The Factors of Production, Corporate Responsibility and Longevity

The factors of production are the four things that every firm must have: land, labor, capital and management (Blick & Dorton, 2007). In the article Creating Shared Value, the authors make arguments for why it is important for companies to grow with their communities, not at the expense of their communities, with the authors’ main reasoning for Shared Value being that companies will make sustainable profits (Porter & Kramer, 2011). While this is true, the motivation for companies should be deeper than just steady profits, the motivation should be longevity.

• Land- Land includes any natural resources a company needs in order to deliver its goods (Blick & Dorton, 2007). As brick and mortar stores become less important to doing business, the need for natural resources remains; all of the physical things that make digital interaction possible are economically scarce resources. Some of those resources can be easily recycled but others are costly to purify and reuse. Companies should invest in finding out how to decrease the price of recycling the materials they need or risk disruption when a competitor figures out how to fill their niche using renewable resources. It is imperative that firms strive to be cleaner to ensure that they have a place and human capital to continue operations.

• Labor- Labor is the human capital that firms need to function. As it has been outlined in Twelve Forces That Will Radically Change How Organizations Work, human capital is one of the fastest changing factors of production (Bhalla, Dyrchs & Strack, 2017). Strategies should outline how they will bring value to their customers and their employees. If businesses neglect their human capital pools they are going to have fewer quality employees, ultimately impacting the way they do business or the kind of business they can do. By putting an emphasis on their employees’ well-being companies are more likely to be able to recruit talent that helps them navigate the changing landscape of the labor market.
• Capital- Capital is the money needed for a company to operate: investment in physical goods and human capital (Blick & Dorton, 2007). Companies should consider what outside factors need to be improved to better serve their customers. If AI and machinery can replace low-skill labor, companies should be investing in education to produce the higher skilled workers they will need to operate the AI and machinery. If a company finds that their shipping times are slow because roads are poor, they should be willing to invest in the roads so that they can better serve their customers. Strategies should address the ways in which a company will invest and add value to its environment, even if the company is not the sole beneficiary of the investment.
  Management is the last of the four factors of production and, while it is obviously important to have proper management to organize the three other factors of production, strategies inherently cater to management because management helps write and execute them. According to 2018 Corporate Longevity Forecast: Creative Destruction is Accelerating, managers would be wise to create corporate cultures that support creativity and innovation so that they can achieve longevity (Anthony, Viguerie, Schwartz & Landeghem, 2018). And very wise managers will recognize that companies who bring value to all aspects of their business model will be harder to supplant.

Strategic Planning

The biggest mistake companies make when developing a strategy is trying to make the future as predictable as possible. Using reams of data and analyzing them, lulls them into a sense of false comfort and blinds them to trends that are emerging but not yet on the horizon. It kills the creative aspect of strategic planning and evaluating distant possibilities out into the future that are uncertain. In order to come up with a successful strategy is to have the right mix of both “creative intellect” and “scientific approach”.

Barbell portfolio is one of the approaches that can be used to find the perfect balance between data analysis and creative ‘distant’ ideas popularized by Nicholas Nasim Taleb in his book “Antifragile: Things that gain from disorder”. In a barbell portfolio, you have extremely safe investments on one side with a low stable return which are balanced by extremely risky investments (options, credit swap derivatives) on the other end. The idea is that using a barbell strategy allows you to place risky bets that are balanced by the profitable sections of your business. Nicholas explains it in his own words:

“The first step toward antifragility consists in first decreasing downside, rather than increasing upside; that is, by lowering exposure to negative Black Swans and letting natural antifragility work by itself.”

Hence, by using profitable segments of your business to subsidize risky bets that don’t provide an upside (profits) but make you somewhat immune to new trends that may be emerging and threaten your existing profitable business segments. This was the strategy that was described by John Chambers former CEO of Cisco Systems wherein he described how they have innovated and caught on emerging trends by acquisitions or by creating small companies/divisions (start-ups) to work independently on emerging technologies that are emerging but not yet profitable.

One of the pitfalls, companies often fall into is not trying to pursue possibilities that are uncertain but hold promise. Instead, they do not want their existing businesses to be cannibalized by these new emerging segments or rejecting strategies that are profitable in favor of those that hold promise but are uncertain.

Hence barbell strategy is one of the ideal ways to pursue ideas that are promising, uncertain, risky and have a high chance of failures by using resources generated from existing legacy business. This would ensure that when an emerging technology emerges the firm would not be left on the sidelines but would be an active part of the emerging narrative around that new product/idea and adapt it.

Blog 4: I can say what my strategy is!

This week, for the very first time I want to reflect on the actual experiences I had as an intern at two, big companies in terms of their strategy implementation.

The first company, let’s call it X, had a long-term goal of becoming a leader in the industry. They really knew they were lagging behind their competition and were hopelessly trying to work on things that were putting them at the end of the race. To make things even worse, operating in an old, well-established market put them in a miserable position of desperately trying to distinguish themselves by making incremental changes to their product offerings.

The second company - Y - was already a leader in its own market. Even though at the time they did not really have any competition performing better than they were, they knew that even a second of inattention to current trends would put them at the end of the race. The realized that their competitive advantage would not last forever and tried to anticipate future trends. Because of that, they wrapped their entire strategy around a very simple message that could be communicated to all employees: We want to make everything AI first.

