Citation
Henry, C. (2013), "Strategy in the media", Strategy & Leadership, Vol. 41 No. 6. https://doi.org/10.1108/SL-07-2013-0061
Publisher
:Emerald Group Publishing Limited
Strategy in the media
Article Type: CEO advisory From: Strategy & Leadership, Volume 41, Issue 6
Five reasons for hope for US economy
Four years after the official end of the Great Recession, US economic growth remains lackluster. But there is more at work here than simply the business cycle: strains in the labor market were apparent long before 2008. Today, labor-force participation is at a 34-year low, and the US has two million fewer jobs than it did when the recession began. Weak investment, demographic shifts, and a slowdown in productivity growth are dampening the economys trajectory.
But the US does not have to resign itself to sluggish growth. "Game changers: five opportunities for US growth and renewal," a new report from the McKinsey Global Institute (MGI), identifies specific catalysts that can add hundreds of billions of dollars to annual GDP and create millions of new jobs by 2020 … .
Shale-gas and oil production. Powered by advances in horizontal drilling and hydraulic fracturing, the production of domestic shale gas and oil has grown more than 50 percent annually since 2007. The shale boom could add as much as $690 billion a year to GDP and create up to 1.7 million jobs across the economy by 2020 … .
US trade competitiveness in knowledge-intensive goods. The US is one of the few advanced economies running a trade deficit in knowledge-intensive industries. But changing factor costs, a rebound in demand, and currency shifts are creating an opening to increase US production and exports of knowledge-intensive goods, such as automobiles, commercial airliners, medical devices, and petrochemicals … .
Big-data analytics as a productivity tool. Sectors across the economy can harness the deluge of data generated by transactions, medical and legal records, videos, and social technologies – not to mention the sensors, cameras, bar codes, and transmitters embedded in the world around us. Advances in computing and analytics can transform this sea of data into insights that create operational efficiencies. By 2020, the wider adoption of big-data analytics could increase annual GDP in retailing and manufacturing by up to $325 billion and save as much as $285 billion in the cost of health care and government services … .
Increased investment in infrastructure, with a new emphasis on productivity. The backlog of maintenance and upgrades for US roads, highways, bridges, and transit and water systems is reaching critical levels. The US must increase its annual infrastructure investment by one percentage point of GDP to erase this competitive disadvantage. By 2020, that could create up to 1.8 million jobs and boost annual GDP by up to $320 billion … .
A more effective US system of talent development. The nations long-standing advantage in education and skills has been eroding, but today real improvements are within reach. At the postsecondary level, expanding industry-specific training and increasing the number of graduates in the fields of science, technology, engineering, and math could build a more competitive workforce.
Susan Lund, James Manyika, Scott Nyquist, Lenny Mendonca, and Sreenivas Ramaswamy, "Game changers: five opportunities for US growth and renewal," McKinsey Insights, July 2013.
Costco bucks retails conventional wisdom
Costco Wholesale (COST), the second-largest retailer in the US behind Walmart, is an anomaly in an age marked by turmoil and downsizing. Known for its $55-a-year membership fee and its massive, austere warehouses stocked floor to ceiling with indulgent portions of everything from tilapia to toilet paper, Costco has thrived over the last five years. While competitors lost customers to the internet and weathered a wave of investor pessimism, Costcos sales have grown 39 percent and its stock price has doubled since 2009. The hot streak continued through last years retirement of widely admired co-founder and Chief Executive Officer Jim Sinegal. The share price is up 30 percent under the leadership of its new, plain-spoken CEO, Craig Jelinek.
Despite the sagging economy and challenges to the industry, Costco pays its hourly workers an average of $20.89 an hour, not including overtime (vs the minimum wage of $7.25 an hour). By comparison, Walmart said its average wage for full-time employees in the US is $12.67 an hour, according to a letter it sent in April to activist Ralph Nader. A total of 88 percent of Costco employees have company-sponsored health insurance; Walmart says that "more than half" of its do. Costco workers with coverage pay premiums that amount to less than 10 percent of the overall cost of their plans. It treats its employees well in the belief that a happier work environment will result in a more profitable company. "I just think people need to make a living wage with health benefits," says Jelinek. "It also puts more money back into the economy and creates a healthier country. Its really that simple" …
Brad Stone, "Costco CEO Craig Jelinek leads the cheapest, happiest company in the world," Business Week, 6 June 2013.
