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Strategy Development has followed a set path since the last century where a predetermined, rectilinear, and inflexible approach defined the process.
In the 21st century, however, business leaders are devising Strategy by evolving it into a probabilistic, repeated, and multifaceted process. An approach that can both endure and adapt to the growing pace of Change and Disruption that is manifesting itself in all industries.
Using gaming, AI, unremitting execution, and adjustment, with numerous scenarios to deliberate on, leaders create “Flywheels” that successfully tackle the not so deterministic world where the future is highly uncertain.
Flywheel is a concept originally used in the power industry to explain an origin of stabilization, energy storage, and momentum. The concept was propagated in the Strategy context by author Jim Collins. Employing the Flywheel concept, executives are able to validate assumptions through simulations as well as in the real-world scenarios.
Rather than using past assumptions and relying on instincts, using the Flywheel Strategy, decision makers exploit the power of Artificial Intelligence (AI) and Advanced Analytics. They model the multitude of variables and produce a sizable number of simulations that propose many strategic bets, option-value bets, and no regret moves.
Instead of numbing decision-makers with a profusion of options they created, the simulations render elucidative insights. Also, the AI system is made more capable through learning mechanisms called Reinforcement Learning by selecting from the above strategies.
The collection of strategic choices is increased exponentially and cost of experimentation is diminished by this approach. Decision-makers are also empowered by this tool to make better decisions. Likewise, organizations are able to select accurate market approaches, pricing, advertising, and customer strategies for several cities and communities, over a time span.
Strategy Flywheels can be used as a basis for developing Growth Flywheels by organizations. The Flywheel Strategy approach consists of the following 3 phases:
- Sense: Market Sensing
- Think: Strategy Formulation and Investment Planning
- Act: Performance Evaluation and Learning
The dynamic and resilient Flywheel Strategy of Sense, Think, Act has 3 parts, which are based on establishing policies, contending with dynamic models within the background of environmental assumptions, and handling randomness.
Let us delve a little deeper into the 3 phases.
Sense: Market Sensing
Environmental assumptions are formulated through this procedure of extraneous Market Sensing.
Uncertainties to which probability assignment is difficult are the target of Market Sensing activity. Most urgent strategic matters can be detected and senior leaders consistently engaged in devising a response to them by recurrently sensing extraneous market changes.
Improvements in Machine Learning and cutting-edge AI can aid in not only expanding the quantity of information scanned but also enhancing the quality of content evaluated.
Think: Strategy Formulation and Investment Planning
Conventional strategic thinking can be aided in the new way of strategizing by the 3-phase process for Gamification—Design and Build, Simulate, and Evaluate.
A stable strategy consists of a portfolio of investments and projects with diverse risk profiles. Diverse risk profile of performance is a mix of:
- No-regret moves
- Strategic bets
- Option-value bets
Act: Performance Evaluation and Learning
Performance Evaluation and Learning from the efforts has to be carried out so that improvement in proficiency to sense the market and experiment with new ideas occurs.
Interested in learning more about how Amazon and Uber used Flywheels, how the Gamification approach is used in Flywheel Strategy formulation, and what constitutes a diverse risk profile? You can download an editable PowerPoint on Flywheel Strategy here on the Flevy documents marketplace.
Editor’s Note:
If you are interested in becoming an expert on Strategy Development, take a look at Flevy’s Strategy Development Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.
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“Strategy without Tactics is the slowest route to victory. Tactics without Strategy is the noise before defeat.” – Sun Tzu
For effective Strategy Development and Strategic Planning, we must master both Strategy and Tactics. Our frameworks cover all phases of Strategy, from Strategy Design and Formulation to Strategy Deployment and Execution; as well as all levels of Strategy, from Corporate Strategy to Business Strategy to “Tactical” Strategy. Many of these methodologies are authored by global strategy consulting firms and have been successfully implemented at their Fortune 100 client organizations.
These frameworks include Porter’s Five Forces, BCG Growth-Share Matrix, Greiner’s Growth Model, Capabilities-driven Strategy (CDS), Business Model Innovation (BMI), Value Chain Analysis (VCA), Endgame Niche Strategies, Value Patterns, Integrated Strategy Model for Value Creation, Scenario Planning, to name a few.
Learn about our Strategy Development Best Practice Frameworks here.
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– Roderick Cameron, Founding Partner at SGFE Ltd
Evaluation and onboarding of outstanding leaders is anything but straightforward. Almost all organizations have set up testing mechanisms or assessment centers to distinguish senior leadership candidates having traits that make up for Exceptional Leaders. These assessment centers shortlist leaders based on certain indicators and criteria.
