00:00:04
your strategy and is a strategy um is
00:00:07
based on roughly the last 10 years of
00:00:09
research on strategy that we've been
00:00:10
doing in the BCG Bruce Henderson
00:00:12
Institute so as you mention uh indeed we
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did a a detailed survey of 150
00:00:19
multinationals in terms of their
00:00:20
perceptions of their environments their
00:00:22
elected approaches to strategy and their
00:00:24
actual strategizing behaviors uh we also
00:00:26
looked at the data the performance data
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from for all uh US public companies
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since 1950 uh for patterns we did
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in-depth uh case studies and interviews
00:00:36
with CEOs which you see featured in the
00:00:38
book and uh we also um validated our
00:00:42
conclusions uh by constructing a what we
00:00:45
call our Universal strategy simulator
00:00:47
which is a a simulation of what sort of
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strategies work in what sort of
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environments that's the evidence on
00:00:52
which the book is
00:00:57
based that ey conclusions from the book
00:00:59
are that business environments are now
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so diverse that we need different
00:01:04
approaches to strategy in different
00:01:06
circumstances and more particularly the
00:01:09
classical style of strategy analyzing
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and planning is still perfectly fine for
00:01:15
some situations but it's no longer a
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Panacea a second conclusion is that
00:01:19
large companies especially need to
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deploy multiple approaches to strategy
00:01:23
in different parts of their business so
00:01:26
we call that ambidexterity they needs to
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master the art of ambidexterity
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and the third conclusion is that we need
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to modify our concept of leadership to
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be able to lead and direct and Design
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This Mosaic of of of strategies that
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applies to uh to companies and the last
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conclusion is that if you do all of
00:01:45
those things there's a demonstrable
00:01:48
performance uh benefit for companies to
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to
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pocket the most well-known approach to
00:01:57
strategy and implementation is what we
00:01:59
call the classical approach this is the
00:02:01
one that we probably learned about in
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business school and it's to do with
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analyzing and planning and implementing
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in a disciplined manner following the
00:02:10
plan uh this is an approach which works
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perfectly fine in predictable
00:02:15
environments that are not shapable
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they're they're given and uh this style
00:02:21
of strategy is perfectly applicable in
00:02:23
very predictable Industries and we give
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the example of for example The
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Confectionary uh industry uh in in the
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bo
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demand grows roughly at GDP relatively
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stable relatively plannable uh so that's
00:02:34
the most common approach to strategy the
00:02:37
second approach to strategy is what we
00:02:38
call the Adaptive approach the Adaptive
00:02:41
approach works really well in highly
00:02:42
unpredictable industries that are also
00:02:44
not easily shapable and a good example
00:02:46
of that is software in particular say
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the gaming industry where the
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competitive conditions are highly
00:02:52
volatile and the technology is
00:02:54
constantly changing the idea here is
00:02:56
since we cannot plan we use a biological
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approach