Social media: teaching old dogs new tricks
Is your companys social media team grounded in the culture of your organization? Younger, new employees are often strong in procedural understanding of social media tools, but they need to be guided by a strategic vision.
Many companies turn to interns or freshly-minted college students to staff their social media efforts. But that is a risk: because these inexperienced employees are not well versed in their new companys organizational culture or strategy, it is often difficult for them to meet organizational objectives with social media initiatives.
More dangerous, younger employees do not know what they do not know, which can be a recipe for disaster when companies hand these rookies a social media megaphone to speak on behalf of their company … .
Companies may find it easier and more effective to train existing managers about social media than to teach new hires about the strategic goals and direction of the company.
Likewise, the most effective organizational social media initiatives may be partnerships between younger employees demonstrating and experimenting with social media technologies while more experienced employees harness that enthusiasm and those ideas to give them strategic direction. This brings together the best of both worlds, combining procedural and strategic know-how.
Gerald C. Kane, "Is your companys social media team grounded in the culture of your organization?" Sloan Management Review, June 2013.
An American success versus Chinese manufacturers
The collapse of the housing market in 2007 and the subsequent recession turned out to be a boon for Chinas brush exports. With far less construction and far fewer jobs, not as many people needed paintbrushes (or brooms or toothbrushes). Those who did need them chose cheap imports over more expensive products made in America. Retailers, who stood to make more from the cheaper products, jumped at the opportunity to sell them. Now everyone in the business has to account for the Chinese.
That is a familiar story for US manufacturing. The strange thing here is that there are still more than 200 brush, broom and mop makers in the US. These companies have employed two strategies to stave off Chinese competition: change everything all the time, or do not ever change a thing. Kirschner has not changed a thing. He makes brushes the very same way, employing many of the same machines, that his father did 50 years ago. He told me that he sticks with the old ways because, unlike with toys and T-shirts, a big chunk of the brush business caters to professionals who are not merely shopping for price but rather for quality. Michael Wolf, who runs the Greco Brush Company, a supplier to professional house painters, told me that his customers need to know before each job that every single bristle on every single brush will be attached properly. One loose fiber left on a wall can damage a painters reputation, which in turn can hurt Wolfs too. Wolf said that he can buy brushes for between a quarter and a dollar cheaper in China, but he is never sure exactly what he will get. Some orders are shoddy; others never arrive. So Greco sticks with the company he knows. "My father did business with his father back in the 50s," Wolf told me. "Were keeping it going, the two of us."
At the other end of the business is Lance Cheney, 53, the fourth-generation president of Braun Brush, who told me that he would close his company rather than make the same kind of brush, the same way, for 50 years. He is constantly creating innovative brushes so that he never has any competition. Cheney makes a beaver-hair brush that is solely for putting a sheen on chocolate. He sells an industrial croissant-buttering brush and a heat-resistant brush that can clean hot deep fryers. His clients, he said, now include General Mills (he made a brush for their cereal-manufacturing line) and the energy industry (a line of expensive brushes for cleaning pipes in nuclear reactors) … . He said his proudest creation is a tiny brush that helped Mars rovers dust debris from drilling sites. When Cheney sees other firms making one of his brushes, he often drops the product rather than enter a price war. Braun Brush, he said, has grown at 15 to 20 percent annually for the past five years.
"What paintbrush makers know about how to beat China," The New York Times, 18 June 2013.
Why are so few companies ready for growth?
In the final analysis, most business leaders would agree that robust strategies, cost and investment management, and fine-tuned organizations are critical to performance. But they may not be aware of how much these factors can reinforce one another if the conditions are right. Mastering all three is the hard part; and our research shows that few companies do so. Making improvements requires a clear-headedness about ones strengths and weaknesses, an understanding of the links to performance, and the development of a detailed plan of attack to reap the benefits … .
What a "ready for growth" company looks like
Although every company is different, our analysis revealed a set of common characteristics that underpin many of the companies in the strongest "ready for growth" archetype. Consider these elements across the three building blocks of the framework:
1. Strategic clarity and coherence: At "ready for growth" companies, strategic priorities are specific, actionable, and – most critically – widely understood at all levels of the company. Leaders make clear choices, striving for "best-in-class" prowess only in the distinctive capabilities that create sustainable competitive advantage, and accepting "good enough" in other areas. Through rigorous, forward-looking review processes, they are able to keep their strategies relevant, sensing and rapidly adapting to market changes. They are quicker to innovate, are willing to make calculated big bets, and feel no qualms about killing investments that are not paying off.
