Creating a knowledge-based organization and People Analytics

Analtytics and BI are 'the thing' these days (along with rye cocktails and pickling).

We can talk all day long about how companies have collected so much data they don't actually know what to do with it. (And, consequently, what to do with it)

But I want to talk a bit about another advantage analytics provides us. That is moving an organizaton forward with internal statistics and benchmarking efforts. So, this comes about in two different ways. First, creating a knowledge-based organization. This means that the organization itself is constantly looking for data, looking for proof of their assumptions, and testing and improving upon these. Proof of this trend is in the prevalence of Chief Knowledge Officers and Chief Data Officers. Young MBA students are coming out of their programs with the idea that the evidence is out there- and they know how to find it. Those students are starting to move into executive positions and influencing their bosses and peers. While the knowledge-based organization is still seldom among companies, changes are slowly being made, and many new start-ups are beginning their culture with this in mind. Redfin is one such firm (p-values are brought up in c-level meetings).
With better awareness of the implications of decision making and practices, executives at all levels can begin to make better decisions, and be more innovative in their daily practice.

The other area where BI has started to do some really cool things is in a space called People Analytics, or HR analytics. Instead of relying on just one person's review of another's performance, and other equally biased measures, HR departments at innovative firms have started to use industry and internal analytics to drive their hiring and development programs. This essentially links strategy of the firm to hiring in a way that is lost on many companies: a company defines which metrics are most important to its bottom line and future strategy, and then figures out how to determine whether current or potential new employees' skills align with the strategy. Then, a firm uses these metrics to determine performance.

Google is well-known for this. Specifically, they call their 'HR department' their People Operations:

"Made up of equal parts HR professionals, former consultants and analysts, we’re the champions of Google’s colorful culture. In People Operations (you probably know us better as "Human Resources"), we "find them, grow them, and keep them" - bringing the world’s most innovative people to Google and building programs that help them thrive. Whether recruiting the next great Googler, refining our core programs, developing talent or simply looking for ways to inject more fun into the lives of our Googlers, we bring a data-driven approach that is reinventing the human resources field."

Google aside, there are other firms starting to implement these analytics, and still other firms that are start-ups that focus on people analytics consulting.

So what do you think: Is People Analytics the next big field? Can organizations actually define a strategic advantage by better aligning their HR practices with their strategy? Or is this only something that works for certain types of firms, specifically more knowledge-intensive ones?

A Return to Sustainabe Strategy

Several weeks ago, I posted about the rising trend for organizations to pursue the element of sustainability within their strategic plans.  This week, I want to revisit this topic, but through the voices of several individuals who addressed this in various Ted Talks. 

The first talk is by Michael Porter, a strategy professor at Harvard University, and the author of various articles we have read this year.  This initial talk is a broad topic about the impact business can have on solving social problems.  While he does not solely address the concept of sustainability, he makes a key point regarding the trade-off for businesses and addressing/contributing to social problems.  The common belief has been that in order for organizations to make a larger profit, the trade-off is to contribute more to social problems and the being social responsible will lead to rising costs.  Porter argues that this is not true and that there can be profitable benefits to organizations committing time and resources to solve in social issues.

Michael Porter Ted Talk

The next talk is by John Doerr, which narrows the topic to focus more on sustainability.  He presents data and current small efforts that are beginning to occur to address environmental concerns.  But throughout the talk, insists that the current efforts are "not enough". Insisting that this needs to be a large scale initiative to for any impact to be felt.

John Doerr Ted Talk

Chris Mcknett provides a clear and persuasive arguments regarding the economics behind sustainability.  He addresses the concerns or risk versus return and shows how investing in sustainability can benefit the environment as well as the economy and company performance.

Chris Mcknett Ted Talk

These are just three talks that further emphasize the need for organizations to embrace sustainability within their strategies.  This concept is not only beneficial to the environment, but could also greatly benefit their own business plans.  While I only featured three talks, there were a number of other talks that also address this issue, further demonstrating this strategic need.


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Sources

"The investment logic for sustainability." Chris McKnett:. N.p., n.d. Web. 27 Apr. 2014. <http://www.ted.com/talks/chris_mcknett_the_investment_logic_for_sustainability#t-715454>.

"Transcript of "Salvation (and profit) in greentech"." John Doerr: Salvation (and profit) in greentech. N.p., n.d. Web. 27 Apr. 2014. <http://www.ted.com/talks/john_doerr_sees_salvation_and_profit_in_greentech/transcript#t-907814>.

"Why business can be good at solving social problems." Michael Porter:. N.p., n.d. Web. 27 Apr. 2014. <http://www.ted.com/talks/michael_porter_why_business_can_be_good_at_solving_social_problems#t-683343>.