00:03:00
we create variation we select that which
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works we Implement that and scale it and
00:03:08
then we repeat the cycle again and again
00:03:11
so if you like strategy in this
00:03:13
particular case emerges
00:03:15
continuously from experiments at the
00:03:18
cold face of the organization the third
00:03:21
approach to strategy is what we call the
00:03:23
Visionary approach here conditions at
00:03:26
least in the eyes of the entrepreneur
00:03:29
are predictable
00:03:30
and also shapable so this is about not
00:03:32
participating in an industry but
00:03:34
creating an industry and the approach is
00:03:36
to Envision a possibility that others
00:03:39
have not
00:03:40
seen to then realize that possibility
00:03:43
and then to persist and scale that
00:03:46
opportunity so we've all heard of
00:03:48
entrepreneurs that have done that and
00:03:49
know we give the example in the book for
00:03:51
example of 23 and me which is a new
00:03:54
genomics testing services company with a
00:03:56
novel business concept I think the big
00:03:58
news here is that large corporations are
00:04:01
increasingly vulnerable to upstart
00:04:04
Challenger companies and therefore to
00:04:06
defend themselves large corporations
00:04:09
also need to master the Visionary style
00:04:12
which was probably present at their
00:04:14
Inception decades ago the fourth
00:04:17
approach to strategy is probably the
00:04:19
most exotic one we deal with and may not
00:04:21
be familiar to everybody and that is
00:04:22
what we call the shaping approach so
00:04:25
here conditions are both shapable and
00:04:27
unpredictable that sounds like a
00:04:29
contradiction
00:04:30
What's Happening Here is that not a
00:04:33
single company but a whole ecosystem of
00:04:35
companies is collaboratively reshaping
00:04:38
an industry uh most often with a
00:04:41
two-sided Marketplace and an ecosystem
00:04:44
of many companies collaborating to uh to
00:04:46
create a new space and a good example of
00:04:48
this would be for example Alibaba or uh
00:04:51
red hat or Amazon uh these companies
00:04:55
have not only deployed a strategy at the
00:04:58
level of an individual company but
00:05:00
they've created a successful position
00:05:02
within a successful ecosystem the recipe
00:05:05
here for thinking about strategy is
00:05:06
really very different it is to
00:05:09
influence to orchestrate the
00:05:11
contributions of others in the ecosystem
00:05:13
and then to co-evolve that collaborative
00:05:16
system the fifth approach to strategy is
00:05:19
what we called renewal uh it's very
00:05:21
common and it's applies to those
00:05:23
situations where companies have gotten
00:05:25
out of step with their competitive
00:05:27
environment and their competitive or
00:05:29
financial performance is suffering we
00:05:32
found actually that this is a very big
00:05:33
bet for companies 75% of renewal
00:05:36
exercises fail and the difference
00:05:38
between failure and success in npv terms
00:05:42
is roughly the Enterprise value of the
00:05:43
company so a very big risky bet and the
00:05:47
way to think about renewal strategy is
00:05:50
firstly to anticipate because the sooner
00:05:52
you uh enter this exercise the more
00:05:56
successful you're likely to be secondly
00:05:59
to think about economizing it's
00:06:02
necessary to free up resources but not
00:06:04
only for the purposes of financial
00:06:06
viability but also to fund the journey
00:06:08
back to growth and the third stage
00:06:11
critically is growth and Innovation the
00:06:13
company cannot cut its way to success he
00:06:16
needs to fund the journey back to growth
00:06:18
and Innovation there are many many
00:06:20
examples of this but for example uh AMX
00:06:23
is is an example of a company that did
00:06:25
this very well uh during the recent
00:06:28
financial crisis pivoted very quickly
00:06:31
back to growth and
00:06:36
Innovation we deal with tricks and traps
00:06:39
in the book and there are some fairly
00:06:41
prominent ones um so when we looked at
00:06:43
how companies perceived their
00:06:45
environments and the strategies that
00:06:47
they uh choose we found that there was a
00:06:50
very human bias towards perceiving
00:06:53
business environments as being more
00:06:55
predictable and more controllable than
00:06:58
they actually are it's a comforting
00:07:00
thing for people to believe that they
00:07:01
can control and predict their
00:07:02
surroundings and sometimes it's the case
00:07:04
and sometimes it's not the
00:07:06
case second big trap is to be stuck in
00:07:10
one way of doing strategy most often the
00:07:13
classical way of doing strategy analyze
00:07:15
plan execute that's not a bad way of
00:07:18