However, these assessments are not always accurate in predicting the best leaders. At times, the entire evaluation exercise results in drafting mediocre leaders and fails to select top influencers and role models for the organization. The traditional methods of gauging senior leaders prove inadequate based, typically, on 3 common flaws:
- Granularity – Gauging the candidates for leadership positions using the profiles of successful leaders from the past. Those profiles are not meaningful considering the pace of change today and the future needs of the organization.
- Long-term Focus – Assessment of candidates based on the traits required to reap the fruits of Business Strategy in 5 years’ time is another ground for not identifying the right leaders.
- Emphasis on finding typical leadership traits – Instead of looking for traits that separate exceptional leaders from the pack, most assessments are geared towards finding typical leadership traits.
Research by PwC—spanning over a period of 10 years with a sample size of 2500 senior executives, who remained a part of C-suite successions in large organizations—reveals that the common flaws in leadership assessment methods can be confronted methodically. To find the best C-level executives, leadership evaluations should focus on identifying candidates possessing the following 4 key traits that are typical only of the top C-level executives:
- Simplification & Operationalization of Complexity
- Drive Enterprise-wide Ambition & Change
- Strong Teamwork
- Leader Building
Let’s dive deeper into these traits.
Simplification & Operationalization of Complexity
In today’s world of disruption, organizations face new challenges on a day-to-day basis. Exceptional leaders have the ability to process tremendous volumes of information and simplify things fairly easily. Leaders who truly standout are well-versed in tackling confusion and learn promptly. They are great at:
- Interpreting complexities and creating simplified operational descriptions around them for others’ understanding.
- Developing visions to influence people and rally them around the shared objectives.
- Developing & implementing actionable plans to achieve objectives.
- Developing functional and dynamic storylines encompassing the agenda that demonstrates how the company will execute its strategy. These storylines consistently remind the people to concentrate on the things that matter most to the company (e.g. customers, products).
- Creating and disseminating robust communication plans—highlighting how their company is best suited to face the challenges of disruption—that are consistently analyzed and improved upon.
Drive Enterprise-wide Ambition & Change
People in an organization often operate in groups. These groups consider people outside their circle as competitors or “outsiders.” This tribal mentality is detrimental for an organization and inculcates individual thinking—focusing only on personal / group targets—and debilitates the ability to operate outside one’s comfort zone. Exceptional leaders have the skills to:
- Make people come out of this tribal or siloed mentality and think collectively in terms of realizing organizational objectives.
- Understand different mindsets and know how to influence them constructively.
- Make people realize their contribution towards the bigger, organizational perspective and work towards achieving their business unit targets rather than personal performance objectives.
Strong Teamwork
Nobody can undermine or deny the importance of teamwork. Much has been written on the subject. However, in reality, most teams do not quite understand the spirit and commitment fundamental to develop teamwork.
Exceptional leaders:
- Are aware of the importance of teamwork and collective leadership. They consistently challenge their people to ponder over ways to achieve not only personal but also the strategic organizational objectives.
- Work with teams to uncover prioritized initiatives critical for organizational growth.
- Lead their teams and make informed strategic decisions.
- Focus more on the strategic planning front than tactical way before they reach the C level.
- Emphasize to the teams the significance of spending time discussing / developing strategy and devising plans.
- Focus on maximizing the effectiveness of each individual to benefit the organization.
Interested in learning more about the traits of outstanding leaders? You can download an editable PowerPoint on Exceptional Leadership here on the Flevy documents marketplace.
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– Roderick Cameron, Founding Partner at SGFE Ltd
The impact of the global pandemic, volatile stock markets, and slowed economic outlook across the globe has hurt the performance of enterprises across the world. The scenario has forced leaders to consider undertaking Transformation of their strategy and operations significantly.
The strategy to buy out troubled businesses and determining to fix the issues that upset the target companies has been a focus of Buyers’ senior leadership for the past 2 decades. In the year 2017 alone, 36,000 M&A (Mergers & Acquisitions) transactions were announced globally. Acquisition of troubled businesses hoping to have a Turnaround account for around 50% of all M&A deals.
A Turnaround can be defined as the financial recovery of an economy or an organization after a period of inertia or Downturn. Several issues trigger a Downturn—issues pertaining to technological disruption, regulations, processes, organization’s financial health, management, business model, hierarchy, or competition.
