How to Develop Strategy in a Changing World by Corporate Research Forum

CRF Madrid 2013 How to Develop Strategy in a Changing World George S. Yip Professor of Management Co-Director, Centre on China Innovation China Europe International Business School gyip@ceibs.edu

Compete?

Cooperate?

Or Die?

Fallen Stars

In Today’s World

In Tomorrowâ&#x20AC;&#x2122;s World

The New Africa?

Whoâ&#x20AC;&#x2122;s Afraid of Huawei?

The Economist, cover, 4 August 2012

Why Does Strategy Matter?

Effective strategy gets you better performance with fewer resources.

Why Is Strategy Difficult? If managers were going to do it anyway, you would not need a strategy.

What is Strategy?

Strategic Objective

Business Model

A Clear Objective

BEAT BENZ

Having A Clear Enemy Helps

When You are a Challenger

Strategic Styles for Environments

Low PREDICTABILITY

High PREDICTABILITY

Low MALLEABILITY

High MALLEABILITY

Adaptive Strategy

Shaping Strategy

e.g., fashion retailer

e.g., internet service

Classical Strategy

Visionary Strategy

e.g., oil company

e.g., Tata Nano,

Reeves, Love & Tillmans, HBR, Sept. 2012 Copyright G. S. Yip, 2013

The Wave of Transient Advantage

Returns

Launch

Ramp Up

Exploit

Reconfigure

Disengage

Source: McGrath (2013) Transient Advantage, p. 5, Harvard Business Review .

Strategy for Transient Advantage: The New Playbook 1. Think about arenas, not industries 2. Set broad themes, and then let people experiment 3. Adopt metrics that support entrepreneurial growth

4. Focus on experiences and solutions to problems 5. Build strong relationships and networks 6. Avoid brutal restructuring; learn healthy disengagement 7. Get systematic about early-stage innovation

Source: McGrath (2013), Transient Advantage, p. 6-8, Harvard Business Review .

The Strategic Task Keep developing new sources of competitive advantage! EXTENT OF ADVANTAGE

High

Low

TIME

Two Primary Uses of Strategy 1. To change (market etc.) position within current business model: Incremental e.g. 10% share

Strategy

e.g. 15% share

2. To change the business model: Old Business Model

Radical

Strategy

New Business Model

The Problem of Strategic Drift Environmental Change Amount of Change

PHASE 1 Incremental Change Source: Gerry Johnson and Kevin Scholes

PHASE 3 Flux

PHASE 2 Strategic Drift

PHASE 4 Transformational Change or Demise

Time Copyright G. S. Yip, 2013

The Fate of High Flyers

Rate of Change

â&#x20AC;&#x153;When the rate of change inside the company is exceeded by the rate of change outside the company, the end is near.â&#x20AC;? Jack Welch CEO, General Electric

How to tell When Your Company Needs Strategic Transformation

Transforming the Organization

Develop the Organization Build Individual Learning

Achieve Mobilization

Create the Vision

Create Reward Structure Change Rules Through Information Technology

Build the Measures Construct an Economic Model Align Physical Infrastructure

Invent New Businesses Achieve Market Focus

Source: Francis J. Gouillart and James N. Kelly, Transforming the Organization, 1995. p.9

Redesign Work Architecture

Transformation of British Airways •

State owned until 1982

•

BA =“ Bloody Awful”

•

Rules for flight attendants

•

New advertising campaign

•

Product innovations

No. 1 among world business travellers.

“Strategic Transformation is the chief executive’s indepth guide to how to sustain and refresh strategy over time.” Financial Times, 24 January 2013, p. 12.

Old Tesco: Pile it High and Sell it Cheap

ÂŠ Hensmans, Johnson & Yip (SST SCOT 05)

Tesco Strategy Changes 1932 Initial Business Model (“Pile it High / Sell it Cheap”)

1950s

1960s

‘Unruly’ Corporate Diversification

Alternative Coalition

1990 Corporate / Business Re-Alignment

Alternative Strategic Direction

2000

New Tesco: Superstore

ÂŠ Hensmans, Johnson & Yip (SST SCOT 05)

150 years of evolving business model 1856

1929

1951

1998

Speedy transformation • Requires emotional « growing up » – Safe opportunities for « hot » debates • Young managers present alternative views • Alternative coalition anticipates behind the scenes • Dominant coalition focuses, but does not obstruct

Developing Traditions for Transformation 1. Build on history 2. Select and develop a new generation of leaders 3. Accept and encourage constructive mobility 4. Ensure that decision making allows for dissent

Developing Traditions for Transformation, cont. 5. Create enabling structures that encourage tension 6. Expect everyone to get behind decions once they are made 7. Develop an overarching rationale 8. Beware of market size and dominance

Strategy Execution

The Seven Essential Behaviours of Strategy Execution • • • • • • •

know your people and know your business insist on realism identify clear goals and priorities follow-through reward the doers expand people's capabilities know yourself Source: L. Bossidy & R. Charan with C. Burke, Execution: The Discipline of Getting Things Done, Random House Business Books, 2011. Copyright G. S. Yip, 2013

Role of the Leader in Execution • Running the three core processes • Reward systems and the norms of behaviour • Only if the right people focus on the right details at the right time. • Moving from the concept to the critical details • Leaders get the behaviour they exhibit and tolerate.

Source: L. Bossidy & R. Charan with C. Burke, Execution: The Discipline of Getting Things Done, Random House Business Books, 2011.

The $15 Billion Woman

The $15 Billion Man

Have the Right View of Your Employees

“ I consider every one of my employees to be a liability.” “As human beings are also animals, to manage one million animals gives me a headache.” Copyright G. S. Yip, 2013

Where They Dream of Apple

The Mountain is High and the Emperor is Far Away (山高皇帝远)

Conclusion A strategy is a journey not a destination. The best strategy ideas are the outcome of a creative process strongly grounded in deep knowledge and understanding of both the external and the internal environment. The best strategies are successfully executed. Copyright G. S. Yip, 2013