Friday, December 14, 2012

Killer strategies by Gary Hamel

(FORTUNE Magazine June 23, 1997) – Ask Nike CEO Phil Knight what he likes to do best, and he doesn't hesitate a beat--he likes to break things. Back in the 1960s, he turned the sleepy footwear industry upside down by betting that joggers would be willing to pay a premium for high-quality running shoes. Then, in the 1980s, he transformed his successful athletic shoe company into a marketing machine, saturating the airwaves with radical commercials that emphasized emotion rather than the product. Now, with the traditional sneaker market getting tougher, he's turning Nike into a sports behemoth that manages events like golf tournaments while it peddles both equipment and apparel.
Nike's stock has been on a roller coaster lately. But over the years, Knight's iconoclastic behavior has paid off for shareholders. Since 1986, Nike stock has posted 47% average annual gains. With returns like that, Knight is part of the most exclusive club in corporate America. Between 1986 and 1996, just 17 companies of the FORTUNE 1,000 grew total shareholder return by 35% or more per year. Their secret? When you dig into the workings of these wealth creators, you find that most managed to grow their return rates by radically changing the basis of competition in their industries. They either invented totally new industries or completely reinvented existing industries.

This is true not only for Nike but for Home Depot, Amgen, Intel, Compaq, Harley-Davidson, Champion Enterprises, and nearly all the others on our superstar list (see table). For instance, back in the 1980s, Harley-Davidson CEO Richard Teerlink had the notion that he was running far more than just a motorcycle company; he turned his operation into a business that sells American nostalgia--and it worked. Amgen's Gordon Binder broke all the rules of the biotech industry by focusing his genetic research not on customers but on the best science money could buy. The result: a 68% average annual total return over the past ten years, the best performance of all FORTUNE 1,000 companies.

Even companies like Coca-Cola and GE, which look like they are winning by execution alone, are also changing the rules in subtle ways. For instance, Coke has dramatically reconfigured its global bottling operation to give the company substantially more distribution and marketing oomph: Over 30% of Coke's global business is now in the hands of nine key bottlers in which the company has an equity stake.

Taking risks, breaking the rules, and being a maverick have always been important, but today they are more crucial than ever. We live in a discontinuous world--one where digitalization, deregulation, and globalization are profoundly reshaping the industrial landscape. What we see is a dramatic proliferation of new economic life forms: virtual organizations, global consortia, Net-based commerce, ad infinitum. Inevitably, the economic sea change now under way will drive an extraordinary amount of wealth creation over the next few decades--just as the move from the agrarian economy to the industrial economy generated enormous new wealth around the last turn of the century. But just who will capture the new wealth? On the road to the future, who will be the windshield, and who will be the bug?

Unless today's established corporations learn to reinvent themselves and their industries, much of the new wealth will be created by newcomers. Today's CEOs are instinctively aware of this hard truth. In an MCI/Gallup survey of 55O U.S. CEOs, 38% said that industry newcomers--not traditional competitors--had taken the best advantage of change over the past ten years. When asked how the newcomers had succeeded, fully 62% of those polled said they had profoundly changed the rules of the game. Only 31% thought the newcomers had won through better execution. Finally, most of the corporate leaders surveyed thought that in ten years' time the toughest competitors they would face would be newcomers rather than the same old same old. This suggests that corporate leaders are painfully aware that incumbency ain't what it used to be.

While most of today's leaders know they must change the rules of the game, few understand how to create a revolution in their own companies. Assuming Phil Knight can't be hired away from Nike, the only alternative is to unleash the spirit of strategy innovation. I define strategy innovation as the ability to reinvent the basis of competition within existing industries and to invent entirely new industries. It will be the next fundamental competitive advantage for companies around the world. In an increasingly nonlinear world, only nonlinear strategies will create substantial new wealth.

And more companies are proving the point all the time. Who has been creating new wealth in the American grocery business? Though companies like Procter & Gamble, Kroger, and other traditional leaders have created a lot of new value in the past decade, industry revolutionaries like Boston Market, Starbucks Coffee, Trader Joe's, Petco, ConAgra, and Wal-Mart have created even more. While the old guard in the grocery industry has been focusing efforts on rationalizing the supply chain and turning out thousands of almost trivial product-line extensions, the vanguard has been creating entirely new product categories and retailing concepts. Starbucks, for instance, took a sleepy supermarket commodity--coffee--and began selling it in infinite varieties in trendy stores, thereby establishing a whole new market.

