Faster. Higher. Stronger. Those three words sum up the Olympic motto. However, not all the games are about speed, or height or strength. Some of them are about other things: grace, lyricism, level of difficulty. In fact, the defining criterion for the games is not any of those specific characteristics, it is about the competition. The games are not about being fast; they are about being faster. They are not about being strong; they are about being stronger.
The same thing is true about business strategy. To win in the game of business, you cannot evaluate your business absent your context. You must evaluate yourself within the context of a competitive business environment. You must be better (Melius).
In the strategy classroom, while we always explain that business strategy can be studied using three lenses (competitive advantage, resource base and institutions), we always begin with the lens of competitive advantage.
The lens of competitive advantage is critical because business economic sustainability begins with the customer decision to purchase―and that decision is almost always made within the context of competition. This means that we must always ground strategy in the value we create for the customer.
In a different sense, strategic decisions are also made using the organization leadership’s existing perspective of the evolving business situation, of what works and what will continue to work, and of what it will take to continue to be successful in the future.
This seems to be a particularly good time to think about strategy and what it takes to be successful. In the AIM strategy classroom, executives generally agree that strategy implementation is more challenging than strategy formulation and that “liveware”, the human side of the strategy engine, is both more valuable as well as more difficult to manage than either the tangible, hardware components or the systems and process software components.
There is also general agreement that changes in the business environment are increasing in terms of both magnitude of effect and frequency.
What this means is that many businesses are constantly in the process of recreating their strategy engine. This discussion leads to the second lens for strategy, the resource-based lens or the lens of capability. Much like competing in athletics, competing in business requires continuous improvement. What this means is that companies must continuously be building their resources and capabilities in order to create sustainable competitive advantage.
In the international front, US President Trump added Huawei to its entity list effectively banning Huawei from all US trade. Locally, Ayala Corp., one of the largest Philippine conglomerates, while acknowledging increasing strains in US-China relations, announced its increasing partnerships with Chinese firms. Clearly, the sharply changing business environment reflects both increasing business activities across country borders as well as the heightened complexities of the global political economy.
Two Mckinsey articles address this need for more dynamic organizations.
In a May 2019 article, Harris Atmar et al, opine on the increasing pressure to respond more quickly to rapidly changing circumstances, how plans have become much more dynamic, and how many businesses must deal with organization designs that are in a continuous state of flux. This pace of change, Atmar et al point out, can create a disconnect between business strategy and its operating model―aggravating problems and fomenting organizational confusion. They espouse a sharp focus on customer value creation and a clear alignment between organization capability and customer value.
In an earlier article (January 2018), Smet and Gagnon wrote about “competing at the speed of digital,” arguing that organizing for urgency requires unleashing strategy with structure and people. They argue that companies who get the speed challenge right have a single thing in common―they create organizations that can respond to challenges as they arise. Essentially, these companies respond dynamically to a dynamic environment. The authors identify four key focus areas for creating this dynamic organization: urgency, agility, capability and identity.
In the area of urgency, the authors point to a clear preference for speed (Increase your organization ability to make decisions in ambiguity. When in doubt, floor it.) and a shift to emergent strategy (Pursuing value creation rather than a fixed target or outcome and honing the organization’s course correcting capability).
In both agility and capability, the authors recommend increasing flexibility and democratizing organizational decision-making and talent development―essentially acknowledging the need for increased points of view. This shift is balanced by the recommendations concerning identity, creating stability through a sharply increased focus in terms of “how we run this place,” and strongly aligning individuals through shared purpose, values and social connections.
Clearly, the basics of strategy remain the same―a sharp focus on providing customer value within a competitive and changing environment; and a focus on aligning capability and organization operating model to strategy. What has changed is the manner within which strategy is both developed and implemented. The increasing speed of change means organizations need to be far more agile, and strategy needs to be far more dynamic.
Note to the Reader: I deeply apologize for the almost year long absence. There were transitions in both my personal and professional life but I aim for a more regular output moving forward.
Readers can email Maya at [email protected] Or visit her site at http://integrations.tumblr.com.