Revitalizing Braddock

Revitalizing Braddock

Braddock was once a bustling steel town.  It is the home of Andrew Carnegie’s first steel mill, his first public library, and one of the country’s first Chevy dealerships at Superior Motors.  However, with the decline of the steel industry, 90% of Braddock’s population left the town in the 70’s, and it has been declared a ‘distressed municipality’ by the state of Pennsylvania since the 80’s. 

In 2005, John Fetterman was elected mayor of Braddock, with a vision of revitalizing the town of 2300 people.  One of his first strategic decisions was to offer free studio space to artists in the 80 year old abandoned Ohringer Building.  This move attracted more than 30 artists to the city, who used money from their grants to redesign the building.  This community enterprise now owns the building, and pay taxes to the city on the property.  In 2007, Braddock partnered with Grow Pittsburgh and converted 10 acres of the city’s empty lots into a community garden, Braddock Farms.  This garden is managed in the summer by young locals who are participate with the Braddock Youth Project, teaching them skills they need to grow organic fruits and vegetables. 

More recently, in 2013, renowned chef Kevin Sousa decided to pursue his next project in Braddock, and raised over $250k for this venture through a Kickstarter campaign.  Kevin’s vision was not due to the competitive advantage that no other restaurants are operating in the area, but that the town was the perfect place to build a business model around social innovation, which unifies a for-profit business with the goal of doing social good. 

The restaurant, known as Sousa’s Superior Motors, named after the historic car dealership which houses it, has three strategic goals: offer culinary training, provide employment, and ensure access by giving a discount to community residents.  This company strategy is very clear with its mission objective, scope and advantage.  The objective is to be a for profit business that can help to economically revitalize the local community; the scope is to source labor and materials locally while providing a high end dining experience (most of the produce will be sourced from the Braddock Farms, while Sousa has a unique employment model which will be described below); and the advantage of being positioned in a town that needs the economic growth this business can provide, while teaching people the requisite skills to open their own businesses in the future – all work together to help shape Sousa’s Superior Motors into a sustainable business model for local economic development and as a profitable venture. 

Sousa plans to hire people to work in his restaurant locally, offering them a rotational program to learn every aspect of running a restaurant.  People will have the opportunity to work in the community farms, front end of the restaurant, and will have access to professional culinary training in the kitchen.  This rotational program will teach unskilled local Braddock people the skills they need to find employment or even open their own businesses in the future.  Sousa also plans to partner with the Braddock Youth program, to garner early involvement from the youth members of the community, which will help to keep them out of trouble or involved in gangs. 

In addition to providing training, Superior Motors will also offer free housing to anyone who is involved in the program.  This will help to foster a community environment that promotes hard work towards helping each other.  Superior Motors will also offer 50-75% off on meals sold to local people, or those who have low incomes, subsidized by the price of high end diner’s meals. 

There is a clear value proposition to this type of community involved business model.  Sousa’s Superior Motors will provide much needed jobs in the area, while offering people outside of Braddock an incentive to visit and dine there.  Being an acclaimed chef, Sousa will be able to use his name and culinary expertise to create unique menus that use the locally produced materials, while satisfying high paying customers.  Unifying all aspects of the business, into a social innovation project, Sousa will be the only business in the United States currently able to provide this experience.  His integration with the community will provide Sousa with near free labor, in exchange for housing and training, access to quality produce at a cheap price from the Braddock Gardens, and a constant supply of new workers and innovative ideas from the people who come through the program. 

Sousa’s Superior Motors should also be well positioned to successfully deliver their strategic ambition.  Their value proposition and strategic vision is very clear; the organizational framework is in place both for the business and community to adopt this change; and the business is flexible enough to adapt to changes in environmental conditions (Braddock is so poor that if this business takes off and is successful, things can only go up from here).  This strategic implementation seems to follow a dynamic approach, where there are no specific milestones in place that need to be met by a certain time.  The direction of the ship has been set, and the framework is in place to accomplish these goals, now with time the business can figure out exactly how to make it all work.  By working closely with the community, and hiring people who do not have any other options and are in great need, the business will be able to increase adoption of these ideals and have their workers focused on long term strategic outcomes, while investing their time and efforts into obtaining the new skills required to better themselves, the business and the community.  With everyone looking out for the company’s interests, should things start moving in the wrong direction people will be aware of the change and assess what is needed to right the ship. 

