9. Leading and Managing on the Edge Flashcards
Resilience [CAR]
Having the capacity to change before the case of changing becomes desperate (experimentation, agility and time pacing)
To continuously anticipate and adjust to deep, secular trends that can impair profits (double loop learning, options and scenarios)
To dynamically reinvent business models and strategies as circumstances change (adaptability)
Misconception with Turnaround Stategies
Misconception: developing turnaround strategies when a business accepts turbulence as a business norm
- suggests that the organisation is not prepared to keep up with the changing demands
- suggests that organisations lack the internal capabilities to keep up with change
- turnarounds often come at a cost
The Goal: Achieving Zero Trauma
Strategy that is forever morphing to meet emerging opportunities and trends
For an organisation to constantly make its future rather than defending its past
Limitations of Zero Trauma
Benign and protected environments
- hard to adopt a new mindset and reinvent business model
- e.g. SPH and internet news, CEO came and retrenched people but that did not solve the main cause of the problem
Status Quo Bias
- why reinvent the wheel?
Challenges to Resilience [PICS]
Political Challenge
Ideological Challenge
Cognitive Challenge
Strategic Challenge
Political Challenge: the challenge
The failure to divert resources (finance and human capital) from yesterday’s products to tomorrow’s
Organisations comprise power silos and sphere of influence. Manager’s fortuns is closely tied to the resources they own
Reward System for managers are designed solely in a way that depend on the performance of their own unit or programme
- need to combine individual, team and organisation goals
Political Challenge: the solution
Liberate Resources
- resource reallocation
- not overinvest in sunset industries and underinvest in sunrise industries (sunk cost bias and milking the cash cow)
- should not overinvest in safe best at the expense of what is emerging (too reliant on tried and tested ways)
- power and reward system redesigned
- allocation process to promote free flow of both capital and talent to support new initiatives
Ideological Challenge: the challenge
Few companies question the doctrine of optimisation
Decisions being made based on short-term bottom-line considerations and not long-term implications
Executives have a poor understanding of managing paradoxes and balancing short and long term goals
Ideological Challenge: the solution
Embracing Paradox
- optimisation works and will continue to work only when consumers continue to demand the same products and services
- optimisation cannot allow for competition with mavericks
- paradox between pursuit of efficiency and the exploration of new strategic options
- an optimised system is a fragile system
Cognitive Challenge: the challenge
Companies deny or are not willing to consider how changes will affect current business
Obstructed by mental models, biases, inertia and an illusion of control
Do not think that change is deep, real of prolonged; thinks that success is self-perpetuating
Cognitive Challenge: the solution
Conquering denial
- presence of status quo bias
- lack of double loop learning
- companies too intoxicated with past success
E.g.: Philip Yeo
- being close to the ground: to visit places where change occurs
- filter out the filterers: speak to renegades and tempered radicals for a new perspective
- accept strategy decay
Strategy [SEER}
- supplantation: competitor’s strategy will render yours invalid or obsolete (e.g. Uber with NETS payment, Grab with dual payment)
- exhaustion: diminishing returns due to market saturation
- evisceration: narrowing profit margins due to democracy of information and presence of choice
- replication: the need to update and change the strategy since competitors will follow; strategy cannot be replicated due to different conditions
Strategic Challenge: the challenge
Difficulties in creating new options as compelling alternatives to dying strategies
Failure to recognise that strategies have a lifespan –> lack options and strategies
Executives do not know what to do when operating environment changes. Workforce is not future ready and they do not possess on the edge knowledge
Strategic Challenge: the solution
Valuing Variety
- resilience depends on variety
- broad-based, small scale strategic experiments
- funnel-shaped process of moving projects from ideas to successful products determines that only with variety, companies are more likely to create alternatives to dying strategies
Learn from biodiversity
- range of scalable plans to deal with a range of possible futures
Organisational ecology
Balancing cost of variety
- small multiple projects through smart experimentation
- stratlets
Agility [SOP]
Strategic Agility: to identify and seize game-changing opportunities when they arise, faster than rivals
- need to have options and be prepared
- long-term perspective from owners and executives; future oriented
- strong balance sheet and large war chest to finance big bets
Operational Agility: within a focused business model, to constantly identify and seize opportunities more quickly than rivals in the same space
- speed and execution
- real time market data which is detailed and reliable
- small number of corporate priorities to focus efforts
- clear performance goals for teams and individuals
- hold workers accountable, but also reward them when necessary
Portfolio Agility: to quickly shift resources out of less-promising businesses into more attractive opportunities
- having scalability and options
- diversified portfolio of independent units
- general managers that can be transferred across units (Olam and GATP)
- central corporate control over certain key resources and processes
Absorption [BODIS]
Buffering: capacity and capability to take short-term punishments; weather out volatility and fluctuations
Offensive: to outlast rivals in competing for a new market
Defensive: buffer against threats from other competitors or changing consumer demands
Increase the chance that company could emerge victorious at the end even without offering the best product
Secure an early lead, reinforce position
