Quick takes

Citation

Gorrell, C. (2014), "Quick takes", Strategy & Leadership, Vol. 42 No. 3. https://doi.org/10.1108/SL-03-2014-0030

Quick takes

Article Type: Quick takes From: Strategy & Leadership, Volume 42, Issue 3

These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.

Crowdsourcing the ecosystem’s expectations: a decision-making process to manage the unmanageable - Haydn Shaughnessy

The modern enterprise increasingly relies on downstream ecosystems, such as an app developer community, a content community, an advocacy community or a customer ecosystem. They are just as much a part of the business model as their upstream supply chains. This reliance on these ecosystem partners creates a new level of uncertainty in the innovation and market adaptation process.

New practices

Because it is increasingly true that the innovations and expertise of the ecosystem, not the talents and resources of the firm, are crucial to its future wealth generation, a firm’s managers who are responsible for these relationships must constantly seek novel solutions to the challenges of innovating with resources they do not control. To succeed in complex interconnected ecosystems, businesses need to rethink how decisions are made and by whom.

Quantifying uncertainty

Leading-edge companies are experimenting with a variety of operational methods that can help identify and investigate change and potential disruption.

Key point

Why pretend we have a semblance of certainty when instead we can find a way to use uncertainty to our advantage? In conditions of uncertainty we want to know what will most affect our decision-making and how much certainty or uncertainty we are dealing with. If we look at the challenge of innovation in this way, it gives us a method to quantify uncertainty. Examples are offered for illustration.

Experiments

After performing the exercise a firm will know where it needs to focus attention to reduce susceptibility to uncertainty in general. Specifically it will have a crowd-scored view of every competency across its main competitor groups, so it will know where to place resources in order to close the potential gap with competitors, if it decides to do so.

Such uncertainty experiments can clarify the risk levels and the need for preparatory investments. They offer a high-level view of the dynamics of the new economic environment. Social decision models give us a new way to start documenting and accounting for decisions in the face of uncertainty.

Bottomline

Firms cannot expect to do new things with old competencies. New ecosystems require new crowd sourcing practices to assess factors for decision-making. Knowledge of uncertainty reveals where we can be outcompeted and the degree of certainty/uncertainty about that. It is "rough and ready" information, but in fast-moving, uncertain environments it is likely the best available information.

Interview: Paul Nunes Riding the wave of "Big Bang Disruption" - Stephen Denning

Big Bang Disruption by Paul Nunes and Larry Downes describes a new trend in many established and emerging industries – high speed, high impact innovation that upends markets. It is different than the "disruption" practices described by Clayton Christensen (The Innovator’s Dilemma, 1997) that have become known and evolve predictably. This version is driven by core technology changes. Now customers are influenced by users driving buzz and information that is fast and readily available. With "big bang disruption," entire product lines – whole markets – can be rapidly obliterated as customers defect en masse and flock to a product that is better, cheaper, quicker, smaller, more personalized and convenient all at once. Disrupters can seemingly come out of nowhere and go global very rapidly. It is hard to anticipate or defend against.

In this interview with Nunes, he offers a conceptual framework for responding to the Big Bang Disruption phenomenon.

Who is affected?

Every industry is now at risk. No industry will be left unscathed, no supply chain left unscrambled, no strategic plan left unraveled. That’s because, one way or the other, every business is now a digital business.

How to respond?

There are four phases of Big Bang Disruption and each phase has its own set of rules for responding effectively.

Phase 1 – Singularity: This is the stage of experimenters and startups exploring the field. Defending against big bang disruption requires organizations to be ultrasensitive and alert to small-scale experiments and startups even remotely related to their business, as any of these seemingly innocuous efforts may become the next big bang disruption.

Phase 2 – The Big Bang: Market adoption occurs with exponential growth.

Phase 3 – The Big Crunch: Rapid success can be followed by rapid failure. Key actions are anticipating saturation, shedding assets before they become liabilities and quitting while ahead.

Phase 4 – Entropy: After succumbing to disruption, companies must act to escape the black hole, become someone else’s components or move to a new Singularity.

Bottomline

Managing disruption at this speed requires new capabilities for success – world-class assembly, low-cost open innovation and robotic manufacturing are examples. Rather than trying to win at all the stages, companies will need to focus on enabling portions of the cycle, and on building world-class capabilities to do that.

