Quick takes

Citation

Gorrell, C. (2009), "Quick takes", Strategy & Leadership, Vol. 37 No. 6. https://doi.org/10.1108/sl.2009.26137fae.001

Quick takes

Article Type: Quick takes From: Strategy & Leadership, Volume 37, Issue 6

Catherine GorrellCatherine Gorrell is president of Formac, Inc. a Dallas-based strategy consulting organization (mcgorrell@sbcglobal.net) and a contributing editor of Strategy & Leadership.

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

Unique experiences: disruptive innovations offer customers more “time well spent”David W. Norton and B. Joseph Pine II

There is an increasing demand by consumers for more meaningful experiences. As customers have so many of their lower-order needs fulfilled in today’s increasingly material-rich societies, they seek fulfillment in higher-order needs. The global recession that began in 2008 even exacerbates this, as many people today question what really matters to them. More and more, they come to the conclusion that is not things. They do not need more stuff; they desire experiences that give their life meaning. They want more than “simple, quick, and convenient” services. Yet most companies are failing to innovatively respond.

Disruptive experience behaviors

Businesses that are convenience-based tend to focus on getting functional jobs done for customers. In contrast, experience innovator companies tend to focus on getting emotional and social jobs done for customers. For discerning coffee drinkers, for example, the emotional and social jobs that Starbucks does are just as important, if not more important than the functional job of giving them a caffeine jolt first thing in the morning. According to sociologist Ray Oldenburg, Starbucks offers a third place – a social venue outside of home and work to which patrons gain an emotional attachment.

The danger

Convenience, or reducing time on task for things we don’t want to do, is an important attribute of functional innovation. But companies (who continue to pare down the amount of time their customers spend with them in the name of making their offerings more convenient) will one day wake up to discover that their customers no longer care about it in the same way they once did. It is at precisely these junctures that people often look for offerings that feel not more convenient but actually less, that take not less time but more – time they find well spent.

New competitive position: time-well-spent value proposition

In today’s market, greater opportunities for growth lie in brands innovating around the emotional and social jobs that people want done in a manner that creates experiences that provide ‘time well spent’.

Innovating experiences increase the value of the time their customers choose to spend with them. The more time customers spend interacting, the more money they spend. Many of the great innovations of the past several decades – like Starbucks – involve customers spending more time with the company, time that has special value. Across a wide variety of industries – food, entertainment, and travel destinations – companies increasingly embrace the view that economic value can be generated in creating a meaningful experience for customers. Think of it as competing on the basis of “time well spent.”

Strategies for winning in the current and post-recession environmentMartin Reeves and Michael S. Deimler

The consensus is growing among economists, business leaders, and governments that the world is in the midst of a prolonged slowdown of unpredictable duration and that even when the upturn comes, the post-crisis strategic and operating environment will almost certainly be quite different.

Companies able to survive and thrive during a downturn gain great momentum in the race for future advantage. And with growth opportunities likely to come in all sizes and shapes, the ability to shift seamlessly and rapidly from insight to action may well make the difference between winning and losing during and after the downturn. So business leaders are well advised to address three themes:

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  Survival.

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  Advantage.

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  Resilience.

Survival: crucial but not sufficient

Clearly, the first task is to ensure a company’s short-term survival. By developing a range of short- to medium-term recession-specific strategies designed to drive growth and ensure that their company emerges from this downturn competitively advantaged. These strategies include several cited. But defensive moves aren’t likely to prepare a company to thrive in the long term. If survival strategies buy time, they are not likely to foster sustainable competitive advantage.

Seek advantage: adapt to the downturn

Given the likelihood that the strategic environment will remain uncertain even after the recovery, the company must institutionalize the lessons learned during the downturn. And go further to adjust the customer offering and business practices (new services, new features, new pricing models, enter or exit markets, band with other businesses in cooperative relationships). Renewal strategies typically entail the artful management of a portfolio of “business experiments.”

