Quick takes

Citation

Gorrell, C. (2003), "Quick takes", Strategy & Leadership, Vol. 31 No. 3. https://doi.org/10.1108/sl.2003.26131cae.005

Quick takes

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

Page 4One CEO's product development motto: care for innovations like newborns!Lotfi Belkhir, Liisa Valikangas and Paul Merlyn

Is your company locked into a single product or service concept? Will you be able to develop new offerings as the market inevitably changes, or will your company be like so many other "one-hit" wonders that failed because of their inability to adapt through innovation? Most know that innovation is important, but then, why do so many companies meet this fate? The impediments on the path to developing new market successes include:

1. 1.

   A lack of the requisite skills and resources to sustain growth.

2. 2.

   A CEO's preoccupation with the existing business. This latter case should quickly be challenged given that the business environment will ultimately render any business concept an anachronism. The only way for a company to sustain itself is through conceiving and nurturing new business ideas that can succeed for the parent business.

3. 3.

   Either no genuine product innovations, or so few the company does not develop the skill to cultivate them.

4. 4.

   Entry into the innovation phase too late, such as in Polaroid's case.

5. 5.

   Belief that an investment in a new business cannot co-exist with the existing business. The company sees true innovative concepts as more a nuisance or threat to their comfortable lives than as the offer of hope for a new future.

6. 6.

   The ability to create an abundance of innovation but exhibit a peculiar incompetence in creating a market for it. Witness Xerox.

The challenge, then, is to foster a capability for innovation – not merely product enhancement. This capability allows a company to migrate from one business concept to the next as the market changes and opportunities emerge. How to do so? Consider the model of parenting.

1. 1.

   Feed your children first. Allocate sufficient resources to the creation of new ideas (procreation) and the nurture of business ventures (parenthood) first.

2. 2.

   Love your children. Unless you really care, you will not be able to make the necessary sacrifices to nurture them to profitability.

3. 3.

   If you can't love your children, give them away.

4. 4.

   Be patient with your children. Each idea/venture will develop at different rates. Prohibit premature scrutiny. Asking a three month old business venture for revenue projections make as much sense as asking a toddler to estimate his/her earnings potential.

5. 5.

   Invest in your children's education.

6. 6.

   Grant your children the freedom for playful exploration.

7. 7.

   Consider your family legacy. Over time management attention typically shifts from building a legacy to protecting one. Don't only minister to the needs of a moribund company that has lost its capability to conceive and nurture new ideas; instead, watch your children grow up and prosper.

Page 12"Experience rules'": a scenario for the hospitality and leisure industry circa 2010 envisions transformationMarvin Erdly and Lynn Kesterson-Townes

During the next decade and beyond, hospitality and leisure companies will undergo a crucial transformation. They will de-emphasize standard offerings for business and leisure travelers and, instead, embrace business models that focus on mass customizing travel experiences. As a result, in 2010, travel will be about engaging in powerful, seamless personal experiences that are carefully tailored to learning and catering to the tastes and demands of individual travelers.

In the past, the travel industry offered destinations to enjoy and trips to get there. In the future, travel will be about creating compellingly personal experiences for travelers and guests. Two key forces are driving this trend on both the demand side and the supply side: globalization that allows more people to go more places, and technological advancements that will fuel economic growth and enable companies to provide experiences on demand. The result: customers will be better informed, more demanding, more global, more discerning, and more varied in their desires than travelers today. Most travel and leisure companies will need to make significant changes to be successful participants in this new experience marketplace.

Travel companies that wish to offer differentiated experiences must do the following between now and 2010:

1. 1.

   Promote customer-experience centricity.

2. 2.

   Brandish the brands: aggressively launch measures to re-affirm the brand positioning.

3. 3.

   Personalize with precision.

4. 4.

   Focus on the fundamentals: guest service, revenue management, and brand building to offer a better quality product and more customized guest service with a lower cost structure.

5. 5.

   Shift focus of personal: use technology for transactional tasks; refocus employees on value-added guest services.

6. 6.

   Reinvent sales and distribution using an integrated direct connect mechanism (IDCM).

7. 7.

   Leverage technology advances in numerous aspects of the operations.

To prepare for the "Experience rules" scenario, consider the following crucial actions:

1. 1.

   Adopt a global mindset with expanded ability to serve multiple cultures, tastes and markets.

2. 2.

   Develop the capability to uncover the unexpected to excite and delight guests.

3. 3.

   Invest in your guest to own the customer relationship.

4. 4.

