The book starts off with a flyer describing the various
facets used by the companies for competing in the future and that are usually restructuring
and Reengineering. There have been good picks in regard to the actual scenario
of the Industries and about the senior management like the questions asked to
them and the answers given, definitely don’t suffice for the future. The
questions are:-
·
What percentage of your time is spent on
external, rather than internal issues?
·
The time spent looking outward, how much of it is
spent considering how the world could be different in the five or ten years, as
opposed to worrying about winning the next big contract or how to respond to a
competitor’s pricing?
·
The time devoted to looking outward and forward,
how much of it is spent in consultation with colleagues, where the objective is
to build a deeply shared, well tested view of the future than a personal and
idiosyncratic view?
For competing the main theme highlighted is the use of Restructuring
and reengineering, they have more to do with shoring up today’s businesses than
creating tomorrow’s industries. Neither is a substitute for creating the future.
These are usually followed when companies face a competitiveness problem -
stagnant growth, declining margins and falling market share.
How these are used is explained here. Now to increase their
profits the companies have a formula = (net income)/ (investments or capital
employed). Now the numerator is where reengineering should be done and mostly
what is followed is the denominator rule where restructuring happens.
Reengineering aims to root out needless work and get every process in the
company pointed in the direction of customer satisfaction, reduced cycle time
and total quality. So, it provides at least hope, if not always the reality, of
getting better and smaller. Any company that is more successful at
restructuring will find itself getting smaller faster than it is getting
better. The point is that in many companies, process reengineering and
advantage-building efforts are more about catching up than getting out in
front. It is not enough for a company to get smaller and better and faster than,
as important as these tasks may be; a company must also be capable of
fundamentally reconceiving itself, of regenerating its core strategies, and of
reinventing its industry. In short, a company must also be capable of getting
different. The real competitive problem is laggards versus challengers,
incumbents versus innovators, the inertial and initiative versus the
imaginative. Successfully managing the task of organizational transformation
can make a firm lean and fleet-footed; it cannot turn a firm into an industry
pioneer. And although being a fast follower is better than being a slow
follower, neither is a recipe for extraordinary growth and profitability. To be
a leader, a company must take charge of the process of industry transformation.
Only when restructuring and reengineering fail to halt corporate decline do
most companies consider the need to regenerate their strategy and reinvent
their industry which till then marks a negative step for the organization as
they are left behind to set the industry standards
To compete successfully for the future, senior managers must
first understand just how competition for the future is different from
competition for the present. The differences are profound. They challenge the
traditional perspectives on strategy and competition. Competing for the future
requires not only a redefinition of strategy, but also a definition of top
management’s role in creating strategy. How can one maximize market share in an
industry where the product or service concept is still under defined, where
customer segments have yet to solidify, and customer preferences are still
poorly understood?
Competition for the future is competition for opportunity
share rather than market share. Competition for the future is not product
versus product or business versus business, but company versus company. To make the company competitive, future
opportunities are unlikely to fit neatly within existing SBU boundaries,
competing for the future must be a corporate responsibility, and not just the
responsibility of individual business unit heads. Second, the competencies
needed to access the new opportunity arena may well be spread across a number
of business units, and it is up to the corporation to bring the new
competencies necessary to access tomorrow’s markets may well tax the resources
and patience of a single business unit. So the questions for top managers are:-
“How do we orchestrate all the resources of the firm to create the future?” or
“What can we do that other companies might find difficult to do?” Companies
that see strategy as primarily a positioning exercise are industry rule-takers
rather than rule breakers and rule-makers; they are unlikely to be the defining
entity in their industry, now or ever. But to create the future, a company must
first be able to forget some of its past.