Braddock, by attracting skilled artists and entrepreneurs, is in the midst of a revitalizing transformation of their city.  By partnering together, and working towards the community good, with an availability of resources and outside interest, Braddock is able to take a failed city and provide new opportunities through sustainable profitable business models that are not available elsewhere.  If successful, Braddock will have implemented a new social model for a way of living, and will have developed an economic viability through sustainable practices not found in other American cities.  Perhaps people in Detroit or other impoverished regions could learn how to implement similar social initiatives in their areas, and pull away from old traditional business models.  Although Sousa’s Superior Motors is not yet open, it holds a lot of promise to the local people of Braddock and possibly even further outside the city as well.

http://iheartpgh.com/2014/01/07/why-kevin-sousas-superior-motors-kickstarter-campaign-epitomizes-everything-we-love-about-pittsburgh/

http://www.pittsburghmagazine.com/Best-of-the-Burgh-Blogs/Brazen-Kitchen/January-2014/Why-You-Should-Fund-Kevin-Sousas-Superior-Motors/

http://www.pittsburghmagazine.com/Pittsburgh-Magazine/April-2013/Braddock-Rising/

A Picture of Failed Strategy: Kodak's Digital Failure

A Picture of Failed Strategy: Kodak's Digital Failure

This week I learned about key features that can cause a company’s strategy to succeed or fail. David Collis and Michael Rukstad’s 2008 article in the Harvard Business Review stressed the necessity for a simple and concise strategy statement centered on the company’s scope and competitive advantage. A Deloitte University Press publication titled Dynamic Strategy Implementation: Delivering on your Strategy Ambition, written by Dunlap, Firth, and Lurie outlined ways to avoid common mistakes in strategy implementation. This led me to do a simple online search for failed strategies. It did not take long for me to find that Kodak was the most recent offender of a strategy that failed to adapt to consumer trends and technology advancements (even though the technology was created in their labs). 

I found an article published on FORBES.com in January of 2012 by Chunka Mui titled, How Kodak Failed. In the article, Mui described Kodak’s “staggering corporate blunder” of failing to recognize the threat digital photography posed to the film and photo industry. According to Mui’s article, the digital camera was first developed by a Kodak engineer in 1975. For decades, Kodak failed to recognize digital photography as a disruptive technology capable of replacing their established film-based dominance.

In 1981, Kodak conducted a study to determine how digital photography would affect the Kodak’s film business. After the report, Kodak concluded that the digital technology was still about ten years away from making a significant impact to the film industry. But in the following ten years, Kodak failed to adjust their strategy for the market disruption. Over the next decade, Kodak continued to regard digital technology as the enemy, rather than an opportunity to enter an emerging market.  

Vincent Barabba, who was an executive at Kodak, recently published a book titled, The Decision Loom, where he outlines four interrelated capabilities that are necessary for effective enterprise-wide decision making.  No doubt, his experiences at Kodak help him formulate the capabilities. Barabba explained that a corporation needs to have an enterprise mindset that is open to change. Kodak failed to accept digital technology as an emerging market which left them far behind the digital curve. Furthermore, they failed to see digital technology as a film replacement.

Failure to adapt strategy to change was the second point discussed in Dunlop, Firth, and Lurie’s Deloitte article. Had Kodak used or paid attention to market research, they would have been able to set a strategy that counterbalanced the loss of market share to digital photos, or at the very least, a strategy to integrate the new technology into their current strategy. 

When Strategy Kills: A lesson on Sears

"The customer is always right!" I've been watching a lot of the ITV/PBS series Mr. Selfridge (staring Jeremy Piven in a very different role than his Entourage breakout as LA agent Ari Gold), partially because it reminds me of close to home (Chicago, Wisconsin), partially because I watch entirely too much costume drama television.

For those of you unfamiliar with Henry Gordon Selfridge, he was involved with making Marshall Fields a blazing success in Chicago, and for coining such standard retail strategy as "The customer is always right" and "Only ___ Shopping Days until Christmas". His work at Marshall Fields, and the department store he founded in London that still bears his name are monumental examples in strong business strategy.

Reading the Collis and Rukstad article on strategy, they closed with the statement "The value of rhetoric should not be underestimated. A 35-word statement can have substantial impact on a company's success."

Selfridge clearly understood that. He constantly integrated his vision to every employee throughout his store. Here's the made-for-tv version of his strategic vision:

Sadly, Collis & Rukstad mention another Chicago retailer in passing while observing consumer value that once had a thriving vision for how to pursue a vision, but no longer. The matrixes relating to Walmart and Sears made me jump because I had recently read a depressing article in Slate about the closing of Sears flagship downtown Chicago store.

They had the following to say about why Sears had faltered and was shuttering stores, "Sears is dying as a result of two not unrelated phenomena: the shrinking of the middle class and the atomization of American culture. It’s still an all-things-for-all-shoppers emporium that sells pool tables, gas grills, televisions, beds and power drills, then cleans your teeth, checks your eyes and fills out your taxes. But that niche is disappearing as customers hunt for bargains on the Internet and in specialty stores, and as the retail world is pulled apart into avant-garde department stores and discounters — exactly what Sears promised it would never be. Maybe in 1975, a salesman and his boss both bought their shirts and ties at Sears, but now the boss shops at Barneys, and the salesman goes to Men’s Wearhouse. This divide is a result of the fact that, over the last two decades, the top 5 percent of earners have increased their share of consumption from 28 percent to 38 percent."