Who is going to create the new wealth in the auto industry? Unless they develop new strategies, it probably won't be GM, Ford, Nissan, Chrysler, or their traditional dealers but instead the new megadealers such as CarMax, Auto-By-Tel, AutoNation USA, and Driver's Mart--companies that are reinventing the retailing and distribution of the auto industry from the customer backward. With AutoNation USA, for instance, CEO Wayne Huizenga hopes to do for autos what McDonald's did for hamburgers: consolidate the industry by creating a national brand.

Take another example. Between April 1995 and April 1996, the capitalization of Internet-related companies rose from near zero to almost $10 billion. Yahoo and Netscape are just two of the new Net-exploiting value generators. True, it's not clear whether companies like these will continue to thrive in this volatile industry. But it seems unlikely that much of this new Internet-related value will be captured by traditional computer industry players like Unisys, Computer Sciences Corp., or Fujitsu.

Let me throw out a proposition: We have reached the end of incrementalism in the quest to create new wealth. Quality, cost, time-to-market, process improvement--these are important, but we are hitting the point of diminishing returns. Ford may be able to take another hour or two out of vehicle assembly time--its Japanese competitors may force it to do so. But if new companies totally reinvent the retailing and service of new and used automobiles, Ford's incremental improvements won't count for much. Neither will share buybacks, demergers, process reengineering, or downsizing lead to new wealth creation. At best, they simply keep profits from eroding. They may prolong the lives of geriatric strategies and anachronistic companies, but they won't create new business, new revenue streams, and new wealth.

Now here's the conundrum: If an innovative strategy drives wealth creation, then why isn't the pursuit of such a strategy front and center in most organizations today? In the MCI/Gallup poll, for instance, a majority of CEOs said that the strategies of their major competitors had become more alike over the past few years rather than more dissimilar. With the strategies of market leaders converging in many industries, it's no wonder many companies are feeling the heat of "hypercompetition." While speed and agility are central to corporate success, they're not enough. To escape, even temporarily, this kind of trench warfare, you need to break the rules of your industry, and that isn't easy. It takes leaders who question conventional wisdom:

Myth: Industry analysis is key to strategy. The rule breakers know that it is now increasingly difficult to define precisely where an industry begins and ends. This is certainly true for financial services, telecommunications, health care, and a variety of other industries. The question, "What industry are you in?" is becoming harder and harder to answer.

Myth: You should focus on your direct competitors. In the past it was relatively easy to tell who was a competitor and who was not. Today it is harder to distinguish competitors from collaborators from suppliers from buyers. The rule breakers understand that rivalry ain't as simple as it used to be. For many companies, it's getting harder and harder to tell the good guys from the bad guys.

Myth: In strategy, it's you against the world. Most managers think they can pretty much control the direction of their business. Yet today's smart leaders understand it is difficult to know just where the boundaries of the firm begin and end--temporary workers, outsourcing, and long-term supply relationships are now the norm. A firm may "own" only a small portion of the relevant value chain. The sort of radical strategy that leads to true innovation becomes substantially more complex in a world where the firm doesn't directly control many of the assets critical to its success.

Knowing that today's world works differently is important but not sufficient. You actually have to know how to create unconventional wealth strategies in your company. Surprisingly, the strategy industry--all those consultants, gurus, and planners--doesn't know how. Of course, everyone knows a strategy once they see one--be it Microsoft's, Nucor's, or Virgin Atlantic's. Anyone can recognize a great strategy after the fact. We also understand planning as a "process." The only problem is that process doesn't produce strategy--it produces plans. The dirty little secret of the strategy industry is that it doesn't have any theory of strategy creation. Whenever we come across a brilliantly successful strategy, we are all inclined to ask, "Was it luck, or was it foresight? Did these guys have this thing all figured out, or did they just stumble into success?"

A key thing to remember is that truly innovative strategies are always, and I mean always, the result of lucky foresight. Foresight, however, doesn't emerge in a sterile vacuum; it emerges in the fertile loam of experience, coincident trends, unexpected conversations, random musings, career detours, and unfulfilled aspirations. But the question remains, can we do anything to increase the fertility of the soil out of which strategy grows? Can we make serendipity happen? Or at least encourage it? I think so.

