Blog #4 (Development to Implementation)

In order to successfully implement strategy, a clearly defined and shared strategy is important. Both leaders and their employees must be able to clearly define their company's strategy, in order to make decisions that will lead to success.

In “Can You Say What Your Strategy is?” Collis and Rukstad state that most business leaders cannot give a pithy summary of their company’s strategy, and that this is true even at successful companies. On the flip side, when an organization clearly defines its strategy, the decision makers then know what the specific goal is, so they can then make decisions that actually align with that goal. The employees at different levels of the organization can work toward the direction of the goal as well.

It is important for staff at different levels to know the organization’s strategy. The company’s objective should be very specific; for example, it should lay out a timeline and contain measurable items. When clearly defined in this way, it becomes easier to implement, because the strategy can be disseminated throughout the organization and more easily digested by employees, to ensure that everyone is employing their energies in the same direction. Employees knowing the strategy also prevents frustration, since the work feels more purposeful and less arbitrary.

I am a research administrator at the CyLab Security and Privacy Institute, at CMU, where I manage a portfolio of sponsored research awards. One thing that differentiates CyLab from, for example, the Electrical and Computer Engineering department, is that CyLab is not an academic department; instead, it is a research institute, and its objective is to be an umbrella for, specifically, cybersecurity and privacy research at CMU. The reason I know this as an administrative staff member, is that this kind of information is disseminated to us at regular department gatherings. Knowing that CyLab’s focus and strength is multi-disciplinary and cross-college faculty research, in diverse areas such as blockchain, internet of things, facial biometrics, etc, allows it to focus on that competitive advantage; using this as its means to an end. Defining objective, scope, and advantage requires trade-offs: CyLab administrative staff’s resources are therefore allocated toward facilitating faculty research, rather than more traditional academic roles, such as facilitating classes and academic advising.

Making these kinds of choices in effort allocation is essential. A clearly defined and disseminated strategy among both leaders and employees at all levels is an important piece of strategy implementation.

Blog #4: Taking Strategy from Development to Implementation

A key takeaway that I kept getting after completing this week’s readings was at how important it is to clearly define the company’s competitive advantage from the beginning during development and then to the implementation. However, I feel that while crafting a strategy based on a competitive advantage can be done in different ways for a startup than an established company. In the article by Bradley, Hirt, and Smit, I tried to apply the 10 tests of a strategy to the company that I worked at during my internship this past summer (to the best of my knowledge). Like most other companies, I think they passed at most 3 or 4 of the tests, but some cannot be answered yet. The company is a startup and even though I believe these are all important tests to develop a strategy, I’m not quite sure they can all be applied to a startup. For example, the test of translating strategy in an action plan isn’t quite possible yet. We cannot apply a full action plan because we have not figured out all of the processes and mechanisms that will be in place to ensure success. We are still testing and developing new processes to find what works. We constantly must shift our focus and strategy extremely quickly based on the results we were finding, and we didn’t always have time to sit down and develop an entire strategic plan to help drive sales of a new product. Also, we are still working to define the population that the competitive advantage can be applied so once that is defined the other tests may become more applicable.

Even though the company did not pass all 10 of these tests, I believe everyone in the company could easily articulate the objective, scope, and advantage of the business in a simple statement like Collis and Rukstad had stressed the importance of. I feel this is more important for a startup that is still trying to find its niche than the 10 tests defined by Bradley, Hirt, and Smit. For example, all decisions can be based on this statement. If a decision is not supported by the objective, scope, and competitive advantage then it should not be done. It helps ground a new company and keep them focused on the values that got them started and fueled.

I believe that the article by Lafley, Martin, Rivkin, and Siggelkow about applying a scientific approach to defining a strategy can work extremely well with a startup.  All seven steps in the ‘Seven Steps to Strategy Making’ can be applied but specifically the designing of tests and conducting of the tests to make a decision can be the most beneficial to startups. Being able to test out processes before defining a strategy can help save massive amounts of time and money for an organization trying to find a strategy to implement.