Perhaps Selfridge had Sears beat by 100 years that specialization (with a lot of wow!) was a more profitable business model to sustain changing times, but perhaps not. Sears was a powerful, profitable company that did stay ahead of changing markets for many decades. Slate also linked to an article from Crain's Chicago Business that gave another picture of what's really problematic at Sears these days:

" At 7 a.m., 10 senior Sears executives gather in a sixth-floor conference room in Hoffman Estates for a daily meeting — or, as some refer to it, a "daily beating" — with Edward "Eddie" Lampert. ...

But not knowing whether it's going to be a good Eddie day or a bad Eddie day is just the beginning of the uncertainty that plagues the hallways of Sears' northwest suburban corporate complex.

"You never know what the strategy or the plan is," says one executive who requested anonymity because of a confidentiality agreement. "What are we building? What are the criteria for success?"

Sears soon may face more fundamental questions. After the second-worst year in the company's history, and with its annual shareholders meeting two weeks away, there is open discussion of a once-unthinkable proposition: Will this 126-year-old company, which helped define modern America, continue to exist?

"The challenges the company faces today are far worse than ever before, but they're very much self-inflicted," says Arthur Martinez, who served as CEO from 1995 to 2000."

Clearly, while there have been substantial shifts within the American retail economy, the anonymous  executive's statement makes clear the extent to while Sear's is in grave strategic trouble from within. Much like the Collis and Rukstad article pointed out, the whole company is without strategy, management are hamstrung to make corporate strategic moves that could right the ship, and there's no leadership in place.

Sears has also really failed at analysing the "strategic sweet spot." They've missed the boat on their market's context, accommodating their customer's needs, and aligning the company's capabilities with competitors' offerings.

Also, btw, I have no idea how their Italian-yacht jet-setting CEO hasn't been run off by the board at this point, and well, he could use some tough love from Mr. Ari Gold:

Four years later, Artisphere is still a bust - why?

In 2010, Arlington County, VA built a new arts space to replace what was once the Newseum (which is now in a new location in the District): Artisphere. This would be one of the first spaces of its kind in the area, and certainly one of the largest arts spaces in the county. Unfortunately, Artisphere did not live up to its expectations. Since its opening, Artisphere has failed to remain profitable and has consistently fallen short of its attendance and financial projections. It is clear that senior management at Artisphere was not able to translate or sustain Artisphere’s strategy, leading to an implementation failure.

When Artisphere opened, senior management wanted to open an “Arts Space for Everyone” (ARLnow, 2011), free of the constraints seen in Arlington’s theatres and museums. However, Artisphere failed to define what fell under “Arts” and who “Everyone” was, leading to much confusion. Marketing & Communications staff did not know how to target constituents, and there was a lack of direction in artistic programming.

In addition, Artisphere opened to the public long before it knew how to sustain its strategy. When Artisphere opened on 10/10/10, it hadn’t hired a Marketing & Communications Director or an Executive Director (Baca, 2011). Without these senior staff members, Artisphere was incapable of sustaining its strategy, and could only focus on trying to stay afloat. By the time senior management came on a few months later, it was too late – staff members had already established practices and were resistant to change.

Four years after its opening, Artisphere is still struggling to remain in the black and increase attendance. The Arlington Commission for the Arts has created a new long-range strategic plan with many recommendations for Artisphere, but it will be difficult for Artisphere to shed its reputation as a floundering, aimless endeavor.

Sources,

Artisphere. Accessed April 22, 2014. www.artisphere.com.

“Artisphere, Two Community Centers Could Be on Next Year’s Chopping Block.” ARLnow. February 22, 2013. Accessed April 23, 2014. http://www.arlnow.com/2013/02/22/artisphere-two-community-centers-could-be-on-next-years-chopping-block/.

Baca, Alex. “Artispheric Ambitions: Did Arlington’s New Resident Arts Center Expect Too Much?” Washington City Paper. June 22, 2011. Accessed April 22, 2014. http://www.washingtoncitypaper.com/blogs/artsdesk/general/2011/06/22/artispheric-ambitions-did-arlington’s-new-resident-arts-center-expect-too-much/.

“DEVELOPING – Major Changes Proposed for Artisphere.” ARLnow. November 29, 2011. Accessed April 22, 2014. http://www.arlnow.com/2011/11/29/developing-major-changes-proposed-for-artisphere/.

