffrey Immelt.
Writes Fortune’s Geoff Colvin:
“To meet P&G’s growth targets, Lafley has to find about $7 billion of new revenue this year, equivalent to a company the size of Barry Diller’s IAC/Interactive. At GE, Immelt has to find about $15 billion of new revenue, equal to the size of Nike. And if they succeed, of course, they’ll have to turn around and find even more next year.”
So what’s the secret formula?
Both CEOs have “reformatted their companies’ fundamental approaches to cultivating change and innovation.”
Colvin finds out more in this insightful interview:
Immelt: “The initiative we’re driving now is organic growth. If that’s your initiative, it doesn’t make sense to be training people exactly the same way you trained them in the past. So we identified about 15 companies that had grown at three times the rate of GDP, and asked what they had in common. It was five things: external focus, decisiveness, inclusiveness, risk taking and domain expertise. So we reoriented the way we evaluate and train along those lines. We just recently added leadership, innovation and growth, which is basically oriented around teams. This is the first team training we’ve done in ten or 15 years.”
Lafley: “We made innovations in two areas. First was in the leadership training we felt we would need for the 21st century. We have an inspirational leadership program that is highly individualized for handpicked managers. They’re nominated by business leaders or functional leaders, and I pick them. A big chunk of it is about personal development. We also have a general-manager program, right before or right after you become a general manager. And then we have an executive-leadership program for individuals headed to be a president or a group president. It’s pretty intense.
“The other thing we pushed at - and Jeff and I talked about this - is, How do we get a global leadership team. Some 55 percent of our business today is outside the U.S., so my top leadership team for the first time in our history is now up to half non-Americans. We pushed really hard to get there. It makes for a very different discussion when we get together for our quarterly or semester meetings. I think we’re a lot more challenging of each other.”
Other insights:
Immelt on China: “China - we just got a big order from the Ministry of Rail. I got it on a Sunday - the whole ministry is working all day on a Sunday. I believe in quality of worklife and all that stuff, but that’s the competition.”
Lafley on Globalization: “Lafley: One of the challenges for the business community broadly is to articulate in a simple way the benefits of globalization and then face head-on the fact that there will be some disruption. When a company like GE or P&G has plants to shut down, we have a pretty enlightened program for handling retraining and early retirements, so employees have the best chance to have a good income and a good life. We do need to be a little more creative in that area because there are a lot of instances that doesn’t happen. But I don’t think it’s for lack of funding or because there aren’t opportunities somewhere in the economy. Our employment rate is still the envy of the world.”
Read the interview >>
Add comment February 20th, 2007
One Billion New Automobiles!
Bill Jackson and Vikas Sehgal from Booz Allen Hamilton warn executives in the ailing auto industry about emerging trends which will change their future:
1) Social mobility: for the first time residents of remote villages in India and China will be able to reach urban centers in a half-day’s travel
2) Environmental Impact: Manufacturers in India and China will likely develop indigenous technologies at lower cost, making the cars more affordable but still meeting emission norms (they will lag behind Western emission standards by a couple of years, but this will be a competitive advantage!).
3) The Expanding Lower-End Market: The requirements in China and India are far different from the West. Take the $4,500 Maruti Alto, for example.
4) The Learning Model in Emerging Markets: The basic vehicle model of the emerging economies could be adapted for other nations, offering fuel efficiency and unprecedented low prices, with a few extra tweaks like the additional safety features that established markets require. China and India are honing their products in the Middle East, Africa, and Eastern Europe.
Jackson and Sehgal warn:
“Recent history suggests that many Western automakers will fail to respond effectively. U.S. manufacturers have focused on large cars and trucks, and European car companies have focused on performance. Both groups have thus missed opportunities to develop economical cars with high fuel efficiency and the selling point of reducing dependence on foreign oil.
“If all the current automotive trends accelerate, many companies will see their value chains overhauled, not just in the auto industry but in every sector. Nations around the world will suffer the consequences of increased pollution and greater global competition for fuel. And the automobile as a product will be transformed. Those manufacturers and suppliers that start planning now for a new wave of upstart competition will be the most likely to thrive in the next automotive environment.”
What will Ford and Chrysler do?
Download the article here >>
For those of you who think this is simply an issue for the auto industry, think again. The $100 PC is here, Dell.
1 comment February 16th, 2007
In our celebrity culture, we love to focus on people. Decker gained, Rosensweig is out, Braun is out, Semel’s still there, Yang’s mentioned, but where’s Filo and who the Hell is going to head up the audience group (and why can’t Yahoo find anyone internally to take this on)?
People matter, of course, but in this context strategy matters even more. Faster movement is dangerous if you have no sense of direction. It just means you do more things more quickly, spreading that peanut butter even more thinly. To paraphrase an old quote by Casey Stengel: “if you don’t know where you are going, you will never get there.”