Resilience: making adaptation a way of life

It seems likely that even after the eventual economic recovery, heightened uncertainty and volatility will remain permanent features of the business environment. Furthermore, some of the classic strategies for gaining competitive advantage – for instance, focusing on scale – have been losing their power. As a result, resilience – the ongoing ability to anticipate and adapt to critical strategic shifts – will become an increasingly important driver of future competitive advantage.

Of course, all of this is easier said than done: for most companies, fostering resilience will require significant cultural change, skill building, and leadership. But the suddenness and the seriousness of this recession can produce a mandate for change as various constituencies within a firm recognize that their survival is at stake. The current crisis, after all, offers bold leaders a unique opportunity to put an end to business as usual.

Migration management: an approach for improving strategy implementationGary Getz, Chris Jones and Pierre Loewe

A poor strategy cannot deliver good results. Conversely, a good strategy that is ineptly implemented is unlikely to produce sustainable competitive advantage. How can companies manage both strategy and execution to ensure their winning strategy is turned into action that achieves its intent?

The answer: interpose a critical activity to link long term strategy development and strategy execution: a “migration management” process.

Managing migration: connecting strategy with action

“Migration management” is a set of tools and practices. To build a migration path involves seven steps (detailed in the article). Using this methodology solves two fundamental challenges:

1. 1.

   Strategy formulation and execution operate on very different timetables. A direct leap from strategic intent to detailed tactics is almost impossible to achieve without having a guiding process to clearly define and sequence a path of major action programs to go from today to the desire strategic destination.

2. 2.

   An allowance for adaptively changing for new external conditions must be part of implementing strategy, but not hinder reaching the strategic destination.

The two core perspectives

The migration management methodology enables companies to start their annual planning process by asking, “What actions do the gaps between our current state and future state suggest?” and finish it by asking, “If we do these things, will we reach our future state?” Desired identity – the future state – drives action; action enables the achievement of desired identity.

Going forward: evaluate migration management differences

Migration management improves on conventional strategy implementation approaches (which generally build a present-forward roadmap of projects that align with strategic themes) in these ways:

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  It focuses on making stepwise progress toward a strategic destination.

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  It utilizes a future-back approach to identify gaps that must be closed to reach the future state we aspire to reach.

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  It identifies the actions that must be taken to close these gaps.

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  It sequences these actions over time, highlights long lead-time actions, and explicitly recognizes interdependencies.

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  It is adaptive by making it easier to respond to unanticipated environmental changes, such as a severe economic downturn, without abandoning a sound strategy.

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  It makes the assumptions and beliefs underlie the path visible so that implementation vulnerabilities can be monitored and managed.

What new general managers must learn and forget in order to succeedPreston C. Bottger and Jean-Louis Barsoux

For a manager to transition from a functional or project role to general management responsibilities is extremely difficult. Many such promotions fail, which is costly for both the individual and the company. Before that happens, those responsible for ensuring high-quality leadership in senior power positions must attend to the likely cause: inadequate investment in preparation. The managers are often unprepared for the sheer scale and complexity of the challenge.

Forewarned is forearmed

People moving into general management positions often underestimate the leap required. The general managers surveyed in leadership development programs drew on their personal experiences to highlight a number of key surprises:

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  The weight of the responsibility; the mess.

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  Dependence/demands of various constituents.

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  Time pressure; conflict outside the silo.

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  Scrutiny; exposure; isolation.

Aspiring GMs will be responsible for an entire business system, including current operations, innovation, the structural design and the culture. All this adds up to a lot of pressure. These pressures assure that the GM will be pulled in multiple directions and make it likely the GM will get caught up in details – thus losing touch with the bigger picture. This makes it essential for GMs to regularly review what capabilities, mindsets and behavior from the past apply to this new job, which ones need enhancing and which should be toned down or discarded.

What should new GMs focus on? Answer: five points

Offered is a simple model – a guidance device – proven useful in helping aspiring and recently appointed general managers focus on their new world of work, and to help them stop relying on past experiences and models that won’t serve them well in their new position. This GM guidance system considers the choices and responsibilities in five core activities – originating, designing, energizing, integrating and protecting – that comprise their key contributions to the creation and maintenance of the firm’s economic and social wealth. Details are provided.