One good place to start is to develop a deep theory of strategy creation. It's clear that strategizing isn't a "thing," and neither is it a process. Instead, it must be a deeply embedded capability--a way of understanding what's really going on in your industry, turning it on its head, and then envisioning the new opportunities that fall out.

Strategizing is not a once-a-year rain dance, nor is it a once-a-decade consulting project. Strategizing must be a skill as deeply embedded as total quality, cycle-time reduction, or customer service. Just as business processes can be reinvented in ways big and small, so too can business models. This is how new wealth gets created.

Here are five ways organizations can radically rethink their missions:

New voices. Companies miss the future not because they are fat or lazy but because they are blind. That blindness is a genetic blindness. Land is a mystery to fish--fish are not genetically equipped to understand land. And by the time fish learn about land it is often too late. Many companies are genetically unequipped to see where the future is coming from. A lack of genetic diversity makes it difficult for companies to first encompass and then exploit the various trends and discontinuities that could be leveraged to create new wealth.

New voices, i.e., new genetic material, must be brought into the strategy process. Diversity was a requirement for the development of life; so too is it a requirement for the emergence of new strategy. A journalist recently asked me if I thought IBM had a chance of leading the next stage of the information revolution, as it had led at an earlier stage. I said that to render such a judgment, I would need to know how many of IBM's top 100 executives had grown up on the West Coast of America--where the future of the computer industry is being created--and how many of them were, at the present time, under 40 years of age. If a quarter, or a third, of the senior group were under 40 and possessed of a West Coast perspective on the information industry, then there was certainly hope for IBM. But the point was clear: IBM will need new voices contributing to its strategy if it is to reclaim intellectual leadership in the info biz. To IBM's credit, it has substantially diversified the ranks of top management over the past few years. It is a far more genetically diverse place than it was five years ago.

New conversations. Strategy depends not only on a diversity of voices but on the connections between those voices as well. For strategy to emerge, we need new conversations--conversations that cross the boundaries of function, technology, hierarchy, business, and geography. One thing is certain: If for five or six years in a row the same ten or 15 people in a company have the same conversations about strategy in the same way, new insights will be unlikely to emerge. Strategizing depends on creating a rich and complex web of conversations that cut across previously isolated pockets of knowledge and create new and unexpected combinations of insight.

Not all talking and listening amounts to deep conversation. For a meaningful conversation to occur, the participants must create some common context--they must, to a degree, "invade each other's worlds." This takes time. Conversations cannot be hurried. Conversations cannot be tightly scripted. They certainly cannot be shoehorned into the typical planning process or a two-day strategy "retreat" at a posh hotel.

We often lament the fact that it takes so long for a new strategy to rise through the layers of a bureaucratic organization to the level of management where resources can be allocated. At one time or another, many companies have set up orphanages for such ideas--typically labeled "new venture divisions." But imagine a strategy process where you put senior management (the people who hold all the resources) directly alongside the folks who have typically been disenfranchised from the strategy process--young people stationed out in the field and newcomers. The challenge is to get engaged in deep and meaningful conversations about opportunity and destiny. There's no reason a new and innovative strategy idea should take two years to fight its way up through the ranks of stodgy, uncomprehending managers. The route from insight to commitment doesn't have to be as painful and fraught as it is in most companies.

New perspectives. One can't raise an individual's IQ, but it is possible to help someone see the world in new ways. If you ever took an economics course, you probably didn't enjoy it at first. But one day something clicked, and you began to see the world through a new lens. Suddenly you understood how interest rates get determined, how supply and demand work to set prices, and what things influence exchange rates. You became enlightened.

Great strategy requires new ways of seeing. Redefining what a company does best constitutes a new way of seeing. Also, looking at your products or services differently can help. For example, Oracle hopes to create an entirely new business around PCs. How? By looking at the personal computer and then figuring out how to separate form from function. As a consumer, you don't want a PC; you want an information utility (just like you want an electric utility). Oracle's goal is to deliver this information utility in a form quite different from today's PC; the company is working on software for a simple $500 device that will handle most people's information needs.

