Quick takes

Citation

Gorrell, C. (2010), "Quick takes", Strategy & Leadership, Vol. 38 No. 5. https://doi.org/10.1108/sl.2010.26138eae.002

Quick takes

Article Type: Quick takes From: Strategy & Leadership, Volume 38, Issue 5

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

InterviewJohn Hagel explains the concept and potential of the “pull” management modelBrian Leavy

Research from The Deloitte Center for the Edge suggests that a “pull” management model is required to achieve company-wide continuous innovation offering increasing customer value. Center co-chairman John Hagel III and his colleagues believe that enabling game-changing innovation is a key leadership survival skill.

Premise: The basis for competition is fundamentally changing. The source of economic value has shifted from knowledge stocks (proprietary technology, products and processes) to knowledge flows. Technology and global ‘flattening’ has allowed systematic erosion of barriers to entry and movement. Competition has intensified. Going forward, the source of strategic advantage will increasingly reside in the ability to gain privileged access to concentrations of relevant and diverse knowledge flows, so that the knowledge stocks can be refreshed more rapidly.

Defining “pull”

“Pull” is all about “evolving new dispositions” and “mastering new practices.” It is the ability to draw out people and resources as needed to address opportunities and challenges.

Hagel’s concept of “pull” addresses three issues – breadth, depth and scalability. “Pull” has three levels that build on each other 1) to access and connect with resources; 2) to attract – the ability to draw people and resources to you that you were not even aware existed; and 3) to achieve – drawing out of each of us our full potential and thereby providing the opportunity to get better faster by working more effectively with the people and resources we “pull” to us.

Using the “pull” view

The world of “pull” starts with the awareness that forecasts and demands are more and more difficult. Rather than focusing on push programs, it concentrates on designing scalable “pull” platforms that can make it easier to draw out people and resources on demand to respond to unexpected opportunities and challenges.

Making the transition from push to pull is inevitable under conditions of increasing change and uncertainty because “pull” increases flexibility and provides a more supportive environment for innovation and talent development.

The power of “pull”

As we adapt to the increasing importance of knowledge flows, we will see a new set of practices and institutions that drive a wave of change. We can replace the experience curve model (where the more experience we acquire, the longer we have to wait for the next increment of performance improvement). With “pull” we will have the possibility of creating environments with increasing returns performance improvement where the more participants that join, the more everyone improves performance.

MasterclassRethinking the organization: leadership for game-changing innovationStephen Denning

In a world of ever-accelerating change and global competition, in which the balance of power has shifted to the customer, continuous innovation and learning by the entire organization are required for survival.

Several pioneering consultants and corporate leaders make important contributions towards explaining how. This Masterclass lesson for corporate leaders integrates their fresh ideas and their implementation suggestions.

The 21st century firm must generate increasing value for customers

Exploiting static stocks of knowledge is no longer a winning business model. Today’s customers want something new that will interest, excite and even delight them. Now, thanks to global competition, they have many choices and instant access to accurate information about what the choices really are.

Premise: companies will need to move from a world of push business models to a world of pull models. To succeed in the new world of pull business models, a firm needs employees who are engaged and empowered to continuously add new value to customers. This means not just adding a new fix to management, but re-thinking management from top to bottom. Everyone in the organization needs to have a clear and current understanding of what the customers want and how to respond. They need to be constantly improving their performance to generate more value for the customer.

In their advice to managers, the change advocates focus on a different piece of the puzzle:

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  The Power of Pull presents a new economic model of organizations and focuses mainly on what is happening at “the edge” of organizations, particularly the interactions between networks of organizations.

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  Getting Change Right focuses on how to communicate the new model of organization in a way that energizes, rather than dispirits, the staff of an organization.

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  Employees First, Customers Second illustrates the role of a CEO in transitioning a firm from a traditional control mode to one in which the employees are driving innovation and creating ever increasing value.

Integrating the lessons

The shift from doing business in the world of “push” to the world of “pull” involves fundamental change of the firm’s DNA. It would be a mistake to see these books as merely offering a miscellaneous collection of unconnected business practices from which a CEO might pick and choose to supplement traditional management practices, or additional skills that a CEO might decide to acquire to upgrade his or her current performance. Because pull companies will compete in a radically different business environment, they will be required to understand and master a radically different kind of leadership.