The ratio of success for M&As is, however, not very healthy. Historical data of 61% of M&A deals based on a BCG’s study, carried out on 1400 M&A deals globally between 2005 and 2018, shows a high failure rate (61%), where they remained unsuccessful to show any improvement in financial performance.
The ones that do succeed offer significant revenue growth and profit margins—around 25% positive variance in TSR than unsuccessful M&As. However, buying and fixing a business under the weather isn’t an easy job. This necessitates a meticulous strategy.
In order to materialize a Turnaround, the leadership needs to thoroughly understand the root cause(s) of the Downturn, have a willingness and plan to reform or transform, and rigorously implement the strategy to rectify the situation (Transformation Execution).
Empirical Research demonstrates that the triumph of M&A Turnaround deals is attributable to 6 Critical Success Factors:
- Investment in R&D
- Long-term Horizon
- Clear Purpose
- Investment in Transformation
- Synergy Targets
- Quickness to Action
Deployment of a combination of these CSFs bring about more pronounced outcomes—in terms of positive 3-year TSR and overall Organizational Performance.
A robust M&A Turnaround Strategy—based on lessons learnt from empirical research—revolves around 4 key M&A Deal Characteristics. These M&A deal characteristics have a profound impact on the outcome of the transaction:
- Level of Performance
- Sector Alignment
- ESG Factors
- Deal Size
Knowledge of these key Deal Characteristics allow the senior leadership to ascertain the factors liable to affect the deal outcomes. Now, let’s discuss the first 2 deal characteristics in a bit detail.
Level of Performance
The performance of the Target company during 2 years pre-deal is a key point to consider for a M&A, as it is directly proportional to the deal success rate and Total Shareholder Return. BCG’s research demonstrates that M&A transactions where the target entity had a 2-year TSR decline of lower than 10% were liable to be more successful than deals where target companies were in more distress (a decline of ~30% or more).
Sector Alignment
Senior leaders should not ignore the significance of uniformity of sectors of the target and acquiring company. Based on research, the rate of success for an acquisition transaction involving the buyer and the target operating in the same industry is 5% superior to the rate for transactions involving the companies from different sectors. The reason for this higher success rate is attributed predominantly to similar business models, customers, vendors, and processes in firms of the same sector, which make the Post-merger Integration of the buyer and target a lot easier.
Interested in learning more about the other characteristics influencing the outcome of an M&A deal? You can download an editable PowerPoint presentation on M&A Turnaround Strategy here on the Flevy documents marketplace.
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– Michael Duff, Managing Director at Change Strategy (UK)
Strategy is about the methods used to attain goals. It’s the “how” of achieving goals—desired future conditions and circumstances towards which effort and resources are spent until their achievement.
If Strategy has any meaning at all, it is in relation to some aim or end in view.
Strategy is 1 of the 4 dimensions of an enterprise structure:
- Goals of the organization.
- Resources at our disposal.
- Strategies for achieving above-mentioned goals –i.e., the methods used to deploy the resources.
- Tactics—i.e., the ways in which the deployed resources are used.
Strategy and tactics – integral part of Strategy Development – bridge the gap between goals and the methods used to achieve those goals. These 4 dimensions of enterprise structure relate to one or both of the 2 domains; Policy and Management. Policies determine the goals of an enterprise, whereas attaining goals is typically a matter of Management. Tactics belong to the managers; strategy is the combined realm of the governors and managers; whereas resources are controlled jointly.
The employed resources through use of Strategies and Tactics give us “certain” conditions. Inspecting them in light of the “desired” conditions enables us to determine future employment of the resources and thus emerges a pattern of actions and decisions which makes Strategy an adaptive and evolving view of what is required, to achieve goals.
We take a look at various perspectives on and definitions of Strategy, as explained by 8 of the most impactful and renowned Strategists in modern times. Familiarity with the perspectives of these strategists enables us to develop a more holistic and thorough understanding of the topic, helping us improve our strategic thinking, decision making, and analytical skills. All of these experts agree on the fact that Strategy is a means to implement a policy or a view envisioned by those who matter. Let’s see how the following strategists define Strategy:
- Michael Porter
- Henry Mintzberg
- Treacy and Wiersema
- H. Liddell Hart
- George Steiner
- Kenneth Andrews
- Kepner-Tregoe
- Michel Robert
Let’s break down how a few of these renown strategists define “Strategy.”