And let’s not just single out Yahoo. I have a growing sense that all the major Internet players – Google, MSN, Amazon, Ebay and AOL – have lost their sense of direction and differentiation. Rather than carving out and rapidly enhancing areas of distinctive advantage, these major players appear to be leaping like lemmings into the red ocean.
Here are some of the red flags that give me cause for concern:
Now, this growing homogenization of the leadership ranks might be understandable if the Internet were a maturing business arena. Given the rapid and sustained pace of innovation in the underlying technology, the rapid growth of usage, the continuing shift of spending to the Internet and the proliferation of new businesses created on the Internet, I find it hard to characterize this space as “maturing” – my sense is that it is still in its infancy.
Some observers have even begun to hail the emergence of “Internet conglomerates” as the wave of the future. Looking from the outside in, one can make explicit the assumptions that seem to be driving the investments, business initiatives and strategies of these leaders. These assumptions seem to converge on this view of the future: leading companies will be vertically integrated and horizontally integrated, offering a broad range of their own resources to users who will “settle” into their spaces. Certainly, the strategies of these companies seem to assume that Internet conglomerates are the wave of the future. Is this really the way the Internet will evolve as a business platform?
As I have written in Harvard Business Review, I believe that a quite different future will unfold, marked by a distinctive process of unbundling and re-bundling of firms. This perspective suggests that all the Internet leaders confront the same difficult choices that more traditional companies also face. Over time, will these companies choose to be customer relationship businesses, product innovation and commercialization businesses or infrastructure management businesses? None of the Internet leaders appear prepared to confront these choices yet.
Of course, there’s another interpretation of the initiatives pursued by the Internet leaders. They may be explicitly avoiding any view of the future and instead spreading their bets across many initiatives in the hope that some of these bets will pay off while others will prove to be dead-ends. Nick Carr refers to this as the spaghetti strategy – “throw a lot of stuff against the wall and see what sticks.”
As uncertainty increases, this has become the preferred “strategy” of many companies, not just in the Internet sphere. While strategy used to be viewed as the discipline of making choices, this approach proudly rejects the need to make any choices. It is a particularly seductive approach for large companies with lots of resources.
And yet this approach stands in sharp contrast to the strategies that enabled the Internet leaders to carve out their leadership positions in the first place. Unlike the thousands of other dot.com start-ups that embraced hustle as strategy and speed without direction, the founders of these companies started with a very clear, even though high-level, long-term destination in mind. It helped them to make difficult choices in the near-term and to launch waves of initiatives that cumulatively built very large and successful businesses. It has stood them very well in the first decade of their business.
In my own work, I use a FAST strategy methodology. It emphasizes the need to have a clear, but high-level view of a long-term destination while in parallel focusing on a limited number of high impact initiatives in the operations and organization that can accelerate movement towards this destination. What the Internet leaders seem to have lost is any distinctive long-term view of what kind of business they will need to build to remain successful in a rapidly evolving business landscape.
People can be moved in and out of executive positions. Large, high visibility acquisitions can be announced. “Strategic” relationships across leading companies can be negotiated. But without a clear and differentiated sense of long-term direction, all of these initiatives will make for good newspaper copy, but count for little in terms of sustained value creation.
Add comment February 2nd, 2007
Senior executives need simple, but very powerful frameworks that help them to think strategically, and to align people in the organization through the use of a common strategic language.
The three box thinking model is an example of a framework that I use to facilitate strategic thinking and alignment.
Actions companies take belong in one of three boxes:
Box 1 — manage the present;
Box 2 — selectively abandon the past; and
Box 3 — create the future.
Box 1 is about improving current businesses. Box 2 and Box 3 are about breakout performance and growth.
Many organizations restrict their strategic thinking to Box 1. This tendency has been particularly acute in the past two to three years, as most leaders have emphasized reducing costs and improving margins in their current businesses.
But strategy cannot be just about what an organization needs to do to secure profits for the next year. Strategy must encompass Box 2 and Box 3. It must be about what a company needs to do to sustain leadership for the next ten years. In fact, the central task of an organization’s leaders is to balance managing the present with creating the future. Examples of successful Box 2 and Box 3 initiatives include: Dell’s direct model in the PC industry, Wal-Mart’s transformation of the discount retailing industry, Apple’s introduction of iPod, and Southwest Airlines’ revolution in the airline industry.
Organizations that operate within a short timeframe base their actions on the assumption that their industry is stable and static. But it takes years for large organizations to change directions. If you take this into account, change is rapid and nonlinear. For instance, nanotechnology and genetic engineering are revolutionizing the pharmaceutical and semiconductor industries. Globalization is opening doors to emerging economies, such as India and China, and billions of customers with vast unmet needs. Once-distinct industries, such as mass-media entertainment, telephony, and computing, are converging. Rapidly escalating concerns about security and the environment are creating unforeseen markets. And other, more subtle changes are important as well, such as the trend toward more empowered customers, the aging population in the developed world, and the rising middle class in the developing world.