doing strategy under the right
00:07:20
circumstances uh but if you have a very
00:07:22
fast moving part of your business one
00:07:25
where the rate of Technology change is
00:07:26
very high for example uh then it's
00:07:28
totally inappropriate
00:07:30
and in particular there's a couple of
00:07:32
capabilities which uh large corporations
00:07:35
need to create to Avail themselves of
00:07:38
these uh other approaches to strategy
00:07:40
one of them is the Adaptive capability
00:07:42
the ability to uh undertake disciplined
00:07:46
experimentation another one is the
00:07:47
shaping capability the ability not just
00:07:50
to participate in their environments but
00:07:51
actually to shape them uh to their
00:07:53
advantage and the third one is the
00:07:55
capability of ambidexterity which is the
00:07:58
ability to run different approaches to
00:08:00
strategy in different parts of the
00:08:02
organization so let me just expand on
00:08:05
some of those
00:08:06
capabilities a company building an
00:08:08
Adaptive capability will build a process
00:08:11
for experimentation they will build
00:08:13
metrics for measuring the effectiveness
00:08:15
and the speed and the return on
00:08:16
investment from their experimentation
00:08:19
they'll be empowering their employees to
00:08:20
take risks and to experiment locally in
00:08:23
the business the second capability for
00:08:26
large companies to build is the shaping
00:08:28
capability and this is essentially an
00:08:31
obsession with what's going on outside
00:08:33
of the company what's new in technology
00:08:35
what's new with customers what's new
00:08:37
with disruptive Mavericks on the edge of
00:08:39
the industry what's new with
00:08:42
regulation and typically large companies
00:08:44
are very introverted they mainly think
00:08:46
about what's going on inside the company
00:08:48
but the Strategic plan of a shaping
00:08:50
company consists in large part of a very
00:08:54
deep understanding of what's going on
00:08:56
outside the company the third key
00:08:58
capability for large companies to build
00:09:00
is that of
00:09:01
ambidexterity uh which means to run
00:09:04
different types of strategy in different
00:09:07
parts of the company uh so a good
00:09:09
example might be for example the the
00:09:11
digital strategy in China a very fast
00:09:13
growing uh environment very fast moving
00:09:16
industry will likely be uh either a a
00:09:20
shaping approach or an Adaptive approach
00:09:23
it'll be a very Dynamic approach to
00:09:24
strategy uh whereas for example a more
00:09:27
stable business in a more slow growing
00:09:29
Market let's say the the printing
00:09:31
industry um will typically be more more
00:09:34
classical in nature so how do you do
00:09:36
that uh well the book deals with the
00:09:38
four ways of actually achieving this uh
00:09:40
one way is by separation the most common
00:09:42
way which is we simply have separate
00:09:44
business units that are allowed to have
00:09:46
different cultures different ways of
00:09:48
measuring things different goals
00:09:50
different performance
00:09:51
contracts the second way is switching
00:09:54
when products progress very rapidly uh
00:09:57
in their life cycle you may not
00:09:59
uh it may not be expedient to actually
00:10:02
uh separate the exploratory from the
00:10:05
exploitative and therefore we need what
00:10:06
we call a switching strategy which is
00:10:08
the same group of people may need to
00:10:10
modify and modulate their behaviors over
00:10:13
time and a good example of that uh was
00:10:15
the Corning Glass company that we we
00:10:17
deal with in the
00:10:18
book a third way of getting at ambid
00:10:20
dexterity is with an internal ecosystem
00:10:24
and we deal with the example of higher
00:10:26
in the book The Chinese white goods
00:10:28
manufacturer that essentially creates an
00:10:31
ecosystem of hundreds of small business
00:10:34
units that all negotiate with each other
00:10:36
to create a very very uh flexible
00:10:39
enterprise
00:10:40
system the last uh example of an ambid
00:10:44
exra strategy is to create an external
00:10:48
ecosystem uh so in answer to the
00:10:50
question how could Apple a company that
00:10:52
had never made a smartphone before
00:10:54
defeat a 60% market share market leader
00:10:58
Nokia in a highly technology intensive
00:11:01
High fix cost Global regulated complex
00:11:04
industry well the answer is they didn't
00:11:07
their multi hundred
00:11:09
company collaborative ecosystem beat
00:11:13
Nokia so you can see that the diversity
00:11:15
that they needed in approaches to to
00:11:17
strategy and implementation if you like
00:11:19
was outsourced to an ecosystem that's
00:11:21
the fourth approach to ambid dexterity
00:11:34
[Music]