Michael Porter
Michael Porter, the father of modern Business Strategy, views Competitive Strategy as “intentionally opting a collection of activities that are dissimilar to the competitors in order to provide a unique mix of value”– i.e. Competitive Advantage. Porter states that Strategy is about:
- A competitive position.
- Differentiating yourself in the eyes of the customer.
- Adding value through a collection of activities different from competitors.
Henry Mintzberg
Mintzberg is credited with co-creating the Organigraph. He has written extensively on management and business Strategy. His contribution to Organizational Theory in the form of “The Organizational Configurations Framework” is a model that describes 6 valid organizational configurations or Organizational Design.
Mintzberg argues that the contrast of changing realities with intentions necessitates accommodation, generating Strategy. According to him Strategy is a combination of:
- The Perspective – Vision and Direction.
- The Position – Decisions to offer particular products or services in particular markets.
- The Plan – a means of getting from here to there.
- A Pattern in actions over time – for example, a company that regularly markets very expensive products is using a “high end” Strategy.
Treacy and Wiersema
Treacy and Wiersema’s Value Discipline Model talks about 3 different value disciplines: Customer Intimacy, Product Leadership, and Operational Excellence. Their research on market leading organizations reveals that they outdid their competitors through mastering 1 of these 3 disciplines.
Treacy and Wiersema assert that companies achieve leadership positions by narrowing, not broadening, their business focus on any one of the following:
- Operational Excellence – lead the industry in terms of price and convenience and is based on the Strategy of production and delivery of products or services. It implies world-class marketing, manufacturing, and distribution processes.
- Customer Intimacy – Long-term customer loyalty and customer profitability is based on the Strategy of tailoring and shaping products to the increasingly fine definitions of Customer-centric Design.
- Product Leadership – concentrates on quick commercialization of new ideas. It hinges on market-focused R&D as well as organizational nimbleness and agility.
Interested in learning more about the 8 definitions of Strategy? You can download an editable PowerPoint on 8 Perspectives on Strategy here on the Flevy documents marketplace.
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“Strategy without Tactics is the slowest route to victory. Tactics without Strategy is the noise before defeat.” – Sun Tzu
For effective Strategy Development and Strategic Planning, we must master both Strategy and Tactics. Our frameworks cover all phases of Strategy, from Strategy Design and Formulation to Strategy Deployment and Execution; as well as all levels of Strategy, from Corporate Strategy to Business Strategy to “Tactical” Strategy. Many of these methodologies are authored by global strategy consulting firms and have been successfully implemented at their Fortune 100 client organizations.
These frameworks include Porter’s Five Forces, BCG Growth-Share Matrix, Greiner’s Growth Model, Capabilities-driven Strategy (CDS), Business Model Innovation (BMI), Value Chain Analysis (VCA), Endgame Niche Strategies, Value Patterns, Integrated Strategy Model for Value Creation, Scenario Planning, to name a few.
Learn about our Strategy Development Best Practice Frameworks here.
Do You Find Value in This Framework?
You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:
“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”
– Bill Branson, Founder at Strategic Business Architects
“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”
– David Coloma, Consulting Area Manager at Cynertia Consulting
“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”
– Roderick Cameron, Founding Partner at SGFE Ltd
Today’s information-based, knowledge intensive, and service-driven economy has forced organizations to make substantial changes to the way they compete. Changing perspective and responsibility of top management amidst rapid Business and Digital Transformation and the shifting role of HR from being an auxiliary function to that of a driver are some of the dynamics of the evolved competition.
This evolution of Competition has been reached by passing through 3 phases:
- Competition for Products & Markets
- Competition for Resources & Competencies
- Competition for Talent & Dreams
Throughout the evolutionary phases of competition, the focus of Growth Strategy, the tools used, and the key strategic resources have been shifting. The strategic objective of front-running organizations is on continuous evolution and Transformation, and motivated Human Capital is their key resource. This realization is now at the forefront of Strategy Development as competition for scarce Talented Human Resources becomes more intense. However, modern-day managers are still using old tools to deal with an emerging reality.
Dexterity in leadership and management is a prerequisite for leaders now. Research suggests that the 3 important changes that the CEOs must make in terms of their strategic perspective are in:
- Strategic Resources
- Value Creation and Distribution
- Role of Senior Leadership
More on this topic in our editable PowerPoint presentation on Strategic Human Resources.
With the fast-changing focus in Strategy, Human Resource Managers are finding themselves leading the strategic charge. However, a large majority is ill prepared for the role. With Human Capital becoming key strategic resource and basis of Competitive Advantage, HR must adopt 3 core processes to evolve into the strategic HR function that has become their new realm:
- Building
- Linking
- Bonding
Let us delve into the first 2 core processes to strategic HR function in a little more detail.