But it is not only a new lens that can provide enlightenment, so too can a new vantage point. Sometimes a company simply cannot see the future from where it is standing. For example, Nokia, a Finnish company that makes cellular phones and is based at the edge of the Arctic, may be ill-positioned to track lifestyle trends on the other side of the planet--trends that could ultimately redefine its industry. One possible solution--send Finnish engineers to Venice Beach in California, down Kings Road in London, or to other places on the planet where new lifestyle trends get set. Immerse those engineers in the new cultural milieu; change their experience base. Mining the world for ideas has helped Nokia invent new approaches. One example: Nokia engineers devised the idea of colorful--bright red, yellow, and blue--phones, which opened a whole new market for the company.

Opportunities for innovative strategy don't emerge from sterile analysis and number crunching--they emerge from novel experiences that can create opportunities for novel insights. As the songwriter Jimmy Buffet succinctly put it, "Changes in latitudes, changes in attitudes." Of course, one produces a shift perspective not only by moving people into different geographical settings but by moving them into different industry settings as well. For example, Enron, widely regarded as one of the world's most innovative energy companies, is reconceiving the energy business from the vantage point of the financial industry (see the interview that follows). Enron's financial whiz kids have built sophisticated computer-based tools that enable the company to exploit arbitrage opportunities in energy markets and help customers manage the financial risks associated with buying and selling various forms of energy. Houston meets Wall Street.

New passions. We've too often ignored the emotional side of strategy. If strategy is partly about collective purpose and a sense of shared destiny, don't we need to recognize this explicitly in the way we go about creating strategy? For example, has anyone out there looked explicitly at the issue of commitment? I don't mean the commitment of financial resources by senior executives, but the emotional commitment of individuals at the bottom of the organization who are being asked to devote their lives to carrying out a new strategy.

The question is, Can one accelerate the time it takes to get employees committed to a new strategy, and thereby reduce the time between idea and action? I believe that one way of raising commitment is to get individuals throughout the organization deeply involved in the process of creating strategy. Individuals, I would argue, should have a say in determining the destiny of the organizations to which they devote their efforts.

Of course, the concern of top management is that involving so many people will prove chaotic. But most individuals have a deep need for order. When a CEO gets more people to participate in making strategy, things may seem crazy at first, but at some point the natural tendency for order takes over, and individuals begin to work mightily to bring order out of chaos. There is an inflection point where the quest for divergence is transformed into a quest for convergence, and a new collective point of view emerges--but one that is typically much richer, more complex, and more sophisticated than the original orthodoxy about the firm's "strategy." It is possible to get thousands of people passionately involved with an idea like quality and yet still maintain coherence--why can't the same be accomplished with strategy?

I believe that inside almost every individual is a deep passion for discovery and novelty. We try new restaurants, take vacations in new places, and search out new experiences of all kinds. I always find it amazing to see the passions that are unleashed when an organization goes to its members and invites them to participate in charting their collective destiny. We must give employees an emotional stake in the future. I can assure you that it is possible to wrap meaning and purpose around even prosaic products. Listen to David Pottruck, COO of Charles Schwab: "Our employees see themselves as the custodians of our customers' financial dreams." Wow! When was the last time your local bank teller had such a thought? So to all you strategists and corporate leaders eager to create value--get a soul!

Experimentation. Passion and foresight will only get you so far. When it comes to executing a strategy, the end target may be clearly visible--"I want to climb that mountain over there"--but much of the route may be invisible from the starting point. The only way you're going to see the path ahead is to start moving. Thus strategy is as much about experimentation as it is about foresight and passion.

In many organizations, the quest for efficiency drives out experimentation. One question I often ask managers: "Can you point to 20 or 30 small experiments going on in your company that you believe could fundamentally remake your company?" In most cases, the answer is no, there is nothing to point to.

In the new economy, we are attempting to explore vast spaces of possibility--how genetics will remake medicine, how biotech will change the chemical industry, how interactive technology will change the very idea of a university, and so on. IBM asks the question, "How will the Internet remake industry structures?" Well, it doesn't matter how many gurus, consultants, and dollars IBM throws at this question; the answer is still going to be at least partly unclear. The breadth of experimentation must be related to the degree of unknowability that confronts the firm. IBM needs to experiment on a broad front.