And forgetting the past starts from within. Often that
precedents, enacted into policy manuals, corporate processes and training
programs often outlive the particular industry context that created them. An industry full of clones is an opportunity
for any company that isn’t locked into the dominant managerial frame. Land is a
mystery to fish and by the time a fish discovers land, it is usually too
late-the poor creature’s on a hook. In the same way, a company’s genetic coding
limits its perception of novel opportunities and non-traditional competitors. A
company following into these footsteps falls into a laggard and then out of the
market. A laggard is a company where senior management has failed to write off
its depreciating intellectual capital fast enough and has underinvested in
creating new intellectual capital. A laggard is a company where senior managers
believe they know more about how the industry works than they actually do and
where what they do know is out of date. So to remove this the company has to do
something they have never done or say do it in different manner like leaving a
bit of play in administrative procedures or being a bit more reluctant to use
the lessons of the past to train employees for the future or it may mean a
greater willingness to hire and promote individuals who aren’t “just like us”.
Although much in vogue, creating a “learning organization” is only half the
solution. Just as important is creating an “unlearning” organization. A firm’s
stake in the past is economic as well as emotional. For a successful firm, the
definition of served market, the value proposition put forward to customers,
the margin and value-added structure, the particular configuration of assets
and skills that yield those margins and supporting administrative systems
together constitute an integral and well-tuned profit engine. To escape the gravitational
pull of the past, managers must be convinced that future success is less than
inevitable. No company will walk away from some of its past unless it feels
that repeating the past won’t guarantee future success. Unlearning happens when
employees are confronted with the potential disconnect between the success
recipes of the past and the competitive challenges of the future.
While unlearning and exploring into new horizons the company
should pave a way for the employees for the future. To successfully compete for
the future a company must be capable of enlarging its opportunity horizon. This
requires top management to conceive of the company as a portfolio of core
competencies rather than a portfolio of individual business units. Business
units are typically defined in terms of a specific product-market focus, whereas
core competencies connote a broad class of customer benefits. Any company that
can’t conceive of markets, both the existing and potential, in functionality
terms isn’t likely to create the future. To move and set the industry future, the
company should look to integrate the core competence and functionality thinking
that points a firm forward toward unexplored competitive space. It is core
competence and functionality thinking that allow companies to move beyond what
is to what could be. When it comes to creating the future, one wide eyed
innocent may be worth ten sophisticated scenario planners. What makes the
future difficult to anticipate is not that the future is inherently unknowable,
but that the forces conspiring to produce the future often lie well outside top
management’s purview. Any group charged with finding the future needs to
encompass an eclectic mix of individual perspectives. No one functional group,
no single geographic entity and no one business unit can find the future on its
own. Each is partially blind. There are 3 types of companies looking beyond the
customer led , first , companies that try to lead customers where they don’t
want to go; second, companies that listen to customers and then respond to
their articulated needs and companies that lead customers where they want to
go, but don’t know it yet. Companies that create the future do more than
satisfy the customers, they constantly amaze them.
For amazing the customers, not only must the future be
imagined, it must be built; hence the term “Strategic Architecture”. It is not
a detailed plan. It identifies the major capabilities to be built, but doesn’t
specify exactly how they are to be built. It is broad opportunity approach
plan. “Sometimes trying to tune up the old engine is like putting lipstick on a
pig!” To words that describe the edge of a company over others is Globalize implies an ability to use
information technology to span geographical, cultural and organizational
boundaries. Informationalize implies
helping customers convert data into information, information into knowledge and
knowledge into effective action. Individualize
refers to the mass customization of information services and products by and
for individuals.
To make a strategic architecture the companies should first
do a bit of content analysis by pulling together answers from the managers.
First, how did they interpret the word future? Did it mean next year, Five year
plan, or a decade hence? In other words, how far out do the headlights of your
management team shine? How much foresight does it actually have? Second, how
encompassing is its view of the future? How broad it its conception of the
industry and of the forces that might reshape it? Is the team trapped in the
myopia of currently served markets, or does it see a broad vista of new
opportunities? Third, how competitively unique is its view of the future? Would
it surprise competitors unique is its view of the future? Would it surprise
competitors or provoke a yawn? Fourth, what degree of consensus exists about
how the future might be different? Without a fair degree of consensus, it’s
easy to spend money on everything, but not really commit to anything. Any
fifth, have the implications of potential industry changes been considered in
enough detail so the short term implications for action are clear? Making an
analysis of the answers the strategic intent forms a big part to implement the strategy.
