© Yves Doz and Mikko Kosonen, Fast Strategy, Wharton School Publishing, 2007 From Product to...

© Yves Doz and Mikko Kosonen, Fast Strategy, Wharton School Publishing, 2007

From Product to Business Model Innovation: Fostering Strategic Agility

for Renewed Growth

Yves DozThe Timken Chaired Professor of Global Technology & InnovationProfessor of Business StrategyINSEAD

Mikko KosonenExecutive Vice President

SITRA(ex-Chief Strategy and Information

Officer, Nokia)

Whirlpool Europe, Comerio, Italy27 May 2008


The most critical challenge today

StrategicRigidity

StrategicAgility

EntrepreneurialInsight and Flexibility

OperationalExcellence

Growth

Time

• CISCO: From corporate to consumer markets

• INTEL: From processors to “ambiant” usagemodel solutions

• IBM: From Hardware to integration services,and “on-demand” computing

• NOKIA: From “devices” to internet-based mobility services

• SAP: From proprietary ERPs to “Fortune 1000” to internet platformsfor the next 200,000

• HP: From disparate products to integrated service solutions

How to discover and implement new business models,to transform one’s core business and rekindle growth

Where is Strategic Agility most needed?


Sources of Sustained Growth and High PerformanceClear Direction and focus

• We should have a clear vision for the future of our core business

• We should have a sustained effort at maximally leveraging our core business

• We should have a tight focus on continuous improvement

• We should have a leadership position in everything we do

• We should have self-confidence and an action orientation

Quick Commitment• We should have clear charters for all organizational units

• We should have strong and experienced leaders with proven track record

• We should make decisions fast

• We should promote successful leaders

High Efficiency• We should have strong business units with sufficient autonomy as they grow

• We should have highly efficient business systems and processes

• We should have deep collaborative relationships with our key customers and partners

• We should learn by doing and build on our experience


Single-minded attention to clear direction and focus leads to…

•Leadership position in everything we do

•Tight focus on continuous improvement

•Sustained effort at maximally leveraging our core business

•Clear vision for the future of our core business

Driver

•High action orientation and self-confidence

•Strategic myopia

•Dominance mindset•Reluctance to open collaboration and experimentation

•Short term internal orientation

•Tyranny of the core business

•Framing everything in the light of the core business

•Tunnel vision•Considering everything outside the core as non-relevant

Toxic side-effectConsequence

•Action hero syndrome, no time and interest for alternatives

•Snap judgment and intellectual laziness


•Learning by doing and building on experience

•Deep collaborative relationships with key customers and partners

•Highly efficient business systems and processes

•Strong business units with sufficient autonomy as they grow

Driver Toxic side-effect

•Management mediocrity and competence gaps

•Forgiven and hidden misbehavior and shortcomings

•Ties that Bind•Customer & partner ‘lock in’ and decreasing strategic freedom

•Activity system rigidification

•Increasingly differentiated and specialized (‘fit for purpose’) activity systems

•Resource imprisonment

•Core business managers ‘sitting on their resources’

Consequence

Single-minded attention to High Efficiency leads to…


Single-minded attention to quick commitment leads to…

Driver

•Emotional apathy•Tired hero syndrome; future opportunities looking less thrilling than past experiences

•Expert management

•Decisions elevating to the top team; decisions made by the ‘same’ leaders

•Heady charm of fame and power

•Inflated egos, overly bold commitments, implicit pecking order

•Management divergence

•Declining intensity of dialogue and decreasing need for collective commitments

Toxic side-effectConsequence

•Strong leaders with proven track-record

•Clear charters for all organizational units

•Preference for fast decision making

•Successful leaders


The Curse of SuccessStrategic Agility easily Turns into Strategic Paralysis Over Time …

Resource Fluidity

• Imprisoned resources• Business system rigidity• Ties that bind • Management mediocrity and competence traps

Leadership Unity

• Tunnel Vision• Tyranny of the core business• Strategic Myopia• Dominance mindset• Snap judgment and intellectual laziness

Strategic Sensitivity

• Management divergence• Heady charm of fame and power• ‘Expert’ management • Emotional apathy


Why Strategic Agility Now? Why so hard ?

CorporateEntrepreneurship

Focus onOperationalExcellence

StrategicPlanning

Simple/Linear

Complex/Systemic

Fast

Slow

Speedof Change

Ope

ratio

nal

Perfo

rman

ce

Natureof Change

StrategicAgility


The Strategic Agility Imperative

Most companies die not because they do the wrong things,

but because they keep doing what used to be the right things…

for too long.


How to discover and implement new innovative business models?