I think the stark difference between X and Y perfectly shows how important strategy execution actually is in a corporate environment. As Collis and Rukstad discuss in their Can you say what your strategy is? article having a sharp focus that any employee of the company can articulate puts it way ahead of the competition. X knew where they wanted to be but failed to decide how to actually go about implementing their strategy and so failed most of the tests described in the McKinsey article Have you tested your strategy lately?

Obviously, starting from a more disadvantaged position than Y (not an industry leader, lagging behind) made it more difficult for them to focus on the future trends. This thought seemed to me surprisingly similar to the Back Bay Battery Inc. case: a well-developed product with some established customers being slowly replaced by some incumbent companies offering a completely different approach to the market problems.

There are two surprising conclusions I have about these realizations:

1. It is really inspiring to see how different strategy development frameworks can actually help to avoid these well-known traps.
2. As an employee at these companies, these strategy implementations actually did make a lot of difference on the daily basis. At Y, it was very clear to prioritize what to do next.

Based on those observations it is really clear to me how strategy execution truly is one of the most important aspects of strategy development.

The art of balancing tensions in a company

In this blog, I aim to draw parallels with the 4 tensions given in the "Good Strategy Execution Requires Balancing 4 Tensions" article and how the company I previously worked at, balanced these 4 tensions.

The tension no. 1 instantly reminded me of the general level of stress in the company. The targets for each team was decided by an onsite who worked remotely at the client company location. These onsites usually did not have a holistic understanding of the available resources to build solutions for the clients. These onsites set the project targets and timelines without consulting the teams. This caused a lot of stress and conflicts among the team members. What would have helped would be an inspiring end state that the team members could agree on and relate to. It would have resulted in a better quality of work.

What I loved about this company was that every individual was encouraged to participate in challenging the companies' strategies or adoption of process and policies. Your position in the organization did not facilitate you or limit you from this participation. The company was mindful in balancing Tension no. 2 by integrating top-down control and democratization of change. During my tenure, the company wanted to change the salary policy from just getting a base income to getting a base plus bonus income. The CEO encouraged focus groups to be formed using representing participants from each team across the company. In the end, the focus groups came out with an organized structure for bonuses. This structure was adopted as the new compensation policy. Most people across the company were satisfied with the policy. They felt that their views were being represented by people in the focus teams and the decision wasn't solely made by the upper management.

Every quarter, we were asked to give our managers a feedback of our current flow in at work. All we had to do was to evaluate what stage of flow we were in the flow model by Mihaly Csikszentmihalyi.

This evaluation, helped my manager and me to recognize if the pressure for results was affecting poorly or if my skill development was not happening at the rate I want. The use of this flow model helped in balancing tension no. 3 of capability development versus pressure for results at an individual level.

The company had a set disciplined process for problem definition by using an internal tool that had specific sections to be filled. Every team I worked in was encouraged to have 2-3 brainstorming sessions to just discuss and define the business problem in any way we wanted to. Post this we had to use the internal tool to put the problem definition in a more formal setting. This exercise helped balance the tension no. 4, Creativity versus discipline.

References:
1. https://hbr.org/2017/11/good-strategy-execution-requires-balancing-4-tensions
2. Image Source : https://dubioblog.com/2012/01/30/my-optimal-how-being-in-a-state-flow/

Disruptive Technologies of the Future

There are many definitions for Disruptive technologies like –

Disruptive technologies are those that significantly alter the way businesses or entire industries operate. Often times, these technologies force companies to alter the way they approach their business, or risk losing market share or becoming irrelevant [1].

As per Clayson Christesen  - Disruption is the process whereby a small company with few resources successfully challenges a larger established incumbent business or invents entirely new markets [1].

Going through these definitions and through intuition there are many such technologies that can disrupt the markets in the near future. It is interesting to study these technologies and their potential to disrupt the market.  For a technology to be considered disruptive it is very important that it answers the following questions “What change does it bring to people’s lives ? What benefit do people gain out of it ? Why would people be bothered to use it?” (credits to Prof. Tim Zak).

Some of these technologies that I can think of are as given below.

1.  Genome Editing – While having a chat with professor Tim Zak last week he suggested that Gene editing has a great potential to become a disruptive technology in the near future. Genome editing is a genetic engineering method in which the DNAs are inserted, deleted, modified or replaced in a living organism[2]. Although it is currently banned or under strict regulations in many countries like UK and US due to its unpredictability of safety and long lasting effects, but once research proves that it is safe and will not have any biological, mental or social effects then it has great potential to be mainstream technology in the near future. Currently China has invested heavily and has claimed to make twins HIV resistant using Genome editing.

Genome editing would have the highest impact on people’s live as it will change how people are born, their health, their appearance, everything. Hence, Genome editing can become a disruptive technology in the near future.

2.  Hyperloop -  A hyperloop is a sealed tube or system of tubes through which a pod may travel free of air resistance or friction conveying people or objects at high speed while being very efficient[3]. Hyperloop is reinventing transportation and providing a unique way of long distance travel. It has the potential to disrupt the exiting technologies of long distance transportation like Air, Land, Rail and water travel. Although there are many challenegs at present before it becomes successful like technology barrier, safety of travel, cost of travel, infrastructure requirement, availability of land and paths for building hyperloop rails, government approvals, etc. Like any new technology even this technology would have to go through various challenges but with the support from all sectors of industry, government and people, this technology can become a great disruptor in the transportation industry. Again this technology too would have a great impact on transportation as it will enable speedy transportation for people and can even be cheaper than air travel due to reduced needs of fuels. Hence, I think that it has a potential to become a market disruptor in the near future.