Planning ahead

Those who aspire to general management will have to change mindsets and habits, to go through the pains of learning (and unlearning), and moving into new functional, business and geographical areas. They must prepare to be energetically ingenious in all aspects of their work, every day, for their many years ahead. The five-point model offers guidance.

Only the right people are strategic assets of the firmDavid W. Crain

Management consultant and best-selling author Jim Collins warns that the old adage, “People are your most important asset” is misleading. In fact, it’s only the “right” people who are a company’s most important strategic asset.

The rise in importance of such crucial cadres of “right” employees follows the transformation of the economy from one of manufacturing to service delivery. In service-based industries (such as healthcare, retailing, transportation, professional services, financial services, and food services) employees are in direct contact with customers, either personally or electronically, completing transactions that are part tangible and part experiential; in short, people are integral to the value proposition.

The core question

Although this is not news, companies have inconsistently recognized and leverage this fact, thus producing a wide array of outcomes. The core question then is: How can employees become strategic assets if they currently aren’t?

The answer

If you want your people to be strategic assets, you need to recruit people who can implement strategy. Both Walmart and JetBlue make certain they have the people they need – Walmart through arduous training and development and weeding out those that don’t fit the culture and JetBlue in its selection of top candidates and then careful training and development. To make people strategic assets of the firm:

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  Criteria for selection and retention of people must be consistent with company values and culture.

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  Performance management must be linked through measurement to the firm’s strategic goals.

In today’s service-based companies, employees are “the center of organizational performance.” For the service-based firm, where people deliver the service (Walmart) or where they become inseparable from the service (JetBlue and Starbucks), employees feel they are valued because they possess an acute awareness of the impact they have on their company’s strategy. In short, in these best-in-class firms, Walmart and JetBlue, people have become strategic assets of the firm.

Even in the current economic crisis, innovative service providers will be wise to not focus on just shaving pennies through mandated budget cuts, but instead reconsider their service delivery employees as critical contributors to the value of the firm’s offerings.

A guide to choosing genuine opportunities for turnaroundsRobert M. Shaughnessy and Kathryn Rudie Harrigan

Opportunities to acquire businesses have increased with the credit freeze of 2009, the on-going recession and well-documented increases in the number of bankruptcies. But experienced turnaround specialists know that most of the troubled companies that could be acquired are not good buys. With so many distressed companies in need of turnaround talent and money, investors would be well advised to reflect on the lessons learned over the years by experienced specialists before they leap into a thorny acquisition.

The good, the bad and the ugly

Distressed companies fall into three categories: (1) hopeless situations that no amount of time, money or effort can save; (2) obvious winners that will revive as the current credit freeze thaws; and (3) problematical situations that require a careful due diligence process to sort the lackluster survivors from those businesses that will best respond to skilled turnaround management. Only the last category offers compelling high returns that justify the resources committed.

But how to sort them out? The problem is that traditional due diligence, with its concentration upon legal and financial analyses, is necessary but not sufficient to ferret out the promising opportunities in this group. Additional criteria include:

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  Does the target company have potentially valuable attributes such as intellectual property, market position or special competencies? If so, they offer the greatest chance for yielding the extraordinary gains that will come from a recovery in better market conditions and after an effective management turnaround program.

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  Are the company’s stakeholders (suppliers, employees, distributors, customers) evidencing their commitment to making difficult changes to help the distressed firm survive? Without their buy-in, there is no point in starting the process.

These are the best of times

For experienced turnaround managers, these are truly the best of times. Entire industries have been priced as though they were truly obsolete. Demand in some industries may shrink, but most of them will still offer exceptional opportunities for good cash flows. But don’t be seduced into trying to save a company that will limp along for years on life support systems or provide only negligible returns. Be brutally realistic about what the future could look like for a struggling firm and only put your energy into potential winners and not into lackluster survivors.