Resource Fluidity

Leadership Unity


Both the sharpness of perception and the intensity of awareness and action

The ability of the top team to make bold decisionsfast, without being bogged down in “win-lose” politics at the top

The internal capability to reconfigure business systems and redeploy resources rapidly


Key Capabilities enabling Strategic Agility

Resource Fluidity

LeadershipUnity


• Open Strategy Process

• Heightened Strategic Alertness

• High Quality Internal Dialogue

• Fluid re-allocation and utilization of capital resources

• Mobility of people and knowledge

• Modular structures

• Cabinet responsibility

• Top team collaboration

• Leadership style and capabilities of the CEO


Co-strategizing with multiple stakeholders

Co-strategizing with multiple stakeholders

Stretched visionStretched vision

Open business definitionOpen business definition

Cognitive diversityCognitive diversityHigh Quality

Internal Dialogue

HeightenedStrategic Alertness

Open Strategy process

STRATEGICSENSITIVITY

Through the magnifier lens: Drivers of Strategic Sensitivity

ExperimentationExperimentation

Factual and conceptualrichness

Contradictory goalsContradictory goals



INTEL CISCO SAP NOKIA IBM HP

Open Strategy Process

- Studies end-user future behaviour and usage models driving the demand for its products and services.- Shares its future product and technology roadmaps with all major value chain members to secure alignment for R&D efforts.- Active ecosystem building.- Intel Software Solution Group, responsible for promoting Intel technology - across all IT domains, has people continuously working in its customers premises.

- Systematic online interaction with all customers.- Active participation on key industry forums.- Joint experimentation and shared “roadmaps” with strategic partners.- Dedicated consultant unit (IBSG) focusing on customer understanding and business consulting (mainly but not exclusively external).- All senior managers expected to meet with external stakeholders every two weeks and report their learnings.

- War rooms and competitive action scenarios (“Sun Tzu” reports).- Corporate Strategy Group actively conducting and facilitation dialogue with multiple stakeholders, including new partners.- Extensive strategic collaboration with key global customers (in the core business domain).

- Assigned designated corporate and business level strategists to drive and facilitate corporate-wide strategic collaboration with key partners.- Active co-strategizing with key global customers (in core business).- Systematic, process for continuously screening new business ideas.

- Active co-strategizing with Key Global Customers.-Global Innovation Outlooks - “Engineering & Technology Services” (ETS) unit to directly interface with R&D in different companies across industries.- Teams of scientists and management consultants to work on client problems.- Meetings with CEOs of client companies.- Teams Strategy +techn.- Emerging Business Opportunities- Innovation Jams with whole personnel and key partners.

- Active co-strategizing with Key Global Customers.- HP Labs as ‘platform’ for learning from the ‘periphery’ and ‘open innovation’.- Global ‘innovation fair’ where the best business ideas are presented and evaluated.

Heighte-ned Strategic Alertness

- Multidimensional organization with global businesses and shared resources.

- Stretched goals/CEO promises.- Multidimensional organization (ex: The R&D head runs all the product lines and technologies, the head of sales and marketing all geographies and industries, …)

- Stretched goals/CEO promises.- Multidimensional organization.- Assigned designated corporate and business level strategists to drive and facilitate corporate-wide strategic collaboration with key partners.

- Stretched goals/ CEO promises.- Open ‘business’ definition: “Life goes Mobile”.- Systematic recruitment from other businesses.

- Multidimensional organization.- Open business definition.- Global Innovation Outlooks and technology outlooks.

- Corporate-wide cross business unit themes for new business development (mobility, security etc.).

Quality of dialogue

- Training and Promotion of ‘Constructive Confrontation’.

- Systematic resource acquisition from prime management consultancy companies and companies from other industries and internally.- Rotation to line organization after three years.- Define core business(es) in a conceptually tight but broad manner fostering growth into new market domains.- Segment councils for cross-functional solution development.

- Corporate Strategy Group (30 person strong internal consultancy team) recruited from consulting and investment banking to improve the quality of strategic dialogue, common frameworks and concepts that allow rich interpretations of strategic issues in a common language.- Create an environment where everybody has the freedom to speak up, criticize, be out of the box. Discuss first as a team at the top. “Openness to disagree forces a true team”.

- Strategic agenda :10 major strategic issues that are continuously followed up, on emerging technologies, business models, or other important trends relevant for more than one business group.- ‘Hand-pick’ 10 of the most capable individuals from any part of the organization to work on selected vision themes.- Strategy process involving thousands of people, supported by web-based dialoguing tools.

- Safeguard new insights and opportunities: developed a process of time ‘Horizons’ to manage its emerging businesses.- 3 top teams focusing on:. strategy. technology. senior executives and selected (by CEO) other contributors (for 1 year).- Securing cognitive diversity by appointing ‘best brains’ to fully mandated top team members for a year at a time.

- CTO/CSO network facilitating internal strategy dialogue.