1. Building
The first core process of Building is all about creating human resource systems, processes, and culture to counter the deep-rooted bias towards financial assets and recognize the value of Human Capital. For instance, Microsoft annually scans the entire pool of 25,000 U.S. computer science graduates for the best 500 to be given offers, of which 400 – top 2% of that year’s graduates – accept. This only fills 20% of the positions. For the rest, Microsoft maintains industry linkages with 300 recruiting experts who scour the industry for the best and the brightest individuals, often wooing them for years.
2. Linking
Developing Knowledge Sharing Networks is core to leveraging Human Capital. Converting individual expertise into embedded intellectual capital is what linking is all about. For example, British Petroleum in the 1990s introduced the Knowledge Management and Organizational Learning program. The main feature of the program was the “Peer Assist” where frontline workers in one location would help solve a problem for workers in another location without the usual hierarchy intervening. Peer Assist was augmented by the “Peer Groups” of business units—i.e. business units engaged in the same assisting activities as frontline individuals. This way managers of decentralized operations compare experiences and share ideas. Once this Information Sharing Network took root it was supported by setting up information-sharing infrastructure – e.g., video conferencing, chat rooms, video clip encoders etc.
Interested in learning more about the details of the 3 Core Processes required to evolve your HR into a strategic HR function and Key Actions needed to implement these? You can download an editable PowerPoint presentation on Strategic Human Resources here on the Flevy documents marketplace.
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The purpose of Human Resources (HR) is to ensure our organization achieves success through our people. Without the right people in place—at all levels of the organization—we will never be able to execute our Strategy effectively.
This begs the question: Does your organization view HR as a support function or a strategic one? Research shows leading organizations leverage HR as a strategic function, one that both supports and drives the organization’s Strategy. In fact, having strong HRM capabilities is a source of Competitive Advantage.
This has never been more true than right now in the Digital Age, as organizations must compete for specialized talent to drive forward their Digital Transformation Strategies. Beyond just hiring and selection, HR also plays the critical role in retaining talent—by keeping people engaged, motivated, and happy.
Learn about our Human Resource Management (HRM) Best Practice Frameworks here.
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You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:
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– Bill Branson, Founder at Strategic Business Architects
“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”
– David Coloma, Consulting Area Manager at Cynertia Consulting
“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”
– Roderick Cameron, Founding Partner at SGFE Ltd
Supply chain thinking used to be limited to the managers of a few global companies—companies that were struggling to coordinate internal information and materials. This, however, led to an exciting boom in cross-business coordination based on Supply Chain Management concepts.
Today, the field has broadened and shifted over time. Current supply chain trends—differentiation, outsourcing, compression, and collaboration—are being used to restructure supply networks and improve coordination. As more companies integrate their networks, capabilities are improving. The levels of product customization and business complexity are also increasing. As this continues, Supply Chain Management is being used in new ways to create uniquely defined customer relationships anchored on appropriate Customer-centric Design.
The field of Supply Chain Management will continue to influence companies. The best way to understand the impact of a long-term trend is to examine how the trend has changed the way executives view their businesses and what issues they choose to focus on.
Rationale Behind Supply Chain Management
Supply Chain Management is the design, planning, execution, control, and monitoring of supply chain activities. It is the management of the flow of goods and services. Essentially, Supply Chain Management addresses the fundamental business problems of supplying products to meet demand in a complex and uncertain world.
Conceptually, Supply Chain Management draws on the value chain concept of business strategist, Michael E. Porter. It conveys the idea of looking at the supply chain issue at the multi-company level.
As the global business environment becomes more complex and competitive, there have been shorter product life cycles and greater product variety. Due to this, it has increased supply chain costs and complexity. The birth and growth of outsourcing, globalization, and business fragmentation has resulted in a crucial need for supply chain integration. Coupled with advances in information technology, this has led to the creation of greater opportunity for Supply Chain Management.
Why is Supply Chain Management essential at this time? There is now an increasing need to create net value, build a competitive infrastructure, leverage worldwide logistics, synchronizing supply with demand, and measure performance globally. Only Supply Chain Management has a systematic process to satisfy these increasing demands.
With the increasing application of Supply Chain Management, there have been shifts in the view of management and influencing Strategy Development.
The 6 Core Pillars of Supply Chain Management Thinking
The 6 Core Pillars of Supply Chain Management Thinking are the major shifts that have redefined management’s view which is far different from traditional Supply Chain thinking.