Kent Foster, president of GTE, puts the problem of unknowability this way: "We are talking about products that are still evolving, delivered to a market that is still emerging, via a technology that is still changing on a daily basis." This must sound familiar to any executive trying to chart a course through the chaotic frenzy that is the new economy. Clearly, experimentation is a must in this environment. As Apple learned to its sorrow with the Newton (a hand-held computer that fizzled), chutzpah isn't a substitute for learning about your market.

The more experimentation, the faster a company can understand precisely which strategies are likely to work. The goal is not to develop "perfect" strategies, but to develop strategies that take us in the right direction, and then progressively refine them through rapid experimentation and adjustment.

So where does this leave us? Convinced, I hope, that the best way to create wealth for employees and stockholders is to renew our commitment to developing and executing innovative strategies. I believe we should spend less time working on strategy as a "thing" and more time working to understand the preconditions that give rise to the "thing." Science is closing in on the deep secrets of life. We must redouble our efforts to close in on the deep secrets of corporate vitality.

A best-selling author, Hamel is chairman of Strategos, an international consulting firm specializing in strategy. He is also visiting professor of strategic and international management at the London Business School.

Wednesday, December 12, 2012

Innovation Cannot be Forced, Innovation Happens!

Innovation means brining the new into the world. And the new cannot come from the mind. If you carefully understand the mind, it is knowledge. The mind is composed of all the information that we have accumulated till date. It consists of all the knowledge that we have gained from people, places, books, magazines, articles, research, things and objects. All these information that has been stored in our memory constitues our data base. And this data base is old. These consists of things that are already there, otherwise there would not be in our memory. We must have had this information collected somewhere, sometime in the past. When we "think", we only search through the data base of old files and perform permutations and combinations with the available data. Therefore thinking cannot lead to creation of something new. Thinking cannot be used to Innovate, because whatever we think is all old. Even our goals are a part of this knowledge. All goals are from the memory; whatever we decide to create in the future, has already been in the past, otherwise we would not be able to make it into a goal. So making a goal to innovate somthing is also futile; we are bound to reinvent the wheel in a different way. Real innovation is - going beyond the human mind.To read more Click

What skills are in demand?

The working environment whether in companies or humanitarian industries is changing very fast. Forbes has published an article which talks about the basic skills that are in demand which can fetch you job in 2013 with the title the 10 skills that will get you a job in 2013. How you think systems through and work within the context of the team. Having the mind set of applying the learning, having the mindset and logic to process the learning are some of the critical skills in demand.  Let me summarise the skill sets here
  1. Critical thinking
  2. Complex problem solving
  3. Decision making
  4. Active listening
  5. Computers and electronics
  6. Mathematics
  7. Operations and system analysis
  8. Monitoring
  9. Writing computer programming
  10. Sales and marketing
The first four applies to all industries. whether one needs new job or continues to work in the same job but the challenge for us is are we prepared for the new demand of skills?

Can we reduce Infant mortality?

I am at Patna attending in the World Vision India's ToT training programme on Maternal and Child health. Volunteers, staff, ASHA workers from 7 districts (Bhojpur, Patna, Vaishali, Muzaffarpur, Nalanda and Nawada are participating. Infant mortality rate: total: 46.07 deaths/1,000 live births male: 44.71 deaths/1,000 live births female: 47.59 deaths/1,000 live births (2012 est.) (Source:India Infant Mortality (2012).
 In a layman term Infant Mortality is children dying between 0-12 months of their birth. Dr P.K Goswami says that 50% of Infant mortality comes from New Born death i.e. children dying between 0 -28 days of their birth and 50% of the new born death is contributed by children dying between 0 - 7 days. So logically we can conclude that if Infant mortality in India to be reduced the New Born death (0-28 days) has to be stopped. Otherwise it is very difficult for India to bring down IMR.
So what are the various causes of new born deaths? Dr Goswami said that following some are the medical causes 1. Hypothermia (Temperature of child's body is less than the normal), 2. Birth Hypoxia 3. Birth Trauma, 4. Sepsis 4. Pneumonia.
Then how could New Born death be reduced. Dr Goswami cited the following few preventive measures:
  1. Wrapping of new born baby with clean clothes. cover head, hands and feet
  2. Breast feeding
  3. Eye care of the new born
  4. Care of umbilical cord
  5. Cleanliness
Dr Goswami says that if these few simple actionable actions are done 50% of new born deaths can be prevented.