   Become more agile: integrate your businesses.

5. 5.

   Rethink revenues: shift to the practice of ROI management vs. revenue management

6. 6.

   Transform staff into your guest experience managers (GEMS)

7. 7.

   Extend the experience after the guest leaves.

Page 19Russell L. Ackoff, iconoclastic management authority, advocates a "systemic" approach to innovationRobert J. Allio

Think tank dynamo Russell L. Ackoff advocates that managers scrap the way they normally approach problem solving in general and innovation in particular. He champions a process called "synthetic" thinking, a way of thinking about and designing a system that derives the properties and behavior of its parts from the functions required of the whole. S&L asked Ackoff for specific suggestions for promoting innovation.

• •

  How can managers formulate effective strategy by understanding a system?

Ackoff: First by understanding what's happening inside and outside the organization, then by developing a vision of what the organization could be within the emerging culture and environment. Next by preparing a strategy for reaching or moving closer to that vision.

• •

  How does a manager develop effective strategy to implement the vision?

Ackoff: This requires design, and designs that lead require creativity. Creativity involves a three-step process. The first step is to identify assumptions that you make which prevent you from seeing the alternatives to the ones that you currently see. These are self-imposed constraints. The second step is to deny these constraining assumptions. The third is to explore the consequences of the denials. Creativity of individuals can be enhanced by practice, particularly under the guidance of one who is creative.

• •

  Give me an example of a creative systemic thinking process that resulted in an important new product.

Ackoff: An urban automobile. Before we could start to redesign the automobile for urban use, someone had to ask, ''What is the most basic assumption we make that affect the design of our current automobiles?'' The answer: We currently design automobiles to serve in a variety of environments, to serve many purposes. But today most households in the United States contain two or more cars, enabling owners to divide their use between urban and inter-urban trips and between use at rush hour or off hours. So, this gives us an opportunity to design an urban automobile for workday and work-time use. To design one from scratch creatively we had to identify the assumptions on which the design of the current automobile is based, deny them, and explore the consequences. The need that remains is for a strategy that will lead to progress toward realization of such a vehicle. It's a process of rethinking constructively and creatively.

• •

  What advice do you have for manager who wants to become a more effective strategist and leader?

Ackoff: First, to become aware of the nature of the fundamental intellectual transformations now taking place and what their implications are for the future of business and management generally. Second, to attach themselves to people who show creative thinking and engage with them in the process of redesigning, from scratch and with no constraints, the systems they manage.

Page 27Translating strategy into effective implementation: dispelling the myths and highlighting what worksJohn Sterling

Why is it that an estimated 70 percent of strategic plans and strategies are never successfully implemented? Several reasons are frequently offered to explain (or to justify) failure to implement strategy. Some are valid but many are, in fact, just myths that have gained credibility from being repeated often. By discrediting the myths, we can more clearly look at a number of approaches that can greatly enhance the effectiveness of strategy implementation.

The Myths. The following are not legitimate reasons for the failure of an organization to effectively implement strategy. On the contrary, they are generally used to paper over more fundamental management failings or to avoid acknowledging that a chosen strategy simply failed in the marketplace.

1. 1.

   Lack of senior management (CEO) support – the truth often is that just because senior management does not reject a strategy suggested by middle management, it does not mean that it was adopted; it never was a strategy.

2. 2.

   Emperor's new clothes – this premise is that the strategy failed because senior management is ill informed or self deluded. Good strategies that are timely and adventurous are necessarily built on imperfect information and management intuition. A greater threat is "analysis paralysis".

Real reasons for strategy failure:

1. 1.

   Unanticipated market changes – strategies can fail because the market conditions change before the strategy can take hold. Three preventative actions are cited with the salient point being that failure to recognize and react is what significantly erodes business performance, not the change itself.

2. 2.

   Effective competitor responses to strategy – to out-perform the competition, competitive intelligence is a must do.

3. 3.

   Too little investment – if insufficient resources are applied, the strategy will fail. Modeling will aid the executive to make smarter deployment of limited resources.

4. 4.

   Failure of buy-in – insufficient buy-in to or understanding of the strategy among those who need to implement it will cause failure. Good strategic management is a function of people actively considering the strategy as they make day-to-day decisions in an ever-changing world.

5. 5.

   Lack of focus – resources are wastefully dissipated if priorities are unclear. Put the strategy on one page: focus to execute.

6. 6.

   Poorly conceived business models – sometimes strategies are simply bad.

A checklist of eight good techniques is presented included to support successful strategy implementation efforts.