The first Core Pillar is Multi-company Collaboration. This is the shift from cross-functional integration to multi-company collaboration. Traditionally, Supply Chain thinking was focused on integrating within their companies. But with the new Supply Chain Management perspective, the focus now is on integrating across companies to coordinate and improve supply.
With the shift in thinking, what is asked now is how do we coordinate activities across companies, as well as across internal functions, to supply products to the markets. This is a great deviation from the traditional thinking which ask how do we get the various functional areas of the company to work together to supply product to our immediate customers.
With the first Core Pillar, we get to achieve significant breakthroughs. There are lower supply chain-related costs and improved responsiveness within a chain of companies.
The very essence of Multi-company Collaboration is rethinking how organizations align goals and make decisions.
The other Core Pillars are Market Mediation, Demand Focus, Product Design Influence, Business Model Innovation, and Customized Offerings. Each core pillar is considered an enabler that has a vast impact on Supply Chains.
Interested in gaining more understanding of the 6 pillars of Supply Chain Management (SCM) thinking? You can learn more and download an editable PowerPoint about the 6 Pillars of Supply Chain Management (SCM) Thinking here on the Flevy documents marketplace.
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Execution has become the new watchword in Boardrooms. As organizations fail to effectively implement strategies, the importance of execution has risen to the forefront. Essentially, the first step in resolving these dysfunctions is to understand how the inherent traits of an organization influence and even determine each individual’s behavior. Organizations must also understand how collective behavior affects company performance.
The idiosyncratic characteristics of an organization can be codified using the DNA. When the DNA of an organization is purely configured, unhealthy symptoms and counterproductive behaviors are demonstrated.
Understanding the DNA and the Organizational DNA Framework
DNA has been used as a family metaphor to codify the idiosyncratic characteristics of a company.
The Organizational DNA Framework examines all aspects of company architecture, resources, and relationships. It ensures that managers focus their efforts on reinforcing what works in the organization and modifying what does not. It helps companies identify and expose hidden strengths and entrenched weaknesses.
In identifying unhealthy symptoms and unproductive behavior, the Org DNA Profiler is used as a tool. It allows management to gain insight into what is and is not working deep inside a highly complex organization.
The 4 Key Areas or Building Blocks
The Org DNA Profiler, as an Assessment tool, was used to fix problems by identifying and isolating them. Launched in 2003, the Org DNA Profiler measures an organization’s relative strength in 4 Building Blocks on the basis of individual employees’ responses to 19 questions.
What Type of Organization Do You Have?
When diagnosing and overcoming organizational impediments, there is also a need to identify the type of organization that you have. There are 7 broad types of organizations; each organization fitting a certain type.
There is a Resilient Organization. A Resilient Organization can adapt quickly to external market shifts. It can remain steadfastly focused on and aligned with a coherent business strategy. Resilient Organizations can anticipate changes routinely and addresses them proactively. They can attract motivated team players and offers a stimulating work environment, resources, and authority to solve tough problems.
However, there is also a disadvantage when it comes to Resilient Organizations. Resilient Organizations have the tendency to be overly adapted toward one direction or the other.
Another type of organization is the Just-in-Time Organization. The JIT Organization demonstrated an ability to turn on a dime when necessary, without losing sight of the big picture. They can manage to hold on to good people and performs well financially. A Just-in-Time Organization is a stimulating and challenging place to work.
While this may be a good place to work, it can also have its disadvantages. A Just-in-Time Organization is not proactive in preparing for impending changes. In fact, it has not made a leap from good to great. As such, it tends to miss opportunities by inches rather than miles. It celebrates successes that are marginal rather than unequivocal.
The third type of organization is the Military Organization. This type of organization succeeds through sheer force of will of top executives. However, it has a shallow and short-lived middle management bench.
There are 4 other types of organizations. There can be the Passive-Aggressive Organization, the Fits-and-Starts Organization, the Outgrown Organization, and the Overmanaged Organization.
The Passive-Aggressive Organization is considered the most prevalent of all types of organizations. The Outgrown and Overmanaged Organizations, on the other hand, are those that are often considered unhealthy.
The intricacies and defining characteristics of the 7 types of organizations are effective in creating specific interventions to enhance performance and execution. Knowing and understanding the types of organizations can better assist organizations in the analysis of their DNA and guide them in undertaking Business Transformation or Strategy Development.