Strategic intent is strategic architecture’s capstone. A
strategic architecture may point the way to the future, but it’s an ambitious
and compelling strategic intent that provides the emotional and intellectual energy
for the journey. Strategic architecture is the brain; Strategic intent is the
heart. It implies a significant stretch for the organization. Current
capabilities and resources are manifestly insufficient to the task. Whereas the
traditional view of strategy focuses on the “fit” between existing resources
and emerging opportunities, strategic intent creates, by design, a substantial
“misfit” between resources and aspirations. The most often problem in the
strategic implementation when not going the way as desired is they just don’t
seem to have a clear idea of where they are trying to get to. To remove such
problem the company should personalize strategic intent by setting clear
corporate challenges that focus everyone’s attention on the next key advantage
or capability to be built. It is sometimes said that the pursuit of total
quality is the key to management innovation. To the uninitiated this must sound
strange indeed. What has quality got to do with innovation in management
methods? The connection is simple. The foundation of a quality program is a
willingness to trace every quality problem back to its roots. The fact is that
those roots usually reach far beyond the immediate vicinity of the problem.
They reach into areas like supplier relationships, process design, information
systems, physical infrastructure and the like. And it is those closest to the
quality problems that are best placed to offer real insight into how corporate
processes and system could be improved. Whenever the strategy goes wrong, what
often happens is that the blame is on the all the employees and there are
layoffs and pay cut in the bottom line is the first to happen, whereas when a
leading Japanese company runs into unexpected financial difficulties: Top
management takes the biggest pay cut, and first line employees the smallest.
This approach more accurately represents who really is at fault for falling to
anticipate and respond to changed circumstances. Strategic planning and capital
budgeting are, in essence, used to reject goals when the means for achieving
those goals are not readily at hand. A view of strategy, as we have outlined,
helps bridge the gap that exists between those who see strategy as a “grand
plan, thought up by great minds”, those who see strategy as a pattern in a
stream of incremental decisions. Strategy as stretch is strategy by design in
the sense that top management does have a relatively clear view of the goal
line and a broad agenda of the capability building challenges that lie between
today and tomorrow. It is strategy by incrementalism to the extent that top
management cannot predetermine every single step of the journey to the future.
It recognizes the essential paradox that while leadership cannot be entirely
planned for, neither does it happen in the absence of a clearly articulated and
widely shared aspiration.
Leveraging at each every point
makes a core competence for the future. Tactical creativity is the child of
resource scarcity. Resource leverage can be achieved in five fundamentals ways:
by more effectively concentrating resources on key strategic goals, by more
efficiently accumulating resources, by complementing resources of one type with
those of another to create higher order value, by conserving resources where
ever possible, and by rapidly recovering resources by minimizing the time
between expenditure and payback. Obtaining resource leverage needs convergence
of the resources. Convergence requires an understanding of how all the resources
of the firm can be orchestrated to achieve a stretch goal, one that firms with
a more fragmented sense of corporate priorities cannot hope to achieve.
Resource leverage comes only if the efforts of individuals, teams, functions
and businesses are additive across organizational units as well as through
time. The principle is quite simple: One doesn’t achieve resource leverage by
going around in circles. Dividing meagre resources across a wide range of
medium term operational goals is a recipe for mediocrity across a broad front.