I sent an SMS to Dr Jayakumar Christian, CEO of World Vision India. He said, "Strange that with solution that simple we still let millions die in our country."
What we need then? We need to relook our public health strategy. Simply shouting at government will not prevent new born deaths. Create mass awareness among the mothers, Panchayats, health workers, TBAs. NGOs promote this vigorously. It does not cost much but need Personal Passion. One need not wait for government to come to rescue the new born babies. This could be done by any one who really wants to save lives of new born.

Again, this is the responsibility of every individual to help save lives. If India has to reduce IMR then issues of New born death has to be addressed at any cost.

Thursday, December 6, 2012

Strategy implementation: An alternative to inspiring through fear

Leaders get paid to think big, which means they sometimes announce ambitious initiatives and then leave the details for others to figure out. These leaders hand down the marching orders and expect targets to be hit. But they are not around at 3 a.m. to see the fallout on the rank and file.
They do not see the impact on people like the project manager we recently met in a Fortune 100 company. She routinely returns home from work around 7 p.m., cooks dinner for her family and puts her daughter to bed. Then she opens her laptop and works several more hours, often until 3 a.m.
We asked her why she does this. Her response serves as a wakeup call for leaders everywhere who distance themselves from strategy implementation. “They keep adding new initiatives,” she told us. “These leaders don’t fully understand what it takes to translate their vision into results.” This project manager is a high-performer who refuses to fail. But she has human limits.

Effective leaders are effective storytellers by Daniel Goleman

Good storytelling is a hallmark of effective leadership. It’s a medium that allows leaders to move others. It also lets others know who the leader is. How the leader thinks and feels. I recently spoke with my colleague Howard Gardner for my Leadership: A Master Class series. Howard talks about three kinds of story telling approaches. One is the ordinary story. These are the stories that everybody tells, in this sector, in this domain, in this company, in this school. Then there are the leaders who bring a new twist to these same old stories. There’s also the visionary leader who creates an entirely new story, which makes me think of the role of story telling in innovation and creativity.
Below is a recap of Howard’s thoughts on how and when leaders might use storytelling techniques to motivate and inspire.
I would want to make a distinction between the role of stories in the actual creative process and then the role of stories as it were, spreading the creation to others. I'm absolutely certain that a very important part of any new invention, whether it’s mechanical or literary or artistic, is a narrative vehicle which helps people relate to that. It helps them understand the ways in which it is complementary to, or consistent with or directly in clash with, what you did before.
I think the most iconoclastic painting in the twentieth century is Picasso's Les Demoiselles d'Avignon. It was so shocking at the time that he kept it under wraps for a decade because almost nobody could handle it. I think the narrative around the introduction of something new is imperative. When it comes to the actual creative process itself, I think that would vary enormously.
If you were working in a science lab and you pick up something that's askew and you decide rather than ignoring it or throwing it away, you really dig into it, I think you could talk about a narrative in a kind of metaphoric way. Namely how we used to phrase this one way and now we frame it another. It’s an interesting idea to see how far you can push this story angle not just in terms of public presentation and convincing, but actually in terms of creating the new ideas themselves.
In terms of startups, let’s look at Mark Zuckerberg. He probably got the Facebook idea working in his dorm room. We all will think it happened the way it happened in the movie, Social Network, and he didn't need anybody else for that. Once he began to become an enterprise, then clearly he needed to be able to attract people. He also needed to have direct and indirect leadership qualities to effectively tell his story.
Direct leadership means you know this is the person who is trying to convince you of something, and you look at what he says, how he says it and how they behave. Direct leadership can't survive the hypocrisy test, because if you push something very strongly in your narrative but every day you're undoing it in your behavior, then you have Newt Gingrich, who is not very convincing any more because what he calls for is so violated by his own life.
Indirect leadership is simply creating some kind of a symbolic product. It could be a literary work or it could be a mathematical equation. It could even be a computer program which itself is so heretical against the earlier standard that people consciously or unconsciously say “God!” We better pay attention to this. There are some inventions that you don't need to mobilize anybody else. I mean if you prove Fermat's Last Theorem and you publish it, the work is done, but if you're trying to start a corporation, you need the venture capitalists and you need people who you can count on to give you honest feedback.
Entrepreneurs need to be very effective story tellers, because basically it’s a promise of a possibility that they're selling to people, and they're mobilizing people around them. If anything, I think this has probably become too important. Namely, if you're a great story teller, you have more success than warranted, and if you're a lousy story teller you may never get to first base. What I would then say, and I don't know a venture capitalist personally, to what extent are they smart enough to basically filter out the charisma and look at the idea per se?
Source: Linkedin