A peek into the microscope… Comparison of the approaches and methods used to foster


SAP NOKIA

Heightened Strategic Alertness

- Stretched goals/CEO promises.- Multidimensional organization.- Assigned designated corporate and business level strategists to drive and

facilitate corporate-wide strategic collaboration with key partners.

- Stretched goals/ CEO promises.- Open ‘business’ definition: Life goes Mobile.- Systematic recruitment from other businesses.

Quality of dialogue - Corporate Strategy Group (30 person strong internal consultancy team) recruited from consulting and investment banking to improve the quality of strategic dialogue, common frameworks and concepts that allow rich interpretations of strategic issues in a common language.- Create an environment where everybody has the freedom to speak up, criticize, be out of the box. Discuss first as a team at the top. “Openness to disagree forces a true team”.

- Strategic agenda :10 major strategic issues that are continuously followed up, on emerging technologies, business models, or other important trends relevant for more than one business group.- ‘Hand-pick’ 10 of the most capable individuals from any part of the organization to work on selected vision themes.- Strategy process involving thousands of people, supported by web-based dialoguing tools.

A peek into the microscope…


CEO First among peers CEO First among peers

Institutionalized top team renewalInstitutionalized top team renewal

Mutual dependencyMutual dependency

Top team collaborationLEADERSHIP

UNITY

Drivers of Leadership Unity

Cabinet responsibility

Embracing conflict + dialogue

Shared agenda &incentives

Shared agenda &incentives

Capability to play multiple roles

Capability to play multiple roles

Leadership style and capabilities of the CEO


Freeing strategic directionfrom org.structure

Freeing strategic directionfrom org.structure

Dissociating results from resource ownership

Dissociating results from resource ownership

Assumption based planning/resource allocation process

Assumption based planning/resource allocation process

Institutionalized job rotation

Institutionalized job rotation

Values and management system emphasizing

knowledge sharing

Values and management system emphasizing

knowledge sharing

‘Plug and Play’ modularstructures

‘Plug and Play’ modularstructures

Modular structures

Mobility of People and Knowledge Sharing

Fluid Re-allocation and Utilization of Capital Resources

ResourceFluidity

Drivers of Resource Fluidity


Summary

Complex Change

Fast Change

Strategic Agility

Strategic Agility results from the multiplicative effect of:

• Strategic Sensitivity: Seeing and framing opportunities in a new insightful way

X• Resource Fluidity: Fast and efficient resource mobilization and redeployment

X . Leadership Unity: Collective decision making and commitment to decision outcomes

Curse of Success

OperationalExcellence

?


Key Levers of Strategic Leadership

Strategic Sensitivity:Seeing and framing opportunities in a new insightful way

Leadership Unity:Collective decision making and commitment to decision outcomes

Resource Fluidity:Fast and efficient resourcemobilization and redeployment

CognitiveCognitive

RelationalRelational

OrganizationalOrganizationalEmotionalEmotional


From Strategic Paralysis to Strategic Agility The "CORE" drivers

Activities

Capabilities

Strategic Agility (or Rigidity!)

Emotional Drivers: Re-energizing hearts andredirecting efforts, leadingthrough values, articulatingaspirations

Cognitive Drivers:Developing and sharingnew broader perspectivesengaging in higher qualitydialogues

Organizational Drivers: Re-integrating theorganization, creatinginterdependent processes,common rewards,integrated value creationcapabilities

Relational Drivers: Re-uniting the top team,fostering an open and honestdialogue around keycollective decisions, andsticking with them.


Opening the Cognitive Context

• Encouraging the expression of new ideas

• Planting and nurturing seeds of change

• Opening spaces and providing fora for sense-making dialogues

• Pacing the exploration journey to gain credibility

• Reframing away from the lime-lights

• Fencing-in resources for investment

• Matching level of attention to level of learning

• Clustering and bending


Adjusting the ‘Organizational Context’

• Unpacking the core business system

• Putting the organization ‘off-balance’

• Allowing for rapid entry and exit into/from new businesses

• Allowing flexible and dynamic differentiation and integration


Renewing the Relational Context

• Putting top team members under renewed tension

• Creating a sense of crisis

• Changing the top team composition

• Letting the new top team gradually develop a new common and more conceptual language


Re-energizing the Emotional Context

• Cognition does not immediately translate into emotions! Emotions precede vision

• Transition spaces and periods (mourning the old, adopting the new)

• Redefining the new to mobilize the attachment to the old

• Executive leadership (leading by example) is fundamental, emotions are contagious

• But regaining strategic agility calls for a shift in emotional attachment


For more information on Strategic Agility

please contact:

E-mail: [email protected]

or connect to : www.strategicagility.com

Success is blinding

Strategic agility is a never ending quest

© Yves Doz and Mikko Kosonen, Fast Strategy, Wharton School Publishing, 2007 From Product to...

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