Defining customer value as the driver of competitive advantageH. Kurt Christensen

Even veteran executives often make statements about competitive advantage that reflect either genuine misunderstanding or casual misuse of the term. This will lead these otherwise-capable business leaders into questionable or wrong assessments about their competitive advantage, with far reaching negative results:

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  A misunderstanding allows errors or omissions in assessing and integrating information, and thus seriously compromising the analysis of competitive advantage in any given situation.

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  When a team of executives does not have a shared understanding about the term, their discussions are less likely to produce strategic clarity.

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  Many executives have misconceptions about how to apply Michael Porter’s well-known dichotomy of cost-based and differentiation-based competitive advantages.

Why does this happen? And what can be done to reduce or eliminate such misconceptions? Answers are offered in this article.

Defining competitive advantage

Here is a definition that can lead to more accurate assessments of competitive position and also can help focus strategy discussions on creating, maintaining and enhancing competitive advantages:

Competitive advantage is whatever value a firm provides that motivates its customers (or end users) to purchase its products or services rather than those of its competitors and that poses impediments to imitation by actual or potential direct competitors.

This definition has several important implications for strategists:

1. 1.

   It reinforces that competitive advantage is an external measure: how your customers regard your products or services.

2. 2.

   Competitive advantage is a perception, grounded in facts, or in emotion-based branding, or in some mixture of the two.

3. 3.

   It focuses attention on the customer’s decision to purchase; competitive advantages must enable a satisfactory or better level of sales.

4. 4.

   Focusing attention on the decision to purchase facilitates consideration of the entire array of potential competitive advantages.

5. 5.

   By juxtaposing customer perceptions with competitor positions and actions, it helps strategists overcome the common weakness of devoting sufficient attention to one, but not to the other. Viable competitive advantages offer significant customer benefits that endure only as long as competitors are unsuccessful at matching them.

Takeaway

With a clearer understanding of “competitive advantage,” with more systematic methods for gathering customer and competitor information, and with careful analysis of the changes in both, businesses be better at assessing, building, communicating, maintaining and enhancing their unique competitive advantage.

Actions to implement three potent post-crisis strategiesSaul J. Berman, Richard Christner and Ragna Bell

To succeed in this post-crisis economic environment, we recommend that organizations concentrate their actions on three main goals.

1. Get ahead of scarcity: As prices recover from artificial lows, the trend toward scarcity will return with even greater impact as economic activity recovers. Business should act now to lock in preferential access to resources critical to the company’s strategies. Preempt scarcity by taking action in four areas:

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  Assure access to key supplies.

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  Secure the best global talent.

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  Move quickly on the M&A agenda.

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  Embrace the financial case for green (the economics of scarcity increases the benefit of operating sustainably).

2. Drive cost efficiency through productivity and agility: While continuing to do more with less, organizations must build processes capable of flexibility and scaling and foster a management system that can sense risk and opportunity and execute quickly. Four enablers can dramatically increase productivity and agility:

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  Improve collaboration.

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  Use predictive analytics to enhance customer, process and asset strengths.

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  Build management systems for rapid decision making and execution.

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  Become globally integrated.

3. Find targeted approaches to grow revenue: Altered customer priorities and buying patterns, along with constraints on macroeconomic growth, mean that companies must selectively find innovative approaches to generate growth. Sources of new revenue:

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  Promote value-conscious offerings (ones that change the price-value equation).

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  Improve productivity – more value with less work.

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  Engage customer through digital channels.

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  Establish government partnerships.

Are you ready for action?

As organizations prepare for a future fraught with uncertainty, there is urgency for companies to take actions to prepare for the key opportunities and risks presented in this post-crisis environment. Business leaders should start by developing clear scenarios for their industry and the overall situation that can help identify which strategies and business models will best position their organization to succeed across the range of possible future outcomes. By combining an understanding of their current position with a clear set of future scenarios, they can select decisive moves across the three recommendations identified (above) to get ahead of scarcity, focus on productivity and agility, and find targeted approaches to grow revenue.