Saturday, December 1, 2012

Strategy is the story | Strategy is the story - London Business School BSR

Strategy is the story | Strategy is the story - London Business School BSR

Stevie Spring, who recently stepped down after a successful stint as CEO of Future plc, the specialty magazine publisher, once told me, “I am not really the company’s CEO; what I really am is its Chief Story Teller.”

What she meant is that she believed that telling a story was her most important task as a CEO. Actually, she insisted, her job was to tell the same story over and over again. And when she said ‘a story’, she meant that her job was to tell her representation of the company’s strategy: the direction she wanted to take the business and how that was going to make it prosper and survive. She felt that a good CEO should tell that kind of story repeatedly, to all employees, shareholders, fund managers and analysts. For, indeed, a good strategy does tell a story.

Not fiction

All successful CEOs whom I have seen were great storytellers. Not necessarily because of their oratorical skills, but because the characteristics of the strategy they had put together lent themselves to being told like a story — and a good one too! The most important thing for a CEO to do is to provide a coherent, compelling strategic direction for the company, one that is understood by everyone who has to contribute to its achievement. For that, a story must be told.

When I say this, I am not implying that CEOs need to engage in fiction, nor do they need to be overly dramatic. In my view, a good business strategy story has three characteristics.

First, the story must provide clear choices. Stevie Spring’s choices were as clear as her forthright language: “We provide specialty magazines, for young males, in British.” Hence, it was clear what was out; there were to be no magazines on, say, ‘music’ (that is too broad), no magazines in German (although that could be a perfectly profitable business for someone else) and no magazines on pottery or vegetable gardens (unless that has recently seen a surge in popularity among young males in the UK without my knowing it). A good strategy story has to contain such a set of genuine choices.

Moreover, it has to be clear how the choices made by the company’s leaders hang together. For example, Frank Martin, who as a CEO orchestrated the revival of the British model-train maker, Hornby, by turning it from a toy company into a hobby company, put his strategy story in just 15 words. “We make perfect scale models for adult collectors, which appeal to some sense of nostalgia.” He decided to focus on making perfect scale models because that is what collectors look for. Moreover, people would usually specifically collect the Hornby brand because it reminded them of their childhood, and with it a nostalgic, foregone era. Frank Martin’s choices were not just a bunch of disconnected strategic decisions; they hung together, and, combined, made for a logical story.

Second, the story must tie to the company’s resources. Importantly, the set of choices has to be clearly linked to the company’s unique resources, those that can give them a competitive advantage in an attractive segment of the market. Although Hornby had been hovering on the brink of bankruptcy for a decade, it still had some valuable resources. First of all, it possessed a valuable brand that was very well-known and appreciated by people who had owned a Hornby train as children.

Additionally, the company had a great design capability in its hometown of Margate. However, these resources weren’t worth much when competing with the cheaper Chinese toy makers. The children who wanted a toy train for their birthday didn’t know (and could care less) about the Hornby brand. The precision modelling skills of the engineers in Margate weren’t of much value in the toy segment, where things mostly had to be robust and durable. However, these two resources — an iconic brand and a design capability — were of considerable value when making ‘perfect scale models for adult collectors’. It was a perfect match of existing resources to strategy.

I observed a similar thing at the Sadler’s Wells theatre. Ten years ago, before the current CEO Alistair Spalding took over, the theatre put on all sorts of grand shows in various performing arts. Yet, the company was in dire straits, losing money evening-on-evening and by the bucket. Then, Spalding took over and highlighted his leadership with a clear story. He started telling everyone that the theatre was destined ‘to be the centre of innovation in dance’.