Realistically there is no permanent solution to the problem. Gaining an understanding of the new realities of the market, and transforming your organization to better align with those realities is key. The "rules" Nunes and Downes propose are the activities essential for companies hoping to survive each stage of disruption. But it is too early to say there is a surefire way to protect your company.

A step-by-step process for transforming contentious disagreements into creative collaboration - R. Edward Freeman and Mark E. Haskins

Innovation, disruptive changes and global competitiveness are all part of the landscape of business. Disagreements will arise about the answers to the when, what, how, who questions that address how to strategically lay out the future. But it is when the management teams find themselves endlessly or too heatedly debating an issue that new decision-processing skills needed. So what is a proven way for turning disagreements into learning opportunities? The answer has three components.

1. Carving out sufficient time.

2. Creating a culture of candor.

3. Coupling root-cause analysis with critical thinking. This is a learnable skill.

Offered here is a step-by-step process for how to sort out the real issues from dysfunctional conflict.

Three root causes

The steps begin with recognizing that the potential root causes for management team disagreements are based in facts, framing and focus. By analyzing a dispute from the perspective of each of these categories, a leader can guide the development of an efficient team decision-making process.

Step 1: facts

The first step is to determine if disagreements are caused by differing facts, or if the facts have been ignored in favor of opinions and assumptions. Here, leaders can simply ask each member of their team to identify the data, the analyses, the unique resources and the history they are using in arriving at their position on the decision at issue.

Step 2: framing

Disagreements may originate in divergent framings of the situation. Frames are the overall mindset, the set of concepts, which we use to describe, envision or contextualize a particular problem or decision. Frames often determine the choices we perceive, as well as their desirability, variety and number.

Disagreements about framing are often obscured by disagreements about facts and values. Key probing questions are offered.

Step 3: focus

If managers can agree on the facts and framings but their disagreement persists, the likely root cause is that they don’t have a shared focus. Clarity of focus comes through structured discussions that consider the decision from three perspectives: stakeholders, harms/benefits and core values.

Premature agreement?

What are the risks of not exploring disagreements? Beware groupthink or a failure to engage with colleagues on politically charged issues. When agreements come to easily leaders should consider inviting or even creating disagreement on a pending strategic or operating decision so that colleagues think more broadly about who are the parties with a stake in the outcome, how those outcomes will be experienced across that relevant spectrum of stakeholders, and in what explicit ways is the team potentially embracing certain values and not others?

Principles operationalize corporate values so they matter - Norman T. Sheehan and Grant E. Isaac

An issue for senior leaders is how to best empower employees so that they are consistently adding value to the corporation while avoiding actions that jeopardize value.

Problem: Empowering employees helps firms to retain the workers that allow them to be more competitive in the creative economy but the cost is loss of management control.

Question: Is there a better control method than using ‘carrots’ and ‘sticks’?

Answer: YES.

Premises

#1 Values are beliefs that influence behaviors; the closer the alignment between an organization’s values and those of their individual employees, the better the organization performs.

#2 Investing in values is an effective way to influence the actions of employees in order to succeed in the new competitive environment.

#3 Though almost all firms have a formal set of corporate values, most are not benefiting from the true potential of such a system.

#4 For corporate values to promote employee behaviors that increase long-term returns, they need to be so meaningful to employees that they internalize the corporation’s values as their own.

How: values + principles = useful guidance

For employees to act in accordance with their corporation’s values, everyone in the organization must understand and share them. The best way to make this happen is to develop a set of principles that define and describe how the corporation’s values should be applied by the employees in practice.

By describing the organization’s values in operational terms, the principles, taken together, provide each employee with a clear framework to use when making decisions. When employees routinely apply the principles in their work, senior management can confidently delegate decision-making authority to the lowest appropriate level in the organization, having confidence that the outcomes of employee actions will be consistent with the organization’s vision, mission and strategic goals. The authors provide a case example to illustrate the five-step process.

Employing principles to improve strategy execution

Step 1: Develop principles for each value.

Step 2: Regularly and consistently communicate the organization’s values and principles to employees.

Step 3: Use principles to hire, reward, promote and fire employees.

Step 4: Monitor adherence to the organization’s principles: "trust but verify."

Step 5: Monitor the efficacy of the firm’s principles: ensure they remain aligned with the organization’s objectives.

Bottomline

Principles give employees who are making decisions better guidance than rules and performance measures. While performance measures, rules and principles are all necessary to encourage and guide employees to effectively execute an organization’s strategy, leaders should favor principles as they have greater application to strategic decisions than rules and performance measures.