Blog#4: Taking Strategy from Development to Implementation

Taking Strategy from Development to Implementation

The correct time to assess your strategy is NOW! “Rather than looking for the next musing, it’s probably better to be thorough about what we know is true and make sure we do that well”, said Phil Rosenzweig, a professor at IMD on being asked, “What’s the next new thing in strategy?”.[1]

The above line is well said as the strategy cannot be formulated to a framework of rules and procedures. A strategy is generally idiosyncratic to their organization, people and markets. Also, many strategies emerge over time rather than from a process of deliberate formulation. [2]

However, strategists also need to take care of the emerging trends that affect the business. Chris, Martin and Sven tell us that, there are ten tests on their list, and not all are created equal. The first— “will it beat the market?”—is comprehensive. The remaining nine disaggregate the picture of a market-beating strategy, though it’s certainly possible for a strategy to succeed without “passing” all nine of them.

Two of the nine tests – Test 4 talks about “Does your strategy put you ahead of trends?”, and “Test 6: Does your strategy embrace uncertainty?”[1]

As the article states, many strategies place too much weight on the continuation of the status quo because they extrapolate from the past three to five years, a time frame too brief to capture the true violence of market forces.[1] Unwillingness to cannibalize a legacy business or an attachment to yesterday’s formula for success shook the real-time industry of Blockbuster. Netflix crushed the market with a new trend. Blockbuster’s company spokesperson said, "We have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future." It doesn't look like things have gone according to plan. Although Blockbuster began a rentals-by-mail and streaming service belatedly to fight against competitors like Netflix, they didn't come on strong enough or soon enough. It was a battle between old technology and new technology, and it looks like new technology won out in the end. One of the most interesting stats on the infographic is the fact that "Back in 2000, Blockbuster declined several offers to purchase Netflix for a mere $50 million." The offer was not too shabby for a company that was, at the time, bringing in billions of dollars in revenue. Blockbuster is certainly hitting themselves for not jumping at the offer, which may have seemed irrelevant and unimportant at the time.[3] Blockbuster's strategy neither put Blockbuster ahead of the trend nor embraced the uncertainty. 

Thus, we see how emerging technology can transition a well set up industry. “We can say that technology by itself is not the disruptor. Customer centricity is. Amazon did not kill retailers. Convenience and better range did.” – Mad Over Marketing

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[1] https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/have-you-tested-your-strategy-lately

[2] For a classic statement of the idea that strategies are more emergent than planned, see Henry Mintzberg, “Crafting Strategy,” Harvard Business Review, 1987, July–August, Volume 65, Number 4, pp. 66–75.

[3] https://www.businessinsider.com/how-netflix-bankrupted-and-destroyed-blockbuster-infographic-2011-3

Blog #4: Taking Strategy from Development to Implementation

Lafley, Martin, Rivkin, and Siggelkow (2012) maintain that most strategic plannings would fail to build their scientific foundation. The processes tend to lack two crucial scientific elements: “the creation of novel hypotheses,” and “the careful generation of custom-tailored tests of those hypotheses” (p. 4). For scientific strategic plannings, the authors propose to argue about strategic options instead of issues to be addressed. They also provide the seven steps which allow companies to evaluate strategic options quantitatively. These recommendations would be useful not only for business enterprises but governments to make strategies.

Importance to shift from issues to options could apply to public policy-making. In national energy policy-making in Japan, for instance, policy goals are energy security (stable supply of energy), economic efficiency (inexpensive energy for industries and citizens), and environmental protection (climate change mitigation). These three goals are often partly incompatible each other, but all are fundamental as a country. Therefore, the government needs to balance them. For the sake, it would be essential to decompose the policy goals into policy elements and consider several paths to achieve the goals effectively.

As an example, the Japanese government has to argue options scientifically to achieve the reduction of greenhouse gas emissions, one of the most important issues globally. Here, setting a goal of the zero-emission economy in 2050 should not be a strategy. There would be several ways to get there, and each path has some uncertainty and hurdles we need to overcome. Introducing renewable energy is so expensive in Japan, where solar and wind resources are limited. Nuclear power, another zero-emission energy source, faces public hesitation due to safety concern. Improving energy efficiency also requires massive investments and can decrease only a part of greenhouse gas emissions. The government needs to analyze various combinations among these measures and find an ambitious but pragmatic option to reduce carbon emissions while securing a stable supply of energy and economic growth.

Moreover, testing hypotheses seems crucial for public policy-making. The government would implement it before asking policy options to its politicians and citizens. In Japan, the government generally conduct the tests with advisory committees which consist of academic and industry experts as well as consumer representatives. The government holds several meetings to hear their opinions, which sometimes makes the government conduct additional studies to verify policy options.