As a result of these forces, companies find their strategies need almost constant reinvention because the old assumptions are no longer valid, or the previous strategy has been imitated and commoditized by competitors, or changes in the industry environment offer unanticipated opportunities. The only way to stay ahead is to innovate.
Part of the job of executives is to make money with the current strategy. That is the challenge in Box 1. Part of their job is to make up for the decay and commoditization of strategy. That is the challenge in Box 2 and Box 3.
Too many companies ignore these two boxes until it is too late.
Add comment January 4th, 2007
What do Michael Porter, Bono, and The Gap have in common?
They’re all related to “The Competitive Advantage of Corporate Philanthropy.” The HBR article, by Michael Porter and Mark Kramer, proposes a fundamentally new way to look at the relationship between business and society that does not treat corporate growth and social welfare as a zero-sum game.
They introduce a framework that individual companies can use to identify the social consequences of their actions; to discover opportunities to benefit society and themselves by strengthening the competitive context in which they operate; to determine which CSR initiatives they should address; and to find the most effective ways of doing so.
Perceiving social responsibility as an opportunity rather than as damage control or a PR campaign requires dramatically different thinking—a mind-set, the authors warn, that will become increasingly important to competitive success.
The framework identifies three ways in which social issues should be prioritized:
Case studies? Porter gives us a few examples: Whole Foods, Microsoft, GE, Volvo etc. Some of his examples are weak (ExxonMobil building roads is not exactly CSR, or is it?)
What’s truly great about this article is the diagram mapping the societal impact of the value chain ( pp.86-87). In it, Porter shows us how companies can start analyzing it’s “inside-out” linkages to see where it can do the most good — for society and itself.
Which brings us to The Gap. Duke grad-student Jeremy MacNealey writes:
“The apparel retailer has struggled mightily over the past few years, but we learned that the company may have found new hope from the most unlikely of sources — its charitable efforts. Teaming up with (Product) Red and launching a new apparel line called Gap (Product) Red, it has seen an overwhelming response by consumers to the edgier and more premium product. The response by the public has been so strong that the company is now planning to apply a similar look throughout the Gap brand. It just may be that the long-awaited turnaround that investors have anticipated will actually come about in part as a result of Gap’s charitable efforts.”
More about Product Red here >>
Add comment December 30th, 2006
Here’s a report you’ll be interested in: The Globalization of White-Collar Work: The Facts and Fallout of Next-Generation Offshoring from Duke’s Fuqua School of Business and Booz Allen Hamilton.
The news? Apparently offshoring is no longer “all about moving jobs elsewhere; increasingly, it’s about sourcing talent everywhere.”
And: “…what used to be a tactical labor cost-saving exercise is now a strategic imperative of competing for talent globally. White-collar work can be performed where it makes the most sense and saves the most cents. More important, a looming shortage of technically trained talent, such as engineers and computer scientists, in advanced economies will require the ability to source and manage such talent globally.”
Here are the 5 main points:
1. Labor arbitrage is giving way to accessing talent as the primary driver of next-generation offshoring.
2. Offshoring high-skilled functions does not replace jobs onshore.
3. Companies look elsewhere because they can’t get it at home.
4. Where you offshore depends on what you offshore.
5. The obstacles to successful offshoring are increasingly internal and organizational.
The reports also says that higher skilled jobs (like R&D, Marketing, and Design) won’t go away because of this growing global talent shortage. Instead firms will compete globally for brain power, regardless of location.
Sorry, I don’t buy that. China’s working hard on educating the next generation of designers, and in India you’re going to see the next generation of innovation. (I’ll get John Hagel to talk about this soon.)
Add comment December 25th, 2006
Wired’s Chris Anderson writes about the effect of the Internet on media industries in the Economist’s The World in 2007:
“The web takes its victims one at a time. First, in the mid-1990s, print media started to feel the terrifying effect of losing their monopoly on publication…in the early 2000s, the same thing happened to music…Now it’s television’s turn. In 2007 TV will have its first “music moment”—the realisation that a core audience (the 18-34-year-old male) has moved online, possibly for good.”
The key insight: “Short, user-created videos are creating a new kind of watching experience, one more about “snacking” than half-hour sitcoms.”
This is all about building future business models around attention spans. No one has time to read Harvard Business Review, or listen to an entire music CD, or watch the whole movie.
Our attention span is now somewhere between 3 to 5 minutes. That’s the size your idea-bite has to be if you’re going get heard at all.
Add comment December 25th, 2006
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