Research report Time to raise the bar on nonprofit strategic planning and implementation - Margaret F. Reid, Lynne Brown, Denise McNerney and Dominic J. Perri

In order to improve the performance of nonprofit organizations (NPOs), they must have the information and tools to meet higher standards of accountability and financial sustainability. To do this, they need a solid strategic plan and a strategic management process that produces maximum benefits but can be implemented with limited resources.

Yet many funders and boards starve their NPO by insisting on keeping overhead – specifically, the resources to do planning and reporting – low in comparison with their cause-activity funding. Critics refer to the consequences that follow as the "nonprofit starvation cycle" and – as can be seen in the results of a 2013 large-scale national survey reported on in this article – it leads to a less effective or, worst, unsustainable organization.

The management practices identified by the survey, which was sponsored by the Association for Strategic Planning, are a good guide for better practice.

Plan development

Regardless of size, nonprofits that characterize themselves as highly successful have a "culture of planning and strategic management" that reflects commitment and discipline; less successful organizations do not. In the successful organizations:

Planning is a "consistent periodic process" versus reactive, spurred by crisis or unanticipated risks and challenges.

Preparation and analysis are more rigorous including environmental and internal analyses.

Responsibility and timeframes are assigned to strategic plan items.

The plan’s communications are concise and understandable, with clear statements of how the plan leads to action and up front expectations for participants.

Ongoing plan implementation

Effective implementation is the most difficult stage of a strategic plan and nonprofits must be prepared to encounter and overcome inevitable challenges. The degree of success varies with plan tracking, oversight, reporting plan progress, and frequency of reporting plan milestones.

True accountability lies in reporting progress to staff, board and community. Far too many NPOs are intimidated by plan tracking and reporting, claiming it opens them to negative feedback or even punitive action from their boards and their funders. The results of this survey make clear that successful organizations embrace these activities and use them to drive their programs and performance to increasing levels of effectiveness and excellence.

Bottomline

The question nonprofits and capacity builders should be asking is not whether to commit scarce resources to planning, but how to plan and implement most effectively. The survey shows that strategic planning and management are in fact inextricably linked to organizational success.

"Performance Accelerators" push the frontiers of CFO leadership - Bill Fuessler

From interviews with 576 CFOs in 2013, IBM researchers identified a subset of superstar finance organizations they named "Performance Accelerators" because their contribution to their firms’ revenues and growth were leaps ahead of their peers. Their particular blend of skills equipped them to help their companies make smarter decisions.

Defining characteristics

Process efficiency – uniform approach. A three-fold combination of capabilities catapults Performance Accelerators ahead. Their single point of responsibility and their accountability for the consistent design and deployment of every financial process, regardless of business unit or territory, makes it much easier to automate manual procedures, detect variations in performance and disseminate best practices. Specific capabilities are:

Standard chart of accounts across the entirety of the business.

A service delivery framework to guide the design, development and operation of key financial processes.

The adoption of enterprise-wide information standards.

Generate business insights

A robust planning and forecasting process, strong analytical skills and partnering with other areas of the business, allows deep insights to be unearthed for profitable growth.

Significantly more time is spent on a wide range of activities, particularly forging an infrastructure to capitalize on big data, handling acquisitions and divestitures and developing new business models.

New territory

Further differentiating Performance Accelerators is their willingness to enter new arenas, and being more competent when they do so.

CFO’s characteristics. The CFOs of a Performance Accelerator company possess two distinguishing features:

A much better grasp of the digital domain; nearly half work in companies with a seamlessly integrated physical – digital strategy.

They understand and collaborate with customers far more extensively than other CFOs.

CFO – CMO teaming. A strong relationship with the CMO. Less than a fifth of all CFOs currently include the CMO in their inner circle, but those who have a good grasp of the customer’s perspective are very much more likely to work closely with the CMO. This small cadre of CFOs is thus uniquely equipped to anticipate changes in the commercial landscape and help the enterprises they work for respond appropriately.

Going forward. Expect to see much more collaboration between CFOs and CMOs. Enterprises in which the CMO’s ability to look outside the enterprise is combined with the CFO’s ability to analyze alternative scenarios will be far better equipped to exploit the opportunities the digital era offers.

Catherine Gorrell

veteran strategy consultant newly based in Portland, Oregon (mailto:4mcgorrell@gmail.com) and a contributing editor of Strategy & Leadership.