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Most organizations are unhealthy. Only organizations that are recognized to be Resilient, Just-in-Time, and Military can be described and relatively free from dysfunction. Yet, only 27% of the responses gathered from the Org DNA Profiler showed a healthy profile.
The Org DNA Profiler is a short online self-assessment tool launched on December 9, 2003. It was used to measure an organization’s relative strength in 4 key areas, on the basis of individual employees’ responses to 19 questions. From a total of 4,007 completed assessments collected, there were 6 Organizational Behavioral issues that were prompted. These issues can still be turned around by undertaking the appropriate step.
The 6 Key Issues on Organizational Behavior
Organizational Behavioral Issues are observations on the prevalence of dysfunctions among business organizations.
- Most organizations are unhealthy. More than 60% of the organizations are either Passive-Aggressive, Fits-and-Starts, Outgrown, or Overmanaged.
- Organizational DNA changes as companies grow. Small companies report more Resilient and Just-in-Time behaviors. They become more centralized and demonstrate Military traits as they grow. Once annual revenues cross the $101B threshold, decentralization occurs. However, often this is undertaken badly.
- Attitude determines attitude. There are sharp differences between senior management and lower-level personnel. A disconnect exists between the organizations that senior executives believe they have established and the organizations they are actually running.
- Non-executives feel micromanaged. Junior managers feel a lack of maneuvering room compared to senior managers who view their self-professed involvement in operating decisions as good.
- Decision rights are unclear. More than 50% of the respondents believe that the accountability for decisions and actions in their organizations was vague.
- Execution is the exception, not the rule. Less than 50% of the respondents agreed that important strategic and operational decisions are quickly translated into action in their organizations.
It is expected that all organizations have behavioral issues. However, unlike humans and other organisms, organizations can change their DNA by adjusting and adapting their building blocks and resolve these issues. There are just processes that organizations must take into consideration to effectively address these behavioral issues and turn them around for the benefit and advantages of the organization.
The Need to Unlearn, Learn, and Relearn
It is advisable for an organization to continue to analyze its organization as it grows into and occasionally out of dysfunction. This can be done by using a 4-step evolutionary process.
Step 1: $0 – $500 Million. The first step or Step 1 generally demonstrates characteristics depicting Resilient or Just-in-Time profiles.
Organizations at this level are effective at executing and adapting to changes in the environment. They are generally younger small companies that are attuned to and aligned with the vision and strategy of the founders. They are known to be able to adapt more nimbly to market shifts.
Step 2: $500 Million – $1 Billion. The second step is an evolutionary phase where organizations are starting to experience the adverse effect of growth in terms of size. This is basically the stage where Military profile has reached its peak in revenue segment. These are the organizations that are bureaucratic, slow, and overly politicized. At this point, expanding middle management starts to second guess and interfere in lower-level decision making.
Step 3 is where organizations are becoming too large and step 4 is returning back to a Resilient profile. The 4-step evolutionary process reflects the stages of development of organizations as they start from being small to being large and complex. It is a reflection of the issues they are encountering at each step of development that they are in. Knowing where they are at this point will enable an organization to better undertake their Strategy Development in a most effective approach.
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The uncertain times, coupled with the COVID-19 pandemic, have spur leaders to reflect on what kind of organization, culture, and operating model they need to put in place. This is to avoid returning to previous patterns of behavior and instead, be able to embrace the next normal.
In this rapidly changing environment, people in organizations need to respond with urgency, without senior executives and traditional governance slowing things down. Waiting to decide, or even waiting for approval, is the worst thing to happen. Today, some level of coordination across teams and activities is crucial for the organization’s response to be effective.
Getting Ready for Business Resilience
Business Resilience is a management approach that integrates many disciplines into a single set of integrated processes. It is an enterprise-wide term that encompasses Crisis Management and Business Continuity.
Business Resilience enables organizations to face a wide range of risks—risks that can cause long-term harm, from a financial penalty to reputational damage. This is further emphasized with the global economy greatly affected by COVID-19, a pandemic that has overturned business and rattled the entire global business environment.
Addressing the COVID-19 pandemic
Leaders across industries cannot treat the Coronavirus pandemic like any other event. COVID-19 is unlike any other event. No single executive has the answer. In this rapidly changing environment, organizations need to respond with urgency. There are several initiatives that can be undertaken and integrated in Strategy Development. One of these initiatives is to build Team Resilience through the creation of a Network of Teams.
A Network of Teams is a cohesive and adaptable network of teams that are united by a common purpose. It is empowered to operate outside of the current hierarchy and bureaucratic structures of the organization.