Sony's Mini Disk Walkman

In 2003, Apple used this slogan in its advertising campaign for iPod in Japan:

 Hello iPod, Goodbye MD

It obviously intended to refer to Sony’s Minidisk player which was popular at that time to carry around and listen to music. Minidisk (MD) is 2.5 x 2.5 inch square media that could record 74 minutes of music (equivalent to one CD album), and later the compress mode enabled four times longer recording time. For me, that was remarkable technology that enables us to carry four albums in my pocket. But after this campaign, iPod started to take off and many of my friends started using iPods. Sony then released enhanced format of MD media called “Hi-MD” but I never seen anyone using that media. As in Apple’s slogan, we said goodbye to MD.

The article “Dynamic Strategy Implementation” (Dunlop, Firth, Lurie Deloitte University Press 2013) explains “three main reasons why strategy implementation fall apart” which are failure to translate the strategy, failure to adapt the strategy, and failure to sustain the strategy. What were the strategy and the implementation behind the Sony’s failure in MD player?

In its corporate strategy for fiscal year 2003 “Confirming Sony’s Position as a Global Leading Brand”, Sony states that:

[Sony] will renew its efforts to enhance group competitiveness and will aim to achieve a business structure securing a consolidated operating profit margin of at least 10% (excluding financial business). Reaching this target will firmly establish Sony's position as a global media and technology company with one of the strongest brands in the world.

Since this was the corporate strategy for Sony group, it is safe to assume that each division in Sony developed business plan based on this strategy statement. So using the three reasons, I would like to analyze what happened to Sony’s portable audio business.

Failure to translate the strategy

Again, the below is the Sony’s growth strategy for audio-visual categories in 2003.

1) Solidifying No. 1 Position in Audio-Visual Categories

Audio-Visual is a core business category, and here we will create a vertically integrated structure through the application of mechatronics and Sony key devices which will result in high added value and product differentiation. This will in turn realize high and sustained profitability. The shift of resources to growth areas like Flat Panel Displays, Optical Disk/HDD Recorders and digital imaging equipment will be accelerated. At the same time added value will be promoted through the application of broadband capability and key devices will increasingly be produced within Sony.

Interestingly, HDD and broadband are mentioned as the growth area. Needless to say, these are the key components of iPod success. So Sony also knew that these are important. But instead of connecting these and coming up with something like iPod, they developed Hi-MD. This could be example of lack of “explicit picture” results in the implementation team building “what they already know or can glean easily” (p.4).

Failure to adapt the strategy

Sony also overlooked the change in the market. Sony’s Walkman evolved from cassette player to CD player to MD player. Initially, the sound of MD was considered inferior to CD. So the implementation teams’ focus might lead to enhancing MD quality i.e. pursuing sustainable technology instead of disruptive technology, as described in Christensen’s Innovator’s Dilemma. For Sony, the first model of iPod with only 5GB storage might not be so much of a threat. However Sony underestimated the significance of the application of broadband capability which iPod fully exploited.

Failure to sustain the strategy

As a barrier to sustain the strategy, the article suggests “organizational resistance”. Sony put “Solidifying No.1 Position in Audio-Visual Categories” as the first growth strategy. Also, it was aware of the importance of internet. However, if Sony tried to start a service like iTunes, it could have caused internal conflict because it could have reduced Sony Music’s record sales. So for the established company like Sony, organizational resistance could be a big barrier for implementing a radical change.

In conclusion, Sony’s failure in portable music player is nothing to do with technological defect or strategic misdirection. In fact Sony’s strategy in 2003 says they were heading to create “a vertically integrated structure through the application of mechatronics and Sony key devices which will result in high added value and product differentiation”. Why wasn’t it a Sony version of iPod, or something more innovative? Well, it might be because of the failures in the implementation phase.

References

Amelia Dunlop, Vincent Firth, Robert Lurie, “Dynamic strategy implementation” 2013

Clayton M. Christensen “Why Good Companies Fail to Thrive in Fast-Moving Industries” 1997

Sony Group Corporate Strategy for 2003 “Confirming Sony's Position as a Leading Global Brand”

http://www.sony.net/SonyInfo/News/Press_Archive/200305/03-023E/

Dynamic strategy - What today's organizations MUST follow

What is the problem with the traditional approach?

Some of the main problems faced by organizations today are their inability to translate their strategy and realize a quantifiable output. The reasons that attribute to this are Failure to translate strategy which happens when the strategy is understood by the senior leadership team but is poorly translated into design principles and downstream implementation choices. Second, it results because of the failure to adopt the strategy since the real world is actually more complex and things change at an accelerated pace. Finally, even if an organization overcomes all these hurdles and implements an efficient strategy, sustaining them is one of the biggest challenges faced by most of the organizations and that is when they fail. This can happen due to poor management, and many organizations succumb to pressure and revert back to the original strategy. So what do organizations today need?

What is Dynamic strategy all about? 