He did this because the company was blessed with two valuable resources: (1) an historic reputation for dance (although it had diversified outside dance in the preceding years) and (2) a theatre once designed specifically with dance in mind. Spalding understood that, with these unique resources, he needed to focus the theatre on dance again. Beyond that, he made it the spider in the web, a place where various innovative people and dance forms came together to create new art, a place where stars were formed.

Third, the story must create a competitive advantage. The story must not only provide choices that are linked to resources, it must also explain how these choices and resources are going to give the company a competitive advantage in an attractive market, one that others can’t easily emulate. For example, Hornby’s resources enabled it to make perfect scale models for adult collectors better than anyone else, but those adult collectors also happened to form a very affluent and growing segment, one in which margins were much better than in the super-competitive toy market. It isn’t much good to have a competitive advantage in a dying market; you want to be able to do something better than anyone else in a market that will make you grow and prosper.

Thus, it has to be clear from your strategy story why the market is attractive and how the resources are going to enable you to capture the value in that market better than anyone else. The story of the CEO of Fremantle Media, Tony Cohen, for example, was that his company was going to make television productions that were replicable in other countries, with spillovers into other media. Because of their worldwide presence, Fremantle Media were better than their national competitors at rolling out productions such as the X-factor, Pop Idols, game shows and sitcoms. While their local competitors could also develop attractive and innovative shows, Fremantle’s multinational’s presence enabled it to reap more value from them. Therefore, that’s what they focused upon: shows that they could replicate across the globe. It was their competitive advantage, and they built their story around it.

Only a beginning

Of course, a good story alone is not enough. A leader still needs good products, people, marketing, finance and so on. But, without a good story, a leader will find it impossible to combine people and resources into a forceful strategic thrust. A good story is a necessary — although, alone, not sufficient — condition for success.

My message for leaders: if you get your story right, it can be a very powerful management tool indeed. It works to convince analysts, shareholders and the public that where you are taking the company is worth everyone’s time, energy and investment.

Perhaps even more importantly, it can provide inspiration to the people who will have to work with and implement the strategy. If employees understand the logic behind a company’s strategic choices and see how it might give the company a sustainable advantage over its competitors, they will soon believe in it. They will soon embrace it. And they will soon execute it. Collective belief is a strong precursor of success. Thus, a good story can spur a company forward and eventually make the story come true.

What Matters Now

Reading the new book "What Matters Now" by Gary Hamel . It is infact sending us to the basics of leadership, management. Gary lays down 5 key issues which are paramount for all organisations, business houses to thrive in this environment of uncertainty. It demands character formation (Values), it promotes Innovation, It advocates Adaptability, it encourages Passion and ideology. The above 5 bold lettered words are issues and principle in themselves.

Let me quote some of the lines from the book:
The opening sentence of the book : "If you are a leader at any organisation, you are a steward - of careers, capabilities, resources, the environment and organisational values."
"In a networked world, when one brave soul speaks up, it emboldens others. Yes moral backsliding is contagious, but so is moral courage - so exercise yours". We saw this happen when a teenage girl posted in Facebook something on Bal Thakary. The goons and police vandalized properties of girls relative and arrested her and the person who liked the status. But we also saw the repurcussion of the event which led supreme court to pass a directive. Ethics and morals are not dead, it is still alive. Need one bold step of boldness and credibility.
"Change without trauma"
"How do you keep a company in orbit? .... building a truly adaptable company is a lot of work. It requires a shift in aspirations, behaviours and management system"
An adaptable company is always reinventing itself, always pioneering new markets"

I am still reading............. If you have not buy it and read........... This would add a string in your competitive advantage.

The Purpose of Power by Gary Hamel

Power has long been regarded as morally corrosive, and we often suspect the intentions of those who seek it. Indeed, the lust for dominion is so unseemly that few of us would openly admit to a craving for clout.
Hence, it might surprise you to learn that one of the world’s most distinguished management thinkers has recently produced a detailed manual for the power-hungry.
It often seems that the mendacious and egotistical have a particular talent for accumulating (and abusing) power—and at some point, most of us have probably been out-maneuvered by a more adept political infighter. But in Power: Why Some People Have it and Others Don’t, Jeffrey Pfeffer, a professor at Stanford University’s Graduate School of Business, gives nice guys and gals the tools they need to even the odds, by summarizing more than 30 years of research and teaching on how to get ahead. Click here to read the entire article