3.  Teleportation – Teleportation is transporting an object from one place to another instantaneously without traversing the physical space between them. The concept that was portrayed in movie Star Trek. Although this seems to be extremely far fetched but scientists today have successfully teleported photons in an experiment. Although it will take around 100 years or more for the technology to be fully capable enough to teleport objects or even humans it will for sure be a disruptive technology for transfer. I believe Amazon should start investing into this technology if it sees itself growing and sustainable for another 50 – 70 years. Just imagine, you order something on Amazon and it is teleported instantaneously to you. That will be the greatest disruptor for any delivery industry. Imagine you can go anywhere in the world using the Teleporting booths. It will change the transportation industry once and for all. How will impact human lives ? The answer is very clear. The world will be closer than ever. Distance will no longer remain a dimension to be traversed. It will truly change the way we travel and see the world.

There are many other potential disruptive technologies but according to me these are the most impacting ones and have a varied timeline where they will act as disruptors.

References –

1.  https://www.investopedia.com/terms/d/disruptive-technology.asp

2. https://en.wikipedia.org/wiki/Genome_editing

3.  https://en.wikipedia.org/wiki/Hyperloop

A piece of the pie after disruption

A piece of the pie after disruption

Disruptive technologies give us products that are cheaper and more convenient, thus attracting a lot of users. They may also have a substitution effect for businesses that were providing similar goods or services. At the point that a “disruptor” enters the market, it is difficult to predict the outcomes. Any drastic success catches the losers and regulators off-guard.

That is how Kenyan banks, micro-finance institutions and other providers of financial services found themselves starting a race late in the day behind Safaricom, Kenya’s leading provider of mobile money transfers services. For many years, Kenya had commercial banks which were concentrated in urban areas. Most of the urban areas were outside the reach of residents of rural areas who had to travel long distances to access financial services. As a result, the proportion of Kenyans that were banked was very low. Peasant farmers and low-income earners were almost entirely neglected and had little or no access to banking services.

Enter MPESA, Safaricom’s mobile money transfer service. Because mobile phone penetration was so high among Kenyans, both rural and urban, the mobile money transfer service found a highly receptive user. Banking services were delivered to the palm of the user’s hand, via a cell phone. The uptake of this service was exponential, beyond the expectations of traditional banks and regulators such as the Revenue Authority. With a cell phone and a registered SIM card, you could send or receive money, save and even take small loans. With the growth in MPESA, a lot of profit was made. Safaricom must not be complaining, with all the profits it has reaped from the high usage of MPESA services.

The mobile money transfer pie is attractive. What with an average of KES 15 billion (approx. US$ 150m) transacted on the platform per day? [1] Traditional banks are now falling over themselves to redesign their banking platforms to be compatible with MPESA. Every business worth its salt has a mobile money payment system or uses a platform that is compatible with mobile money transfer. And alas! The taxman is not blind to the potential revenue that can be collected from billions of transactions generated by mobile money transfers. Almost a decade after MPESA was introduced in Kenya in 2007, the Government imposed excise duty tax on mobile money transfer services that is charged per transaction.

Disruption is good. But as part of strategy, businesses that fall victim to disruption should find ways to either leave that market segment or claim a piece of the pie early enough. As a Kenyan bank, the growth of mobile money transfer should have shifted the agenda in the boardroom to how to capitalize on that growth and share in the profits. This should also have happened sooner than it did.

Strategic Value Creation

The world is so complex with a lot of moving parts where things move and change quickly. The temptations often in these circumstances is to try to make a complicated strategy to respond to the complicated world. This is totally wrong. The argument is that the complexity of the world can be dealt with a simple strategy. This being said the strategy could be very simple with just simple rules. Digging in a bit deeper into strategy, there are numerous terms that define strategy but it could also be done in a very crisp manner. It is just about how one creates value, captures it and sustains it. If we focus on the creation of a value which is the first step, basically all the things that have been written, all the different ideas, can be reduced down to three core logics around value creation. The first is the value creation through position. A favorable and attractive market is identified, a position is staked out in the market and high barriers of entry is created to keep the competitors out. The barriers could be of different kinds such as patents and regulatory issues.

The second is the resource-based approach to value creation. Here the basic idea is owning and controlling the resources that have a certain set of characteristics. They need to be rare( something only we own and not everyone else), they are valuable(value for the customers) and very difficult to imitate. Basically, competitors cannot quickly build a brand as it takes time and effort to build. If there is a resource with these characteristics, and we own and control that resource, it becomes very hard for the competitors to grab the value created. The third one is a very interesting one. It is the opportunity logic of value creation. Here it is around see a gap in the marketplace, identifying an unserved customer need and then assembling the resources we need to pursue this gap in the market. So we don't own the position or the resources but create value to an extent the uncertainty is managed in pursuing a new opportunity.

I want to go back to my undergraduate time when a strategy had to be built around how a new cafe that I co-founded could come and compete with the college cafeteria that was holding the monopoly in the market. We initially analyzed the trends in customer behavior. What was liked, what was hated, and the various pain points were dealt with more caution and carefulness. We created a customer journey map, noted down the touchpoints, realized the pain points and worked towards solving these pain points. It was an iterative process where we made a few mistakes in the assumptions but identified and rectified them at the earliest iterative phase. We did the things the cafeteria did not care to give importance to. We promoted new food products, gave discounts and offered an app booking that created more value to the customer. This took a bit longer to have an effect but in the end, the effect was massive. We completely managed to overthrow the college cafeteria that did not care to change its strategy when it had a new player in the market.