The 4-phase Approach to Creating a Network of Teams
The Network of Teams needs to be created in phases for it to be effectively cohesive and adaptable.
Phase 1: Central Team with Response Teams. Phase 1 begins with a Central Team launching a few primary response teams very quickly. There are several key considerations that must be underscored in Phase 1.
Organizations must create teams that will tackle current strategic priorities and key challenges facing the organization. The model that is to be built must be flexible and capable of shifting when mistakes happen. The network must be created to learn, using the information to update actions and strategies. It must spur experimentation, innovation, and learning which is done simultaneously among many teams. There must be spontaneous learning in the face of challenges and opportunities at the individual, team, and network-wide levels.
Team leaders must be creative problem solvers with critical thinking skills, resilient, and battle-tested. Having teams that can respond to the dynamic demands of the external environment is one of the strengths of the network approach.
Phase 2: Hub and Spoke Model. The Hub and Spoke Model emerges when additional teams are launched to address rapidly evolving priorities and new challenges.
After the initial set of teams are created, leaders must shift toward ensuring that multidirectional communication takes place. There should be steady coordination with the central team hub in a daily stand-up meeting. Central Hub must make sure that support teams are using first-order problem-solving principles.
Leaders must take the role of catalyst and coach. The primary goal is to empower teams and support them at the same time, without micromanaging.
The next phase is Phase 3: Hub and Spoke with Subteams and Phase 4: the Network of Teams. The Hub and Spoke Model evolves into a Network of Teams when peripheral teams start connecting and collaborating directly with another.
With the Network of Teams, all self-organizations are turbocharged ready to face any disruptions the business has to encounter.
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COVID-19 is shaping a “New Normal”—a Low Touch Economy that requires a strategic response.
The world is changing. Forced isolation and social distancing restrictions have been put into place with the advent of the COVID-19 health crisis. This is not expected to end soon but is expected to have a lasting effect on the world. In fact, a new generation of consumer behaviors is already being shaped.
The new world will not be better off or worse. It will be different. During this period of influx, some businesses will thrive in this change and reach accelerated success, while others will struggle to find their footing in all of the chaos. The Low Touch Economy is here.
The New Normal
The post-COVID-19 era will have an economy shaped by new habits and regulations based on reduced close contact interaction, tighter travel, and hygiene restrictions. While managing the current health crisis is the first priority, companies must start adapting its strategic response to the mid and long-term ripple effects of COVID-19.
Businesses, to survive, must learn how to effectively respond to COVID-19 that is marked with plenty of ups and downs and economic uncertainty. There will be fundamental shifts that are here to stay and there will be industries that will be turned upside down. Until there is a vaccine or herd immunity, the base case scenario will be continuous up and down of disruptions for the coming 2 years. Strategy Development now calls for business to make the right strategic approach.
The 3-phase Approach to Strategic Planning
During turbulent times, businesses must have the agility to switch from defense to offense. Taking the 3-phase approach to Strategic Planning will prepare organizations for the Low Touch Economy.
Phase 1: Protect
The first phase is focused on acting now to protect and run the business today. It is basically responding to the crisis and protecting the business. The primary objective of Phase 1 is to ensure the continuity and stability of the business despite the ongoing crisis.
This is best undertaken when employees and customers are grappling with one basic emotion and that is fear. The organization is faced with a declining revenue with prospects of liquidity freeze. Unfortunately, time horizons at this phase also remain uncertain.
When these scenarios are happening, the organization must strive to undertake strategies that will both protect the business, as well as ensure its continuity and stability. One strategy that must be undertaken is to put the safety of employees and customers first. With the advent of COVID-19, this is considered the most urgent thing to do and the most important. Once this has been taken care of, senior leaders can set up a war room where they can tackle immediate challenges.
The war room discussions must shift from just being reactive to being proactive when it comes to crisis management. At this point, model scenarios that are developed must be more aggressive than any of the team can think of. It has to be aggressive in the sense that it is capable of protecting the business from the disruption that COVID-19 is greatly inflicting on the organization.
At this time, during this phase, this is the best time too to invest in Innovation Management and R&D. While others are stalling, the most innovative companies spend more on R&D during the recession. The other 2 phases are Recover and Grow. Phase 2, Recover is focused on accelerating through the recovery and Phase 3, Grow is focused on achieving growth in the Low Touch Economy.
In what phase is your organization now? Are you Protecting? Recovering? or Growing?
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