Dynamic strategy has all the elements that are required to combat these issues with the traditional strategy implementation. It helps the organizations to efficiently translate the strategy, adapt during strategy implementation by course of correcting and by building in mechanisms for learning and finally it helps organizations to sustain this strategy by building organizational capabilities and demonstrating impact. The dynamic approach addresses these issues on multiple fronts by articulating actionable design principles which provide direction to implementation teams without being prescriptive. All said but done, dynamic strategy implementation involves a lot of challenges and demands a different kind of leadership attention with consistent focus. Dynamic approach requires the use of metrics that specify a clear line of sight between program deliverable and the desired strategic outcome. Having said this, Can dynamic strategy plans be applied to start-ups as well?

Dynamic strategy for start-ups:

Technology start-ups cannot stick to a proposed strategy plan in most of the cases. This is because, the field of technology grows at a very fast pace and the market space is really competitive. Hence, these kind of organizations need to adapt to changes quickly. Hence a traditional strategy approach cannot be implemented in this kind of a setup. Dynamic strategy approach can be implemented to these start-ups to help them gain market share and help them compete with the big players. The two variables that are a major constraint for these start-ups are Time and cost. Based on these they can build an incremental model which can be reviewed at each point in time and further investments on that front can be decided based on that.  

The bottom line:

Many organizations today are moving towards a more dynamic approach to strategy and leaving behind the traditional approach. Organizations feel that it is easier for them to plan ahead and it does not hurt them monetarily in case the strategy fails to work out. This happens many times in a fast paced environment. So the bottom line is that dynamic strategy does score over the traditional strategy approach as it helps organizations to translate, adapt and sustain the strategy they devised. However, will this be a good

approach for all the organizations? Or is it restricted to only well established firms?

References:

1. Dynamic Strategy Implementation (Dunlop, Firth, and Lurie, Deloitte University 

Press, 2013) 

2. A dynamic strategy for uncertain times - McKinsey & Company

Yahoo's Strategy for the future

Yahoo, once dubbed as force behind explosion of internet, is languishing behind its main competitors. The total valuation for the company in third quarer of 2012 came down to $9 billion, from $128 billion during heights dot com bubble. In 2012, Yahoo’s board of directors have taken a significant step towards its revival by roping in Marrisa Mayer, former google search and mobile executive, as the C.E.O of Yahoo. Ever since Marissa took the office, Yahoo has been on an acquisition spree during which it has reportedly spent around $2 billion.

  

Yahoo's mobile services

The acquisitions include an impressive list of mobile-based startups alongsideTumblr, Xobni and Aviate etc. A closer look into these seemingly random acquisitions, some of them include startups with utter lack of revenues, would reveal strategy Yahoo is planning to pursue in the future. Yahoo, being a web-based company itself, identified that its future growth would be driven by its mobile-based products and search. In addition, Yahoo, which was once a very attractive place for high quality engineers during late 1990’s and early 2000’s, is finding it difficult to attract high quality creative and engineering talent. This formed the genesis behind Yahoo’s Red Ocean Strategy of Acqui-hiring, where it started acquiring companies with expertise in building innovative mobile platforms, to compete in mobile space. The employees of these acquired companies would then be locked in a 2-4 year contract with Yahoo. This is reflected in the fact that Yahoo has closed down 31 out of 38 startups acquired under Marissa’s leadership.

Aviate, personalized mobile platform service

Aviate's flagship features

Alongside making strides towards positioning Yahoo as a mobile-first company, Yahoo has also focused its efforts towards ‘Search’. Through its acquisition of Aviate, a contextual mobile-based platform which learns about users behaviors and displays applications at the right place and right time for the users, Yahoo is seemingly betting big on contextual search, which it believes is the future. If Yahoo manages to bridge mobile services with contextual search, it would be able to provide true personalization to its users which goes beyond intuitive. This would also ensure that Yahoo will remain competent in web space, where companies like Google, Facebook and Amazon etc are currently dominating. Whether Yahoo manages to convert its Acqui-hiring into substantial results will remain to be seen. 

-Bharath

References:-

1) http://techcrunch.com/2014/01/28/yahoo-tomfoolery-bonforte/

2) venturebeat.com/2014/01/07/let-the-2014-acquisition-spree-begin-marissa-mayer-reveals-yahoos-acquisition-of-aviate/

3) http://readwrite.com/2014/01/31/yahoo-microsoft-search#awesm=~oCi69r0sGiWvmw

The Dynamic Approach to Strategic Planning

Andy Cole

Strategy Development

Blog Post 4, Week 6

4/23/14

“The Dynamic Approach to Strategic Planning”

             In his article from the Philanthropy Journal, author Jeffrey Steed explores the benefits of implementing a dynamic strategic plan for an NPO over traditional planning methodologies.  Once an organization establishes its forward vision and outlined mission statements, objectives and milestones can become fixed, creating a “static environment during implementation.”  This can lead to a drain in resources and hinder organizational growth due to, among others, missed opportunities unincorporated in the set strategic plan. 