The Unbearable Lightness of Being

A few years ago, I managed a small publishing nonprofit in the R. of Georgia. Strategy development for nonprofits, especially small ones in small countries, is very dissimilar to private sector development that this week's readings focused on. When I first started this position, I was tasked with developing a five-year plan by the organization's board. We had a market advantage (we provided very high-quality translations of NYT best sellers for free or nearly free to poor people), we had a strong brand, and the strategy I inherited would like pass most of the 10 "Have you tested your strategy lately?" tests from the McKinsey report by Bradley, Hirt, and Smit. The mission was solid, how we were going about it was working. But...we didn't have any money. And we didn't have a plan to fund ourselves. So in a way, perhaps this example doesn't quite jive with this week's readings. I couldn't just jack up the price of Oil of Olay to convince consumers to buy (or whatever the translated book equivalent would be), not just because we were a nonprofit, but because contractually to our donors (few that they were) we weren't allowed to. 

The objective and scope as Collis and Rukstad discuss in "Can You Say What Your Strategy Is?" were each problem areas (as mentioned above, we were good on advantage). We struggled with scope, because chasing after whatever money for whatever kind of project vaguely overlaps with what we were doing was the norm. At one point, I had secured funding to start a radio station while being pressured by one of the board members to start a chain of (non-profit) cafes. These only peripherally if at all had anything to do with translating, printing, and distributing books to poor people. The objective took a little work to put into words, but in the end, largely from needing boilerplate for grant applications, I had ironed out where the organization wanted to be in 2 and 5 years. These things are hard. The only thing we were good at was the core activities, and we were bad at the rest of them (the radio station tangent, in the end, fizzled out). 

When I give this as the answer to the interview question, “Tell me about a time when you worked on strategy development” (or a close equivalent), I always tell this story and its variations like it all worked out and I was the hero. Collis and Rukstad (well, Collis at least) would be shocked to find out that it’s not just that nonprofit directors can’t articulate a strategy (like the dirty little secret of for-profit executives) but that few even have tried to have a strategy, and that making one is harder, I would proffer, than in the for-profit world (unless it’s more of a foundation, in which case it’s hard because there’s too much money and no one really has to care about outcomes [or at least that’s my anecdotal standpoint, solely from my own experiences]). Nonprofits are great at honing a perfect mission statements and project goals. But strategy? Not so much.

References

Can You Say What Your Strategy Is? (Collis and Rukstad, Harvard Business Review, April 2008)

Have You Tested Your Strategy Lately? (McKinsey Quarterly, January 2011)

Bringing Science to the Art of Strategy (Lafley, Martin, Rivin, and Siggelkow, Harvard Business Review, September 2012)

Tailor your strategy for success

Strategy planning and development is important to every business and a vital component that defines the journey to success. The goals of a company in-line with its mission and vision help them follow the path to greater achievements. A small business owner works closely with the small set of staff to plan the marketing, sales and customer service strategies whereas larger organizations follow a more siloed approach and have subject matter experts defining the strategies of each of the multiple departments in the organization.

Audi, a premium segment automobile company have had a very successful strategy in the past years. They’ve grown from selling around 1,00,000 cars in 2008 to over 2,00,000 cars in 2016 in the US[1]. This has been a mix of corporate strategies and competitive advantages they have leveraged to overcome the extremely competitive market. Audi follows a segmentation model to divide its luxury and cosy cars on Psychographics and Behavioral factors. It targets a niche segment of population who can afford an Audi and appreciate the design and the brand. Audi also targets the younger generation who love to drive and markets the technology and drive to them. As this segment of the population is growing, Audi is investing more in its RS series of vehicles to provide a better drive. Being a part of the Volkswagen group, Audi has the global buying power of VW and its distribution channel which puts it in the driver seat when compared to BMW and Mercedes, its two main competitors[2].

Walmart on the other hand has a very different strategy in which it markets it goods as a commodity and thrives on offering the lowest price in the market. This is a “cost leadership strategy enabled by the economies of scale derived by the company in a significant attempt[3]”. Working on increasing its online business Walmart is utilizing a different strategy and via this over 75% of its sales are coming from non-store items which makes it more cost efficient.

In my previous organization Cleartrip, an online travel company we implemented a sustainable strategy during the price wars between four major players. Rather than targeting the price sensitive customers we marketed the premium and corporate customers who valued quality over price. The higher markup gave us a chance to provide better customer service and acquire over 90% of that segment contributing to over 60% of the revenue.

A strategy that worked for someone in the industry is not sure to guaranteed to work for all other companies in the industry. Strategies are tailored to suit the needs of the company and meet the market conditions. These should be revisited and adjusted according to the fluctuating market conditions and the goals of the organization to keep the company on the right track.