2. Resource alignment: In the area of resource allocation, "ready for growth" companies employ a disciplined process that ensures adequate funding for high-growth, core activities. Clear and objective investment criteria prevent department rivalries and other parochial concerns from interfering with the allocation of funds to top corporate priorities. These companies manage spending strategically, making rigorous trade-offs based on cost transparency and a deep understanding of how they earn money. Acquisitions are made only if they advance the companys strategic positioning …
3. Supportive organization: "Ready for growth" companies are organizationally efficient, flexible, and lean. They align their power structures and allocate decision rights in ways that best serve strategic priorities and business realities, rather than aligning them with historical legacies or individual agendas. They create nimble mechanisms for governance and collaboration across business units. Talent management practices support key capabilities by moving the best people into pivotal roles … .
Ashok Divakaran and Vinay Couto "How ready are you for growth? A Booz & Company study reveals that only 17 percent of companies are poised for a profitable future." Strategy + Business, June 2013.
Scenarios and wargames
My largest and most successful was a simulation designed to teach telecom executives about how to compete in a converging world, where fixed line, mobile, broadband data, broadband wireless and video were overlapping. An unusual wrinkle in the design was the idea that in a large corporation, it is not enough to compete with external competitors, you also need to cooperate with internal stakeholders. And just as importantly, you need to understand the different leads and lags that individual functions in the business operate under.
Surprisingly, even managers with long experience in an industry will often underestimate the impact of planning cycle differences. And it is very common for managers to underestimate the range of outcomes possible.
This need to push managers to consider wider extremes is one of the reasons that scenario analysis is talked about so much. But there is theological split in the world of scenario creation and use. Some scenario consultants are quite adamant that scenarios should be stories not numerical models. These professionals are reacting against the phenomenon that spreadsheet sensitivity analysis is sometimes confused with scenario analysis. They use scenario analysis to drag resistant managers kicking and screaming into considering the unthinkable, the Black Swan, and the fat-tailed distributions or risk.
But if that battle has been won and managers now understand the vocabulary of and the differences between sensitivity analysis and scenario analysis, then there is a next generation modeling opportunity, i.e. to translate the stories of a scenario into the impact upon a business.
Alistair Davidson, "Why wargaming is useful. The bankruptcy of Detroit", 19 July 2013, http://http://alistairdavidson.blogspot.com/2013/07/why-wargaming-is-useful.html
Teaching leadership
What makes leadership hard is not the theoretical, it is the practical. It is not about knowing what to say or do. It is about whether you are willing to experience the discomfort, risk, and uncertainty of saying or doing it.
In other words, the critical challenge of leadership is, mostly, the challenge of emotional courage.
Emotional courage means standing apart from others without separating yourself from them. It means speaking up when others are silent. And remaining steadfast, grounded, and measured in the face of uncertainty. It means responding productively to political opposition – maybe even bad-faith backstabbing – without getting sidetracked, distracted, or losing your focus. And staying in the discomfort of a colleagues anger without shutting off or becoming defensive … .
I have discovered two things that work:
1. Integrate leadership development into the work itself. This is the ideal environment, where the learning and the work are seamless …
2. Teach leadership in a way that requires emotional courage. Most leadership programs strive to create a safe environment for people to learn. At best, they teach about courage. They articulate why it is important, what it looks like, how it plays out in a case study. Maybe they do a simulation.
But that is a mistake.
The only way to teach courage is to require it of people. To offer them opportunities to draw from the courage they already have. To give them opportunities to step into real situations they find uncomfortable and truly take the time to connect with the sensations that come with that.
For example, most leadership programs give people feedback from anonymously collected forms they and their colleagues fill out before the program. That is safe.
In the leadership week I conduct for senior leaders, I have people give each other real feedback, in real time, face-to-face with each other, based on what they are witnessing in the program. That is courageous.
Peter Bregman, "Why so many leadership programs ultimately fail," HBR blogs, 10 July 2013, http:http://blogs.hbr.org/bregman/2013/07/why-so-many-leadership-program.html
Craig Henry
Strategy & Leadership's intrepid media explorer, collected these examples of novel strategic management concepts and practices and impending environmental discontinuity from various news media. A marketing and strategy consultant based in Carlisle, Pennsylvania, he welcomes your contributions and suggestions (Craighenry@aol.com)