In the example above of energy sources, the government formulates its best option by mobilizing the expertise in the advisory committee on energy. The government first collects necessary data, uses energy economic simulation models, and narrows down a promising combination of energy sources. Then, it proposes a promising composition of power sources to the advisory committee with estimated costs, greenhouse gas emissions, and energy security index. It also demonstrates sensitivity analyses of alternating an energy source to another in terms of the three estimates. Based on the discussion in the committee, the government corrects its strategy if necessary, before entering political confirmation processes.

Blog #3 - Internal Organizational Analysis and Developing Strategic Options (Part II)

In continuation with the first part of the series as studied last week, delving deeper into Internal Organizational Analysis and Developing Strategic Options. I feel as though I have only doubled down on my view that innovation is a benefit (and perhaps a curse due to the lack of focus it brings) that is more available to smaller firms than larger ones. Smaller firms being so light on their feet and having team members who simply by ratio of member to team have significantly more sway than they would in a larger firm. Staying Ahead of Technology reinforces this as we could see from the article that the size of the firm permitted “idea ripples” or “foresight” from the team members to permeate through and actually be seriously considered.  Staying in touch with the market and consumers appeared a far simpler task than it would for a mega company.

I believe that there are then two categories for companies that should dictate whether a company remains small so as to be adaptable and innovative or larger and more rigid. If the business is more quantity based, I think they can afford to be larger and less light on their feet, simply because profitability arises from doubling down on proven methods and executing as efficiently as possible. On the other hand, if a company is more “socially conscious” reactiveness especially when serving a narrow consumer sector is more important.

Blog #3 Developing Strategic Options

Strategizing plans for a company, big or small, is not an easy task. The strategy needs to align with the company vision, market conditions, and they should always keep an eye out for any changes on planet earth that could be disruptive to their business or strategy. The company might not have to act as soon as they spot something but need to be aware and even prepared, in some cases, to act. It is also important to see what is happening at the edges of the market to know what could be the next disruptive innovation that could lead to the failure of a company’s business model. In the book “The Innovator’s Dilemma” the authors talk about disruptive innovation and why some companies fail when they choose to ignore it.

Uber is an example of disruptive innovation in the transport industry. Before Uber, people used to rely on public transport services like bus, subway or personal vehicles. When Uber decided to move from the black limousine (as they started initially) to a more commercial, affordable market, it became the face of disruptive innovation. Speaking in the context of Mumbai, India, the traditional taxi services were available only during a specific time and you had to go to certain taxi points to get a cab. There were a few companies like ‘Meru’ who had their taxi service and we had to call them to book a cab, but it usually was subject to the cab availability at that time. These services had limited capacity in terms of drivers and cars which limited them from doing any better. When Uber launched in India with this affordable and super convenient way of transport, it redefined the mode of transportation in India. It empowered both the riders and the drivers both by giving the people the choice to do either. The whole business model is based on not hiring any employees to drive for the company but having the people choose to be drivers and earn from it. Another thing that added convenience was not having to pay in cash, which further secured their position in the ride-sharing industry.

Following the success of Uber, Meru also switched to an app-based service, but the market was already taken over by companies like Uber and Ola in India. Now they have come up with other perks for the drivers like they allowed the drivers to set their prices within the government regulated price range. This is giving them an edge over Uber and Ola whose prices are set at the government-regulated price. Meru riders are allowed “to choose from up to 10 taxis whose fares, expected time of arrival, vehicle model and driver ratings”. This although is a slight differentiator, it isn’t enough to sustain in the industry in the long term. Uber had been in other countries long before they expanded to India. If Meru had looked at the edges and seen what was happening, they could have easily been at the top of the game today because they already had the finances and Infrastructure set up in the market.

In conclusion, strategy development should also involve looking at the edges of the industry and the current capabilities of the organization and not be afraid to take risks and invest (maybe just a little at the beginning) in these edge technologies.