[1] Audi US car sales figures. (n.d.). Retrieved from http://carsalesbase.com/us-car-sales-data/audi/

[2] Bhasin, H., & Facebook. (2018, March 05). Marketing strategy of Audi - Audi marketing strategy. Retrieved from https://www.marketing91.com/marketing-strategy-audi/

[3] Walmart Business Strategy and Competitive Advantage. (2016, March 28). Retrieved from https://research-methodology.net/walmart-business-strategy/

Processing thoughts on Methods for Ideation and Testing

 “Bringing Science to the Art of Strategy,” utilized the example of Proctor & Gamble’s Olay in order to demonstrate a process that is often spoken of conceptually, but lacks demonstration. After reading the article, I went back and used the Proctor and Gamble Oil of Olay example to answer the questions from “Have you Tested your Strategy Lately?” This process helped to demonstrate the usefulness of the questioning process. It also illustrated how the process for creating strategy outlined in the Lafley article inherently helps to avoid the pitfalls that the questions are exposing. For example, Biased Strategy, question number eight in the article, is avoided in the Lafley process in two ways; by 1) making sure the leader is not in his or her typical role, and 2) the facilitator continues to encourage the suspension of judgement. These methods avoid the pitfalls of anchoring, over-optimism and confirmation bias.  Likewise, P&G would be able to answer confidently to the question “Is your strategy granular about where to compete?” due to the Lafley process. Looking at the strategy of putting Oil of Olay in the prestige channel and asking the question, “What must we believe that the end customers value,” and “What must we believe about the strategically distinct segments?” allowed for Proctor and Gamble to recognize that customers at the edges of two distinct segments could be drawn in by the product at right price. It hinged on drawing buyers from two different behavioral and psychographic segments to a singular well priced product. Using the Proctor and Gamble example helped me to recognize value in the “Have you Tested Your Strategy Lately?” article.

The readings from this week also are causing me to consider the intersection of different methods of ideation and testing. The method in the Lafley article begins the strategy process by creating at least two possibilities of what could be true in the future.  It does not go into detail about methods for that process, it only states that choices will help to focus the group on the future rather than analysis. However, some analysis must be present prior to this moment, especially when dealing with a broad question. Depending on the intended target of the strategy, this could be a point of intersection with design thinking methods that can help to identify a direction for the brainstorming process. A broad question of “How do we improve experience?” for example, has infinite potential variables; a process of narrowing down the direction based on research is necessary. Design thinking helps to take some information from past data or research and find a direction for focus. Recently, I was part of a design thinking process that narrowed down the scope of improvement possibilities by taking responses from qualitative field research and clustering them by similarities. This process helped to reveal a common thread and proved an direction for the team to begin brainstorming. Having different methods that have overlapping qualities helps to tailor the process on the specific questions and needs of a group. 

Validating your strategy

For managers, devising strategy can be a daunting task – what’s even more is implementing it – even carefully crafted strategies can fail miserably. However, the good news is that your strategy can be tested. It can be tested across certain parameters most crucial to propelling your organization to newer heights and victories. McKinsey’s “Have you tested your strategy?” presents a neat framework that can be adopted as tool by leaders and managers to experiment their strategic positioning in the market and among competitors.

As someone who is about to step into the corporate world and an aspiring leader, I have drawn certain inferences and key take-aways from the article that help me streamline my thinking and develop a mindset necessary to achieve business and personal developmental goals.

One of test that I found most useful was (and since strategy is – the way I see it – winning against competition) to determine whether you are truly harnessing your competitive edge in the market place. I also can leverage Porter’s 3 methods to evaluate my organizations true source of competitiveness. For example, one of the determinants that Michael Porter talks about is “Benefit”. Questions such as “What would my customers miss if I do not provide a specific service or good?” Other than that, being aware of what trends or external forces that are affecting my product and service in the market place. For example, for a content provider (such as Netflix, Hulu) who provides services to customers that are based on the interned and requires them to be online, internet service providers must also be in place. Understanding such an inter dependencies and dynamics in businesses can be crucial to drive up revenues and margins.

Another aspect that McKinsey has shed light on is the idea of how readily your strategy can handle uncertainty and unpredictable situations. As a technology professional I think this area of thought is most relevant to me given that technology is one of the most rapidly changing and advancing industries. Absorbing the variables that could highly impact decisions and prioritization would need to be considered first. Using tools and techniques such as scenario and sensitivity analysis can be helpful in terms of gauging what factors, given a certain degree of uncertainty might influence your decision the most, and then to direct most attention to those.

While uncertainty is pretty much out of control, bias is another controllable force that can truly influence the outcome and implementation of your strategy in many cases – McKinsey classifies it as “unintentional fuzzy thinking”. The article accurately highlights how strategy can blind-sighted by different kinds of biases and faulty logic that arise simply out of human tendencies in decision making. Developing multiple hypothesis and having multitude of perspective from different people can be a good way to start and build a solid data-base.

According to me, and building on top of the previous point, given the plethora of data in today’s day and age, it can be one of the strongest tools for an organization for many reasons. One, to construct a strong insight into what is happening in the business. Two, to be able to incorporate a wide range of possible outcomes (as discussed earlier) to build and validate hypotheses, and thereby moving a step closer to fulfilling goals.

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References:

https://www.thebalance.com/what-is-competitive-advantage-3-strategies-that-work-3305828

On Choosing Your Battles (and Is the Status Quo One of Them?)

McKinsey Quarterly's “Have You Tested Your Strategy Lately?” (2011) boldly claims that “80 percent of the variance in revenue growth is explained by choices about where to compete...leaving only 20 percent explained by choices about how to compete.” This points to the essential distinction between strategy and tactics--not how you fight your battles, but which battles you fight. In the organization where I last worked, the most contentious elements of our five-year strategic planning process, completed last year, boiled down to this very distinction and confirmed that for a well functioning organization, the most valuable strategic question may not be about how, but where you spend your resources.