CaseFormulating policy with a parallel organization: how a CEO integrated independent divisionsDale E. Zand and Thomas F. Hawk

Challenge

Communications between business units is always a challenge. Even harder is to develop policies that synthesize the interconnected but different practices of independent divisions in areas such as pricing, energy management, product line divestment, and human resources.

When problems are critical, non-routine, and poorly defined, formal hierarchies can hinder solutions. Managers, programmed and rewarded for working on recurring, well-defined situations, often ignore or transfer poorly defined issues from one department to another in an attempt to minimize diversions from their production goals and responsibilities. Or maybe they are poorly prepared to make the inquiries and judgments necessary for decisions in unstructured situations.

Solution

To avoid power plays, insular thinking, and inflexibility, one solution is to create a “parallel organization” consisting of participants from across company units and levels. Its purpose is to be a platform for group inquiry, with free communication outside of formal channels with sources in and outside the organization; its task is to surface policy issues, investigate them and recommend appropriate policy changes.

A “Parallel Organization” is, by design, intended to only supplement the formal organization. The outputs (recommendations) are inputs to the formal organization. A case study explores how a company addressed projects using a parallel process.

Benefits of “The Parallel”

Improve policy formulation. By developing policies that synthesized the common and different needs of independent divisions the Parallel facilitated standardization of practices that adapted and frequently surpassed elements of the best practices found among the divisions.

Improved integration. As a result of working in the Parallel, managers formed efficient social networks that they used to communicate across divisions and functions to get counsel and solve problems in the formal, production organization.

Improved management development. Managers acquired subject matter knowledge and expertise and greatly improved their investigative, analytic, writing and presentation skills, and enhanced their ability to work in teams. The Parallel improved the quality of their decisions by helping them take a larger, firm-wide perspective. Having worked with norms of inquiry and mutual trust, managers carried their learning back to enhance performance of the formal association.

Using executive education program rosters to identify a succession cohortMark E. Haskins and George R. Shaffer

Succession planning is not merely a process for CEO succession, but one for all critical enterprise positions. Executive education (EE) programs are a strategic opportunity to identify the “right” people for the corporation’s success. Most EE programs have two characteristics: very few companies do it well; and the costs of not doing it well are high. We believe that the work of identifying participants to attend an EE-development program should be, and can be, strategically extended in three simple steps to build or strengthen a succession roster.

Step 1: How to best select managers for an EE program

The selection of EE-program attendance should be made with an eye towards representing a mix of career stages and functional expertise. Using both vantage points, a company can reach several layers into their organization for more effective outcomes. Criteria are offered.

Step 2: Focused assessment of those on an EE-program roster

For each of the managers selected for an EE-program roster, it is essential to synthesize each manager’s detailed competency ratings into two overall ratings – one for his/her leadership behaviors and one for results orientation. See chart.

Step 3: Identify the best succession candidates

The Talent Overview Matrix (TOM) is used to identify, from the EE-program rosters, those managers whose competency assessments mark them as succession candidates. More specifically, the TOM assists those responsible for succession planning to: differentiate an organization’s managerial population; customize further developmental work for those considered for succession planning; and develop an overview of the organization’s leadership strengths and developmental needs. Exhibits graphically present the points discussed.

Take it even further to ensure a future focus

Upon completing the prior three steps, the TOM also offers the opportunity for organizational leaders to re-think and re-answer its most strategic questions. For example, the differences exposed by juxtaposing a current TOM versus a future-oriented TOM can highlight an organization’s key priorities for management development in order to best prepare a succession cohort. Those imperatives can then become the basis for establishing customized EE-development paths for the organization’s top talent.

If your organization periodically sends a cadre of managers to any number and type of EE programs, those rosters are easily adapted for identifying a cohort of succession candidates. From such a baseline, and in three discrete and practical steps, a cohort of succession candidates can be identified, differentiated, and guided towards customized developmental paths deemed necessary. This structured approach can facilitate the start, or the re-vitalization, of an organization’s succession planning.

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