Strategy

Strategy

A future-oriented company seeks to change its industry as much as itself. By Vic Zbar

In general, only about 2.5% of senior management time is spent on the key task of building a corporate perspective of the future. This is not to suggest that executives are lazy or lack commitment. Rather, it reflects the fact that people are running harder than ever merely to stand still, and that confronting the future requires them to acknowledge that they may not be in full control of the present.

The consequence is that senior management gets so caught up in the restructuring and re-engineering required to manage the present, they pay insufficient heed to the regeneration of core strategies needed to shape the future.

If corporations are to become and remain internationally competitive, they are not merely required to get smaller (restructuring) and better (re-engineering), but they also must become different to meet the needs of customers ten years from now as well as today.

In other words, the corporation must seek to transform its industry as much as it looks to change itself. This could take the form of merging existing industries in creative new ways (for example the joint development of pay TV by media and telecommunications companies in Australia) or changing the scope of the corporation’s participation in the industry (such as British Airways transformation from a national into a global airline).

Rapid advances in technology are generating a vast array of opportunities to reshape existing products, services and industries. These opportunities are inherently global, and the corporations that succeed will be those that can forge alliances to deliver leading-edge products to advanced markets around the world.

The swing shift
What is the starting point for managers who wish to make the shift?

• The focus must shift from current market share to the share of tomorrow’s opportunities that the corporation can reasonably expect. This requires it to consider what it can achieve with its existing set of competencies, and what new competencies it needs to develop to prosper in the future.
• Identifying future opportunities is a task for the whole company rather than individual business units. Only the company as a whole can bring together the full range of competencies and resources available to develop new products and markets.
• The sophisticated nature of most products under development means that few firms have the capacity to develop them entirely on their own. Thus, the development of strategic alliances with others is becoming an essential element of competition for the future.
• New approaches to time are required. On the one hand, firms must react instantaneously to customer demands and expectations. On the other, however, they must have commitment and perseverance to spend years, if not decades, in developing new market opportunities.
• The industry terrain is less structured and predictable than it used to be, with the result that boundaries between various industries are less and less clear. For example, do we treat multimedia as a product of the computer industry? Or is it entertainment; or education? Yet firms must still make strategic choices about which products to pursue and which competencies to develop.

Managers must develop foresight based on a vision of the future that emerges from an analysis of the technological, demographic, regulatory, lifestyle and other trends that are likely to have an impact on the corporation and its customers. This requires a number of steps:

• Look beyond the constraints of current activities and markets. Creative opportunities emerge for the company that views itself as a portfolio of competencies rather than as a producer of particular goods and services, or the amalgam of separate business units. A company will need to seek to exploit the full range of its capabilities and the potential synergies between them.
• Challenge the various orthodoxies that tie the firm to what it does and does right now, and instead take a wider view of the world and the forces that will shape the future of the industry.
• Consider, if not welcome, unconventional ideas that are raised, and encourage vigorous, open-ended debate about the future. Anticipating the future lies less in the work of an individual, specialised unit, than in dialogue between the whole range of views and experiences that span the corporation  a dialogue that in turn can broaden the horizons of each person it involves.

A leader of customers
The corporation needs to be more than just customer-led. Customers can be notoriously lacking in foresight because they do not necessarily know what is possible. Part of developing industry foresight involves the provision of leadership to customers, by developing new products and services to meet needs that customers do not yet know they have. In other words, the aim is to identify and reach the corporation’s future markets ahead of competitors.

Unlike product development, building core competence does take a substantial amount of time. It arises from cumulative learning rather than any sudden advance, and tends to precede the competition surrounding the range of products that result. It also requires a clear sense of what is core, and what is non-core, so that senior management can focus its attention on what really matters for the long-term success of the firm.

The core competencies are those that:

• Make a disproportionate contribution to the delivery of those benefits that really matter to customers.
• Are unique strengths of the firm, compared with its competitors  not necessarily unique in the sense of being exclusive, but unique in that they are used better here than anywhere else.
• Are envisaged as leading to the development of new products to compete in future markets.

A core competency is more than just a company asset, or a competitive advantage derived from non-people sources such as the exclusive rights to a particular technology. It is a corporate skill or aptitude that needs to continually be developed; not an historical endowment to be taken for grated as a source of competitiveness and profitability. And inevitably, what constitutes a core competency will change over time; as competitors catch up and the industry environment is transformed.

This means extending the conventional view of the corporation as a collection of strategic business units all contributing to the production of goods and services, to encompass a view of the corporation as a bundle of competencies as well. This helps the corporation to adopt a more holistic approach towards the development of new products and services, rather than allow them to fall between the cracks because no business units deals with the field or the competencies required for product development are spread across separate parts of the organisation.

Competent to the core
Adopting a core-competency perspective also makes it more likely that the corporation will invest in the development of those competencies that can underpin its longer-term growth, and conceive of new and creative ways in which its competencies can be applied to other products and markets. The entire management team must fully understand and participate in five key competency management tasks:

• Identifying the core competencies the corporation already has.
• Developing an agenda for the acquisition of core competencies that are required.
• Building new core competencies for the future.
• Deploying and redeploying the core competencies that are available.
• Protecting the core competencies the corporation already has.

What are the components of an effective statement of strategic intent?

It is necessary to give the firm and its employees a sense of:

Direction. Individual commitment derives from knowing where you are going, and organisational unity depends on a common sense of purpose. A statement of strategic intent should set out the broad direction for the organisation without limiting the ways to get there.

Discovery. A unique organisational mission can enthuse people with the prospect of entering new territory or creating something that no other organisation will provide.

Destiny. Employees must feel that what they are doing is worth the effort and that the company’s direction offers meaning to them.

Corporations must seek not only to work effectively within the current structure of the industry, but also to restructure the industry for the future. Corporations should not confine themselves to dealing with organisational issues by continually searching for the middle ground between the two ends of a spectrum. Rather, they should strive to develop a synthesis between positions that constitute the higher ground between competing organisational archetypes. If a corporation is to behave differently, then senior managers must start by thinking differently about the meaning of competitiveness, strategy and organisations.

Based on the work of management theorists Gary Hamel and C. K. Prahalad in Key Management Concepts.