Take a simple example. Suppose that someone standing three yards away suddenly
hurls five golf balls at your head. What’s your immediate reaction? Unless you
are a world class juggler, your first instinct is to duck. This is the same
reaction middle managers have when top management attempts to push down five or
six key improvement goals of undifferentiated priority. Now imagine someone
throwing one golf ball at you, waiting the few seconds it takes you to catch
it, then another and another. All five will be successfully caught in about
half a minute. Where there is convergence and focus, individual mediocrity may
well sum up to collective brilliance. In their absence, individual brilliance
may well sum up to collective mediocrity. Resource leverage comes not just from
better amortizing of past investments or a particular skill set, but from
creating entirely new forms of functionality and, thereby, value added. To be
balanced, a company, like a stool, must have at least three legs: a strong
product development capability, a capacity to produce its products or deliver
its services at world class levels of cost and quality, and a sufficiently
widespread distribution, marketing and service infrastructure; in short, a
capacity to invent, make, and deliver. If any leg is much shorter than the
others, the firm will be unable to fully exploit the investment it has made in
its areas of strength. The leverage impact comes when, by gaining control over
complementary resources, the firm is able to multiply the profits it can
extract out of its own unique resources.
Whatever the nature of the imbalance- whether strong on
distribution or weak on product development, strong on manufacturing and weak
on distribution, or another combination- the logic is the same. A firm cannot
fully leverage its accumulated investment in any one dimension if it does not
control, in a meaningful way, the other two dimensions. Control doesn’t have to
mean ownership, but it typically requires something more than temporary, arm’s
length contracting. Rebalancing leads to leverage when the additional profits
captured by gaining control over critical complementary assets are more than
covers the cost of acquiring those resources. A wise general ensures that his
or her troops are not exposed to unnecessary risks: One doesn’t attack a
heavily fortified position, one disguises one’s true intentions, carefully
reconnoitres the territory before advancing, diligently studies the enemy’s
weaknesses, feints to draw the enemy’s forces away from the intended point of
attack, exploits the element of surprise and so on. The greater the numerical
advantage held by an enemy, the greater the incentive to avoid a frontal
confrontation. The goal is to maximize the losses inflicted on an enemy while
minimizing the risk to one’s own forces. This is the notion of “protecting”.
The commitment a firm makes to building a new core
competence is a commitment to creating or further perfecting a class of
customer benefits, not commitment to a specific product-market opportunity.
Competence-building represents more cumulative learning than great leaps of
inventiveness, it is difficult to “time compress” competence building. Product
cycles may be getting ever shorter, but the quest for core competence
leadership is still more likely to be measured in years than in months.
Competition for competence is not product versus product or even business
versus business. It is corporation versus corporation. A core competence is
just what the name implies: an aptitude, a skill. A business may possess many
advantages vis-a-vis competitors that don’t rest on skills and aptitudes. This
doesn’t make these advantages any less valuable or critical to success, but it
does mean they will be managed in quite a different way than people-embodied
competencies.
Think of an archer shooting at a target shrouded by a veil
of fog. Intent on hitting the bull’s eye the archer has two choices: wait till
all the fog has cleared or shoot a series of arrows in the general direction of
the target, each time adjusting one’s aim as one receives feedback about where
the arrow landed. As each arrow flies into the distance and a shout comes back
“right of target” or “a bit to high”, more arrows are shot and more advice
comes back until the cry is “bull’s eye.” Although waiting for the fog to clear
may guarantee that the arrow hits the target, the patient archer is likely to
find that a rival’s already blanket the target. What counts most in
expeditionary marketing is not hitting a bull’s eye the first time, but how
quickly one can improve one’s aim and get another arrow on the way to the
target. Failure is as often the child of unrealistic expectations as it is of
managerial incompetence. If the goal is to build brand awareness and customer
credibility in the minimum possible time and with the greatest possible
efficiency, it makes no sense to totally fragment brand building efforts across
a range of product specific brands. Use product brands to communicate specific
product attributes and overlay this with a corporate brand to communicate
integrity and quality. The capacity for pre-emption rests not only on a
physical ability to move the product quickly to rapidly communicate the
advantages of the new product in each country managers around the world, to
ensure that adequate sales and marketing resources are devoted to the new
product in each country, and to quickly spot where the new innovation is not
taking root and take corrective action.
Note:- Taken from "Competing for Future" by Hamel and Prahalad