I now believe the process was effective in producing a strong strategy for the organization. At the time, however, I was, naively, surprised that the emerging strategic plan had little--almost nothing at all, in fact--to do with how we conducted operations in service to our students. Instead, the central questions focused around which students, how many, at what schools, and at what level of education we would choose to serve--basically a question of “mission creep” or strategic re-positioning.

A weaker part of the process (from what I can understand from where I was in the organization at the time) was that because the status quo seemed generally to be good, it was not held under the same scrutiny as alternatives. In Lafley, Martin, Rivkin, and Siggelkow’s (2012) suggestion, in “Bringing Science to the Art of Strategy,” that leadership treat strategic planning with a process similar to the scientific method, the authors propose including the status quo as one among several strategic alternatives and examining the risks and benefits associated with maintaining strategy and operations as they are. My organization adopted a strategic plan that maintained and build upon, rather than altering, the status quo--this may turn out to have been a wise choice; however, I believe the resulting plan would have looked differently had the current state of things been questioned as intensively as the strategic alternatives we considered.

The human mind is naturally given to analyzing alternatives, costs, and probabilities ineffectively--hence the complexity and value that deep data analysis and probabilistic modeling have brought to modern economies. Organizations and companies capable of considering the costs and benefits not only of alternative strategic options, but also of the status quo become more agile and capable of otherwise uncomfortable change in the face of unpredictable markets.

References

"Have you tested your strategy lately? - McKinsey & Company." https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/have-you-tested-your-strategy-lately. Accessed 27 Nov. 2018.

"Bringing Science to the Art of Strategy - Harvard Business Review." https://hbr.org/2012/09/bringing-science-to-the-art-of-strategy. Accessed 27 Nov. 2018.

How my first college club failed

In my last year in college, I founded the university’s first Diplomacy Club, the Youth Diplomat with one of my friends. As the co-founder and the Director of Marketing, I spent a lot of time and effort on building the vision for the club and advocating it through various creative marketing campaigns. And because of our networks, we succeeded to get support from the school and some prestigious faculties. Our effort did get paid off in the following semester – our club member had grown to over 60 in half of year. However, as I graduated with my friend, the other co-founder, the club soon collapsed.

If I am to reflect on the failure of my first “start-up” experience today, I think there are at least two tensions I and the rest of the board members failed to address: (1) the inspiring end-state versus challenging targets; (2) top-down control versus democratization of change.

After managing several projects myself, I realized the importance of establishing a clear mission and goal for every team member; that was why when I started my own club, I spent a lot of effort on that. The board members had many detailed discussions on how to brand the club, what value should we deliver, and how to promote the club to the rest of the school. As a result, we targeted the right group of people, we delivered our promises clearly, and built up a promising world that attracted people to join. It all went very well for a semester, but then when it came to the re-election of board members, we realized we didn’t establish a solid organizational structure. The regular activities were usually only organized by some key members so that most of the team members are not fully participating in the running of the club. Therefore, despite having a very promising end goal, we fail to live up to our promises because we spent too much energy on marketing and branding, but not enough on program development and daily management. By the time we have acquired enough club members and started to focus on the latter, the first board members are already graduating.

Apart from that, we didn’t build up an effective communication channel. Considering it was a new club and took time to grow, the founding members tried to keep our decision-making process somewhat arbitrary – we made important decisions only within the board members. As a result, it was both hard for the rest of the club to contribute to the growth of the club, and hard for them to make sense of where this club was going. This has made many of our core members lose their interest gradually because of lack of a sense of ownership; this has also sort of led to when it came to the re-election, many few people were interested in running for the board members role.

If I were to learn about strategy implementation at that time, I wish I could have spent more time on managing our deliverables to keep our promises and building a more inclusive, participating environment for the whole team.

Implementing a strategy and being a good leader for it!

When companies talk about strategies there is usually a component of change and a visualization of the future in a different way, in the desired status. Harvard Business Review authors Collis and Rusktad present the idea of the importance of understanding your own strategy for your company, of leaders and executives being able to explain the exact strategy in a simple friendly approach. Explaining your strategy, or any other thing in life, means you understand fully the topic. And despite the fact that it might sound obvious what you want to achieve, it is not so obvious how you would get there and why you need or want that, what are the ultimate motivations for that.

Some elements about the strategy that has to be clear are the objective (end), the scope (domain) and the advantage (means). Understanding a strategy gives an advantage of executing it successfully. For an executive, communicating in a clear manner and motivating a new strategy for the rest of the company is key for it to succeed.

According to Horan and Connerty (2017), good leaders take care of the following four specific aspects: inspiring people to make the change needed by giving them a compelling purpose, democratizing change, building capabilities rather than pressuring for results and lastly, knowing the balance between creativity and discipline for a company. It might sound easy to do but it is hard to get people on board and make changes, specially when employees have been doing the same thing for years and are perfectly comfortable in doing that. That is why the first task is very important: how to inspire people in wanting to make a change. It is necessary to have a convincing and attractive reason for doing this, and the second task also helps: making this change a democratized one, where everyone feels part of it as a group and is not a top-down control. At the same time, including people in the decision can be useful for generating interesting ideas and insight. As Lafley, Roger, et al (2012) point out, having different individuals participate and give ideas about the project, with diversity of specialties, backgrounds, and experience is key in the art of strategy, “this not only deepens practical wisdom but also builds early commitment to and knowledge of the strategy that is ultimately chosen”. This is finding ways of generating creative strategies, that might not be conventional but could bring great approaches to change.