Page 35Achieving an M&A's strategic goals at maximum speed for maximum valueOrit Gadiesh, Charles Ormiston and Sam Rovit

When merging two companies, after the deal is signed the CEO faces few challenges more risky than integrating the businesses to capture maximum value. Speed is essential to successful merger integration. But it is not everything. Only 25 to 50 percent of deals create shareholder value. This is often because those managing the integration process do not know how to make tradeoffs between speed and careful planning. To keep the value of merger from evaporating, leaders need to manage the integration process actively and steer a course that leads the new organization to its stated strategic goals as swiftly as possible.

Start with the strategic goals. There are two general types of mergers:

1. 1.

   efficiency deals that "play by the rules" (achieve performance improvement in a merger that will have high functional overlap and high predictability of value) and

2. 2.

   transformation deals that "transform the rules" (low overlap and low predictable value). Top management needs to articulate the purpose of a deal and its strategic rationale long before the merger is consummated. Four rationales are offered and discussed. The first two rationales apply more to type 1 deals and the second two more to type 2 deals.

1. 1.

   Merging to capture the benefits of scale. In this type of merger, the longer you take, the more risk you incur. Success depends on very early identifying the key people to lead and removing those who will block the process.

2. 2.

   Merging to expand into adjacent markets, customers, and/or product segments. The big prize comes from revenue growth. Teams from both sides must work together to develop a new marketing plan for the combined company.

3. 3.

   Redefining the business for a new direction. As a framework for judgements, consider using these reference goals: focus on leading-edge customers, make decisions quickly, and look for ways to lead change in the marketplace.

4. 4.

   Re-inventing an industry. Two initiatives in parallel are required: typical short-term objectives (cost reduction, consolidation, divestment, etc.) and long-term direction objectives for the new business. Details from the AOL Time Warner and the Citigroup merger cases are cited as examples.

Customize the plan. Active management is needed in all three phases of integration:

• •

  Phase 1: Set the stage. Articulate the vision and answer the four big questions: where are we going? Who will lead us there? What are the obstacles? How might this impact each stakeholder, collectively and individually?

• •

  Phase 2: Design the new company.

• •

  Phase 3: Make it happen.

Several examples taken from Cisco System's many mergers are cited to illustrate process points and insights.

Page 42Two merger integration imperatives: urgency and executionArthur Bert, Timothy MacDonald and Thomas Herd

The operative word for a successful acquisition is "quickly". A.T. Kearney study findings indicate that a company has just two years to make the deal work. For example, among non-manufacturing companies, 85 percent of all merger synergies are gained in the first 12 months. The remaining 15 percent come in year two. Though many mergers do not succeed, if the acquiring company meets analyst's expectations, a top-performing merger can increase shareholders' wealth anywhere from 4 to 65 percent above industry averages.

Those companies that gain momentum early create value for both shareholders and customers. How to do it? The answer lies in the fact that the momentum is a natural byproduct of a sound strategy and the personal energy and involvement of the executive team. Their execution makes or breaks the deal.

Within the two-year window, the execution of the sound strategy begins with management's priorities: how they are balanced, delivered, and communicated. In general there are seven ground rules for M&A execution to follow:

1. 1.

   Select leadership quickly. Top acquirers set their watches according to a tight timeline. The top three layers of senior management are selected and responsibilities assigned within the first seven days; all position and roles are to be set by the end of the third month.

2. 2.

   Establish clear goals and manage expectations. The best integrators create a sense of urgency by immediately rolling out the highest priority projects and quick-win synergy projects.

3. 3.

   Build a strong integration structure. Establish a merger steering committee made-up of the company's senior executives, who delegate integration efforts to individual, decentralized teams. A program management office is used to maintain consistent processes, monitor progress and coordinate teams.

4. 4.

   Establish open, frequent and timely communications. For most companies, the biggest barrier to merger integration is failure to achieve employee commitment. Communications does not just happen; managers must take responsibility, plan carefully, and control it over time.

5. 5.

   Actively address cultural issues. The culture must be both satisfying and challenging to attract top people. Ensuring stability and openness within the employee ranks is critical.

6. 6.

   Focus on customers explicitly. Top acquirers launch high-level plans for customers retention, making sure that the appropriate team is acting and using metrics to determine customer service and satisfactions levels.

7. 7.

   Rigorously manage risks. There are high risks associated with rapid growth. Create a "merger integration dashboard" using four main metric categories: economic (benefits), project risks, customers, and employees.