            Steed suggests taking the traditional strategic plan model and introducing a “dynamic, flexible perspective” to its vision.  The idea, according to Steed, is analogous to an organization’s own mission statement.  By adding a mission-oriented flexible plan for unknown opportunities, a philanthropic organization can incorporate changes to its industrial landscape to better accomplish its vision by economically using its available resources.  One of the best practices among philanthropic organizations in utilizing these flexible mission statements is to, over the course of a strategic plan’s timeline, meet and identify external opportunities.  This will give the organization a valuable opportunity to evaluate the amount of additional resources needed to incorporate such new opportunities among its strategic plan and determine if its worth while for the long-term. 

            Despite the potential to overlook, potentially critical, new opportunities for organizational steps, strategic plans are crucial to an organization’s long and short-term success.  Strategic plans guide organizations’ leaders and their managing of internal resources to drive successful campaigns and programs.  This influences the organization as a whole, allowing staff and other organizational support networks to respond to operational challenges or better execute their respective tasks. 

            While traditional strategic planning helps organizations and their leadership to ‘see the forest for the trees,’ the lack of a flexible perspective during its implementation can be detrimental.    Without the ability to adapt to changes in their internal and external environments, organizations may loose focus or face an impediment that prevents them form moving forward.  As such, organizations may abandon an otherwise valuable plan or (worse for a philanthropic organization) social benefit, wasting valuable resources at a high cost.

            Strategic plan development and implementation present delicate resource allocation, strong leadership, foresight, and a bit of luck.  Adding a dynamic component to a traditional strategic plan is an economic mechanism to decrease the risk of missed opportunities and further an organization’s impact.  Many philanthropies and NPOs utilize mission statements as an overarching objective to best serve constituents and accomplish their set goals, without explaining concrete steps to carry out.  Similarly, a dynamic approach gives an organization the ability to keep its vision in mind without missing new developments or getting boxed in by rigid implementation processes.

Questions/Comments to consider:

1.     What are the most missed opportunities during traditional strategic plans?

2.     How do these missed opportunities effect organizations in the long-term versus the short-term?

3.     Does the issue of traditional versus dynamic strategy implementation lend itself to certain industries over others?

4.     Aren’t all strategic plans inherently dynamic?

Source: http://www.philanthropyjournal.org/resources/managementleadership/dynamic-approach-strategic-planning

Micromax Upsets the Indian Smartphone Market

Last week I wrote about how companies should formulate their 35-word strategy. However, I realized that I know about some great Blue Ocean Strategy success stories that I should share. One such story is the success of Micromax – a consumer Electronics Company based in India primarily known for its smart phone manufacturing. Micromax started as a software company in 2000 but started getting recognition only after they started their mobile phone manufacturing operation in 2007, and became the largest local producers in 2010.During their rudimentary stage in India, Micromax was fighting the big names: Nokia (The erstwhile largest player. Microsoft acquired the giant when they failed due to the lack of pace in their innovation), Samsung, LG, Sony Ericson and others. Micromax tasted success because they adopted strategies that are key to a company adopting the Blue Ocean strategy. Interestingly, as with the case of Blue Oceans, Micromax created a mobile market demand for them by catering to the local Indian tastes, needs, preferences and issues. They did not look far beyond the Red Ocean. They just restructured the boundaries of the existing Red Ocean. Micromax “created a new space, challenged the competition, expanded and catered to the demand and broke the barrier of value-cost trade-off”. Let me discuss their story, and tell how they made all this possible.

India has a mammoth demography spread across the rural and urban areas. One may find it hard to believe, but mobile communication is the chief factor that has redefined the way businesses are done in the last decade. Mobile communication has changed supply chains for the better, integrated the country and enhanced commerce between the rural and urban economy. Now, cell phone being a key element of business, every businessperson- in whatever scales possible- doctors to small vendors- needs it for the success of the business. However, the truth remains that the phone needs to be charged repeatedly. India has imminent power issues, and especially in rural areas. Micromax wanted to create demand by revolving their selling point that addresses the issue. They launched their first model named X1i, which claimed to have battery charging that lasted 30days.This triggered their network effect.

In India, there is hardly any concept of locked phones. Generally, users buy SIM cards and do have the option of selecting from various players who control the spectrum. Many customers use multiple SIMs simultaneously to enjoy the best tariffs provided by each service provider. Again, Mircomax differentiated with smart innovation that fit the local needs. They launched the first dual-SIM phone, which could support two active SIMs at the same time. Other global brands found it difficult to launch their dual-SIM versions very soon.