 To finalize it is important to know exactly what you want to achieve and how you will measure the success of it. As Lafly, Roger et al (2012) created the conditions that have to be true for an attractive strategy. Some ideas of them are to generate a list of all the conditions needed and that it enhances a respectful and participating discussion. There is never a right and wrong answer, but a spectrum of possibilities available. When it comes to strategies, the questions that should be posed are exactly that: what are the right questions to make, what is needed to know?. This means is always about finding more information, complementing knowledge, rather than trying to establish a good/wrong concept or idea.

Collis and Rukstad. Can You Say What Your Strategy Is?. Harvard Business Review, April 2008

Have You Tested Your Strategy Lately?,McKinsey Quarterly, January 2011. Available at: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/haveyou-tested-your-strategy-lately

Lafley, Martin, Rivin, and Siggelkow. Bringing Science to the Art of Strategy. Harvard Business Review, September 2012

Horan and Connerty. Good Strategy Execution Requires Balancing Four Tensions. Harvard Business Review, November 2017. https://hbr.org/2017/11/good-strategy-executionrequires-balancing-4-tensions

Cards on the table

One of the biggest initial challenges entrepreneurs face is to build a strategic vision for their company. While they may have a generic vision in mind for the company’s future 4-5 years down the line, they usually fail to align the vision to the product roadmap and strategy. While the strategy is built with creativity and a generic vision in mind, it has to be backed with solid data and plan. The first step is for companies to identify the approach they plan to use. A top down approach is one of he most common approaches used to build a vision and strategy. A centralized approach is normally used at a micro-level but for a higher level vision, the top down approach is used with the burden of implementation being pushed on the lower levels. A bottom-top approach promotes team bonding and a healthy work culture with ideas being promoted from the root level. Many companies struggle in striking a balance between these two approaches and often lose out on good strategy alignment by not using a bottom top approach.

Once the approach is identified, companies focus on specifying conditions for the strategy that they choose to move ahead with. Many organizations rely on the usability testing they conduct to capture these requirements and shape their requirements accordingly. Companies that move into implementation without testing tread through thin ice and many a times their products fail due to the lack of significant user insights. Kellogg’s for example released cornflakes as a breakfast cereal in the Indian market without realising the fact that the Indian customer base was not accustomed to consuming milk in cold form. The texture of the cornflakes that was released could not withstand the heat of boiled milk, which resulted in Kellogg’s releasing an extra crunchier version of corn flakes for its Indian market. The biggest fallacy in this case was the fact that Kellogg’s did not build a strong product strategy that aligned with its business objectives and it was missing user insights prior to product implementation.

It is imperative for companies to lay out their strategy and vision clearly in front of their employees to align all the future projects to the ultimate vision. Amazon as a company is famous for strictly following its 14 leadership principles and all the projects undertaken are strongly aligned with these leadership principles. Thus, having a clear plan in mind and backing this plan by solid data is key for every company to successfully align its projects to its ultimate strategy and vision.

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References

• https://www.inloox.com/company/blog/articles/back-to-basics-8-top-down-versus-bottom-up-project-planning/
• https://www.strategyand.pwc.com/technology-strategy
•  http://www.albrightstrategy.com/ten_reasons.html

Implementing Strategy for The Future of Futurist Club

Simon Horan and Michael Connerty, authors of the article “Good Strategy Execution Requires Balancing 4 Tensions” [1] outline clearly four obstacles in implementing strategy. They juxtapose four sets of “tensions” that need to be balancing to create and maintain successful implementation.

In an effort to better understand these tensions and how they impact strategy implementation, I have used the Futurist Club of Carnegie Mellon University, of which I am the President, as a case study to analyze and discuss strategic decision-making to create optimal balance.

Tension #1: An inspiring end-state versus challenging targets

The Futurist Club’s end-state goals are to increase sustained engagement in club activity across campus, improve and increase offerings of high value events, increase social media presence, and develop and maintain connections with a variety of industry experts and other clubs on campus. The difficulty in outlining and executing that strategy is measuring progress and focus on mid-level targets. It’s critical that the club define these goals and targets to avoid “a sense that the initiative lacked a compelling purpose.” [1]

Ultimately, to solve for this tension, the Futurist Club holds weekly meetings to discuss and discover how our end-state goals can be measured. In these meetings, we also consider the turnover rate of officer and leadership positions in the club, which is naturally high because most of the members of the club are graduate students who stay between 9 months - 2 years. Having meetings that include all of these club leaders increases the accountability of the group and sustains an ‘institutional memory’ that facilitates executing goals. The ‘ownership’ of goals within sub-teams like the ‘events team’ or the ‘recruitment team’ that define their own methods of achieving goals also improves the ‘ownership’ of achieving goals.

Tension #2: Top-down control versus democratization of change

As the President of the Futurist Club, this tension is top of mind for me. From the article, the authors state, “when everyone in the organization feels empowered to make decisions that can influence change, it creates a palpable energy...but the flip side can be myriad groups of enthusiastic change agents dashing off in multiple, uncoordinated directions.”