REFERENCES:

(1)    Cisco’s CEO on Staying Ahead of Technology Shifts(Chambers, Harvard Business Review, May 2015); https://hbr.org/2015/05/ciscos-ceo-on-staying-ahead-of-technology-shifts

(2)    Why Good Companies Fail to Thrive in Fast Moving IndustriesandDiscovering New and Emerging Markets(Christensen, Introduction to and Chapter 7of The Innovator’s Dilemma, 1997)

(3)    Agarwal, Surabhi. “Meru Rides to Marketplace to Catch up with Its Rivals.” The Economic Times, Economic Times, 15 Mar. 2018, https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/meru-rides-to-marketplace-to-catch-up-with-its-rivals/articleshow/63309737.cms.

(4)    Horn, Michael. “Uber, Disruptive Innovation And Regulated Markets.” Forbes, Forbes Magazine, 21 June 2016, https://www.forbes.com/sites/michaelhorn/2016/06/20/uber-disruptive-innovation-and-regulated-markets/#74d3064b37fb.

Blog #3: Develop strategic options to evolve, or be Extinct!

‘Impossible burger’ created a new market for itself by providing a totally different product: meat made by plant extracts. The brand first started out by offering its unique burger in restaurants across the country. The meteoric rise in popularity of the burger led the leadership team to change its strategy by making the product available in grocery stores ^[1]. Similarly, Netflix, during tough financial times, pivoted from its media-by-mail strategy to online streaming strategy and created a whole new market for itself ^[2]. The move changed the traditional movie-retail industry and propelled Netflix to become the market leader. At the same time, Blockbuster, then-market-leader in movie and video game retail, did not adopt to the changing industry and became obsolete ^{[Figure 1]}. Companies that innovate and create new markets for themselves perform well in those markets, and traditional companies that do not respond to the changing industry dynamics are destined to fail.

Industry leaders have learned a great deal of things from the cautionary tale of Blockbuster. John Chambers, the former CEO of Cisco, strategizes such that he can stay ahead of technological shifts ^[3]. The biggest hurdle for any company, which prevents it from adapting market shift, is the fear of ‘Self Cannibalization’. No company wants to invest in products that would steal market share from its cash-cows (Money generating product lines). However, this short-term profit proves to be a long-term loss. Kodak, the then-market-leader in cameras and films, lost its lead because it could not adapt to digital pictures. John – during his tenure at Cisco – made sure that Cisco provided high quality products, and never hesitated to invest into products of the future that might even rival established Cisco products ^[3]. This ensured that Cisco was strategically positioned every time there was a market shift.

Creating your own market: Airbnb created a whole new market for itself by providing a platform where individual users can rent their apartments for few days. In the traditional market, customers would rent a hotel suite as per the tenure of their stay. However, Airbnb disrupted this traditional market by allowing anyone to rent their apartment like a hotel suite. The uniqueness of Airbnb’s product allowed it to grow exponentially ^{[Figure 2]}.

Embracing market shift: Walmart, a company known for the cheapness of its products and operational efficiency, has traditionally conducted business through its giant retail stores. By assessing the current shift in customer’s purchasing pattern – retail stores to online stores – Walmart enhanced their strategy to incorporate ecommerce as a core service. The company invested heavily to ramp up its online services, decrease the turn around time of package delivery (two-day shipping), and acquire established ecommerce players ^[4]. Walmart stayed competitive by preparing well in advance towards the changing industry.

Source:

[1]: https://www.theverge.com/2019/9/19/20869271/impossible-burger-foods-gelsons-markets-southern-california-meat-free-plant-based, Accessed September 24, 2019

[2]: https://www.inc.com/minda-zetlin/netflix-blockbuster-meeting-marc-randolph-reed-hastings-john-antioco.html, Accessed September 24, 2019

[3]: https://hbr.org/2015/05/ciscos-ceo-on-staying-ahead-of-technology-shifts, Accessed September 24, 2019

[4]: https://techcrunch.com/2018/08/20/walmart-flipkart-deal-done/, Accessed September 24, 2019

[Figure 1]: https://www.businessinsider.com/how-netflix-bankrupted-and-destroyed-blockbuster-infographic-2011-3, Accessed September 24, 2019

[Figure 2]: https://www.businessinsider.com.au/airbnbs-summer-reach-has-grown-by-353-times-in-5-years-2015-9, Accessed September 24, 2019

Figure 2

Figure 1

Blog #3: Developing Strategic Options

Something evident from this week’s readings was the difficulty in assessing when a company should listen to its customers and when it should not. In the excerpt from Why Good Companies Fail to Thrive in Fast Moving Industries, Christensen addresses companies that perform in a way that would be objectively considered “good management.” As he says, “good management was the most powerful reason they failed to stay atop their industries. Precisely because these firms listened to their customers, invested aggressively in new technologies that would provide their customers more and better products of the sort they wanted …they lost their positions of leadership." 