Post that success, where they made themselves visible amongst the bigger players, came the era of smart phones. Although only around 20% mobile phone users in India use smart phones, Indian market is 3rd largest Smartphone market after China and the US. Owing to the style, features and capabilities, with the changing trends everyone aspires to have Smartphones. However, not all could afford the price for a high-end Samsung model or an iPhone, which is nothing short of a status symbol in India. Micromax appealed the Indian emotion, and targeted the youth by launching a series of low-priced versions of Smartphones. And yes, all Smartphone are powered by Android OS. Android was easily the biggest factor for Micromax’s success.  Market leaders are using android too. Hence, it brought about standardization of mobile OS, and in-turn product differentiation became difficult. In this scenario, the Samsungs and the LGs were at a disadvantage because Mircomax launched a series of smart phones similar to their high-end models at a price a fifth as theirs. They are constantly doing that and have maintained the fast pace of innovation required to sustain in this industry.  They do so by saving on their R&D costs. They use components powered by cutting-edge technology, but just one-generation old- and again, in an industry where a generation lasts only a few months. They do not build components. They smartly customize it by using cheaper products. So far, this formula is working guns for them, at least in India. They have sold large volumes of Smartphones. In fact, now, few of their models have a waiting period. They are raking in the moolahs! They are a billion-dollar company.

Their present target is to unseat Samsung from the top position, which holds the highest market share. Micromax is also increasing its market to other countries like Nepal, Bangladesh, Sri Lanka and Russia. In addition, they are increasing the product line by entering into Tablets, LED TV and 3D Data card market. Though I cannot predict how the company is shaping up for its long-term prospects, I will certainly track what lies ahead for Micromax. 

References:
[1] http://forbesindia.com/article/boardroom/can-micromax-become-indias-leading-smartphone-maker/36577/0
[2] http://yourstory.com/2011/08/the-story-of-micromax-mobiles-meteoric-rise-by-co-founder-vikas-jain-techsparks-2011-grand-finale/

Dynamic Strategy and PNC's Success

In the article this week, PNC Financial Services’ strategic integration of its recent acquisitions is briefly detailed, but the sheer scale is glossed over to an extent.[1] Events of the early 2000s left PNC in a low risk, well capitalized position. PNC was mostly unexposed to the disintegration of the mortgage backed securities—and the mortgages themselves, contained in many other banks balance sheets and in their investment portfolios. As a result, when National City Corporation was hit hard by the crisis, the smaller, more regional player was one of the few banks able to absorb the foundered institution, effectively doubling its size.  With that kind of growth, finding a way to knit together the two organizations presented a monumental opportunity for success or failure.  An article from The Holmes Report in 2011 summarized it as follows: 

• Customers: PNC achieved strong brand awareness in existing markets but was relatively unknown in many National City markets. Further, the bank needed to prepare six million National City customers for the upcoming changes with their banking relationships and accounts. 

• Employees: PNC needed to engage, educate and motivate half of its employees on the benefits of their new employer, while overcoming the stress and uncertainty that accompany a merger.

• Communities: Local community leaders worried about whether the combined bank would invest as heavily as its predecessor in philanthropic pursuits.

•  Shareholders: Investors had high expectations that the company would deliver value on the transaction as it doubled in size, despite the dark economic times.[2]

The dynamic approach to strategy implementation enabled PNC to begin a series of acquisitions and expansions into other areas of financial services as well as a number of banks in the Midwest and southern US.[3] 

Beyond commercial success, however, consider the effect of the cultural push as reflected in public opinion.  PNC is currently the 8^th biggest US bank behind J.P Morgan Chase, Bank of America, Citigroup Inc. Wells Fargo & Co. BNY Mellon, US Bancorp, HSBC North American Holdings Inc, and sometimes Capital One,  depending on the time the list is made. [4][5] Despite its newfound prestige, it suffers few if any of the negative connotations many associate with its larger competitors because it has been able to preserve its core principles and strategy through its expansions.  Following the internal cultural push as well as the corresponding public outreach PNC managed to achieve a “zero negative coverage rating related to customer issues” in the media and outperformed the four peer institutions it was benchmarked against in “Positive Impact Score.” [6]  From core principles to operational achievements to public perception, the guiding strategy here has been the key catalyst of success.

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[1] http://dupress.com/articles/dynamic-strategy-implementation-delivering-on-your-strategic-ambition/

[2] http://www.holmesreport.com/casestudy-info/10751/PNCs-Growth-Shines-During-Dark-Economic-Days.aspx

[3] http://www.bizjournals.com/orlando/news/2010/12/16/pnc-looking-at-regions-bankatlantic.html

[4] http://www.bankrate.com/finance/banking/americas-top-10-biggest-banks.aspx#slide=4

[5] http://www.forbes.com/pictures/eehd45egjjk/8-pnc-financial-services-group/

[6] http://www.holmesreport.com/casestudy-info/10751/PNCs-Growth-Shines-During-Dark-Economic-Days.aspx