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