Meanwhile, in the HBR article by Cisco’s CEO, he acknowledged moments in the company’s history that were successful explicitly because they chose to listen to customer needs and desires. Said Chambers, “customers helped us spot a market shift and pointed us toward a new technology that would be useful in making the leap.”  If Cisco would not have listened to the customer signals, they would likely have continued with the same strategies and investments in technology that yielded higher profit margins, rather than shifting to the lower-margin, higher-investment disruptive technologies.

In short, Cisco is listening to its customers and succeeding, while companies that fall under Christensen’s “good companies failing to thrive” category are listening to its customers and failing. What is Cisco doing differently? Christensen makes the point that disruptive technologies are not rational investments, and customers initially do not want the products being offered. This is where Cisco succeeds: they take the cue of what the customers say they need and develop technologies based on the need, rather than developing a technology and telling the customers what they need.

When it comes to investing in disruptive technologies, companies need to follow the Cisco model and listen to customer needs.

References:

Christensen, Clayton M. The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, 1997.
https://hbr.org/2015/05/ciscos-ceo-on-staying-ahead-of-technology-shifts

Week 5: Developing Strategic Options (Part II)

The article, Cisco’s CEO on Staying Ahead of Technology Shifts by John Chambers, as well as the introduction of The Innovator’s Dilemma provide important perspectives on how companies should embrace and conquer ever-changing markets. Chambers summarized the overall approach to these changes in the market best: view market disruption as an opportunity, not as a threat, and modify your company’s strategic options/plans accordingly. This will provide the executives with the appropriate market trends, consumer insight, and information about the market disruption to accurately reshape and shift approaches.

To achieve and maintain market success, it is helpful to reference both of the Ocean Strategy approaches. Competing and sustaining relevance in a market means identifying where one’s company currently prospers in the industry, having sufficient knowledge on its consumers, and generating accurate market trends and potential innovations. If these unique insights are identified early-on during the process, a company can behave similar to a start-up in its research and development approach by creating and developing the new technology or innovation in-house. This could be achieved by allocating the appropriate resources and staffing to the R&D department or engaging in certain agile software development frameworks (i.e. Scrum) to efficiently work toward completing the task at hand. After creating the necessary innovation, it’s important to be bold both in terms of the deliverable itself and when to make the shift, which is one key way to avoid unsuccessful disruption. Monitoring the market and general consumer-supplier complex will help to pinpoint where exactly the market is changing, and where the new companies trying to exploit this area are. Once this discovery is made, the organization has to have the correct executive judgement - open-minded yet calculated – to alter the company’s methods and ideals.

I believe two examples summarize both aspects of this strategic approach: Blockbuster and Toyota. In terms of the retail movie and video industry, Blockbuster had full control over the market back in early 2000s. However, due to inaccurate market projection and staying persistent (even stubborn) in the company’s strategic plan of continuing to be a retail movie outlet, they allowed Netflix to capitalize on a newly emerging digital, technology-driven movie and video watching platform. The industry pivoted without any technological advancements made by Blockbuster to remain competitive, which is why they could not achieve sustaining relevance during this market disruption. On the other hand, Toyota created its Lexus SUV during a time where the market seemed to have no place or value for its presence. However, Toyota had read the market well, acted wisely (and boldly) on its decision, and created market disruption in the luxury SUV market. Since Toyota could create its SUV with cheaper parts than other luxury brands, they were able to sell their new luxury SUV at a much more affordable price than that of BMW, Mercedes, etc. This appealed to a broader, untapped SUV population that was eager to experience this new Toyota Lexus SUV and disrupt the existing market.

References:

1.     Discovering New and Emerging Markets – Clayton M. Christensen

2.     Innovator’s Dilemma: Introduction: Why Good Companies Fail to Thrive in Fast-Moving Industries – Clayton M. Christensen

3.     https://hbr.org/2015/05/ciscos-ceo-on-staying-ahead-of-technology-shifts

4.     https://digital.hbs.edu/platform-digit/submission/blockbuster-from-blockbuster-to-bomb-an-industry-leaders-stunning-failure/