The tension in Futurist Club is also correlated to the leadership turnover rate. For this reason, the facilitated weekly meetings for our leadership positions in the club have developed a mission, vision, and overall constitution that guides our strategy. As the President, I serve as guidance and perspective, a living memory to pass along the vision of the foundation of the club. The specific leadership sub-teams develop the vision for each of their scopes, and club advisors (professors and outside experts on Futurism) serve as mentors to guide our final vision. This way, all members feel ultimately involved in creating and executing a vision, but the checks and balances of presidentiary decision-making and advisory guidance ensure that we have a clear path.

Tension #3: Capability development versus pressure for results

The Futurist Club also faces this tension between developing the club officer’s internal skills, capabilities, and strategy as futurists and the pressure to continuously host events and create value for our members. We want to develop new exciting activities and events, which requires intense research and discovery as well as further training for us as the leadership team. However, we need to balance our time in planning and running the existing events and activities that keep our members interested and involved in our club.

To solve for this tension, the leadership team, this semester, has streamlined our event offerings to include our top 2 most popular and successful event series’ to maintain our membership base, and have developed a repeatable system for planning and executing these events to minimize the time spent working on them. We utilize the extra time in weekly meetings to share skills between the team, discuss strategies and method with outside experts, and familiarize ourselves with the community of futurists in Pittsburgh to develop our capabilities as future-thinkers.

Tension #4: Creativity versus discipline

Simon Horan and Michael Connerty state that creativity vs discipline, “at its best this can lead to unanticipated insights and outcomes, but at its worst it can lead to chaos and complete unaccountability for results.” In the Futurist Club, there is an infinite amount of creative potential in our event planning, organizational structure, and other club activities. The difficulty in allowing for the space and mindset of creativity is direction: being creative at the right place, in the right time, for the right amount of time, and in the right direction. Unbounded creativity can spiral a strategy instead of spearheading it.

For the Futurist Club, we manage this through closely facilitating our meetings and setting expectations and goals before they begin. We have designated sessions for ideation, with guidelines for divergent thinking. We also have designated sessions for critical evaluation or focused decision-making, with guidelines for convergent thinking. The guidelines act as bumpers for bowling lanes; constraints that drive our meetings toward a goal without impeding it. Having a pre-defined difference between these types of meetings satisfies our needs to ideate freely and to make tough down selection decisions when necessary. 

[1] https://hbr.org/2017/11/good-strategy-execution-requires-balancing-4-tensions

Disruptive Innovation and Public Policy

The interaction of public policy and disruptive innovation is interesting because of their diametrically opposite natures. Policies usually are formulated as a reaction to a need/issue in society. Whereas, disruptive innovation creates technologies that get adopted later to satisfy a need in the society. This the reason why it is said that policy is usually a few years behind a technological change. However, public policy can and should play a more proactive role in the area of disruptive innovation for two reasons. First, policies can be a catalyst for such innovations. Second, policies can anticipate and create appropriate regulatory frameworks for disruptive innovations.^[1]

Public policy can be a tool to facilitate disruptive innovations. The traditional route has been to give tax incentive to companies and make doing business easier for startups, which are usually the source of disruptive innovations. However, policies could also enable these innovations through more partnership between government research agencies and private organizations. Government policies could facilitate involvement of individual entrepreneurs through programs and portals to accelerate recognition and further development of disruptive innovation that might be out there. Disruptive innovation breeds competition and creates new markets, both of which are advantageous to the economy.

While fostering sustaining innovation is straightforward, encouraging disruptive innovation comes with its risks. The reason is that disruptive innovation creates a new market^[2] and hence unanticipated regulatory issues. One such example is the advent of electronic medical devices. Only after several safety and use concerns could the Food and Drug Administration(FDA) create regulations for the medical device market. More recently, bitcoin and use of artificial intelligence has created regulatory concerns. I believe the reason why policies cannot respond well to new innovations is the same as that why established companies cannot. Clayton Christenson in his book described that the process and values of an organization although effective could be the hindrance in developing or competing against disruptive innovation.^[2]  The myopic design of certain policies makes it difficult for the government agencies to implement them in the markets created by disruptive technologies.

Although Uber is not a disruptive technology by Christenson’s definition^[2], it presents an example how innovations can easily circumvent regulatory policies, in this case the taxi regulation laws. Granted that the existing regulatory policies cannot anticipate new markets and disruptions. However, had the relevant government agencies been on an active lookout for disruption, they could have responded to Uber’s rise efficiently. Wharton Professor Sarah Light and her colleagues coined the term ‘policy disruption’ to explain the scenario in which new businesses and innovations challenge the existing regulatory schema.^[3]Policy-makers in the future will have to respond to disruption proactively to remain risk averse to any innovations. They need to invest time and resources in assessment of disruptive products and processes to analyze and predict the regulatory framework for the corresponding new markets.

Governments through their policies should enable disruptive innovation. This in turn will give them insight into development of robust regulatory schemes for the future markets.

References:

1] "Disruptive Innovation – Policy Implications." Visionary Analytics. http://www.visionary.lt/disruptive-innovation-policy-implications

2] Christensen, Clayton M. (1997) The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Boston, MA: Harvard Business School Press (Introduction and Chapter 7)

3] Business Radio. "Regulating Disruptive Innovation: Here Are the Key Challenges." Knowledge@Wharton. http://knowledge.wharton.upenn.edu/article/when-business-blows-up-policy-how-to-regulate-disruptions/