- Santosh T
- June 20, 2023
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Strategic Resilience: It is the practice of thinking forward while leading through present turbulence - adapting to difficult operating circumstances while looking beyond current conditions to keep focused on the horizon. These cultures prove their endurance during tough times by experiencing minimized disruption of key outcomes. For example, the COVID-19 pandemic has put businesses through rigorous strategic resilience tests. In a recent survey conducted by McKinsey, 80 percent of executives said that their organizations have responded effectively to the pandemic. They rapidly adapted their strategies to address both the challenges and the opportunities created by the crisis. For example, logistics companies that have introduced contactless delivery to restaurants shifting to home delivery and pick-up orders.
Lessons learned from the Food Truck Challenge simulation:
Organizations adapt different approaches to build their business.
Analytical Approach: Here the assumption is that the future is the extension of the past. This approach works well in a predictable and stable environment. Here we will analyze various parameters, make decisions, and implement those. This approach might be problematic if the future is not the extension of the past.
Test and learn approach: This approach is more suitable when we operate in the unstable
Test and learn approach: This approach is suggested when we are operating in a dynamic environment where things are changing. Here the environment will be unstable and will undergo rapid changes, unpredictability, and ambiguity. Also called the experimentation approach. For example, online retail companies do more than 10K experiments annually. The Test & Learn approach is the real customers or employees that are providing the data upon which the learnings and, ultimately, strategic decisions can be made. For example, the product recommendation while checking out a product in the Amazon portal is initially recommended by an employee and incorporated this feature when they found it is generating more business in the test & learn phase.
Design Experiments: Experimentation is useful for startups and experienced large organizations as things keep changing for everyone. Experiments are for test and learning and go with certain questions in the mind. This is different from trial-and-error experiments where we don’t know anything.
Four things are mandatory while designing experiments say purpose, management commitment, doable and can we ensure reliable results.
Common pitfalls are like success metrics that don’t fit strategic intent or goals, lack of trust due to low data quality and not paying attention to causality.
In experimenting we are not just trying something, instead testing hypothesis, which is based on experience, past history etc.
As per the article “The discipline of business experimentation”, companies must ask the following key questions. Does the experiment have a clear purpose? Have the stakeholders made a commitment to abide by the results? Is the experiment is doable? How to ensure reliable results? Have we gotten the most value out of experiments? For example, in Kohls late store opening hours experiment, they addressed all these questions and came up with the result. Many organizations like booking.com has dedicated departments for experimentation.
Experiments prepare businesses to be more resilient during times of change. Depending on the demands in the competitive context and incremental returns, organizations take a call to stop the experimentation.
Strategic Inflection Point(SIP): SIP is a point at a company's evolution change from one set of industry structures to another set of industry structures, or one way of doing business to another way of doing business or one set of dynamics that work to another set of dynamics. The decision take at this point will drive the future. A strategic inflection point is a time when an organization must respond to disruptive change in the business environment effectively or face deterioration. The changes happen over a period and capturing it at the right time is important. According to Intel co-founder, Andy Grove, strategic inflection points are occurrences that alter how we think and act because they are ten times more impactful than the normal change businesses or industries encounter. The inflection point effects on a company are usually far-reaching. Unexpected occurrences such as recessions, natural disasters, regulatory changes, innovative technological breakthroughs, political events, etc. can be potential causes of inflection points. A strategic inflection point is a time when an organization must respond to disruptive change in the business environment effectively or face deterioration. For example, the American railroad busines failed in 1960s because they didn’t respond effectively to growing competition from airlines, cars and other forms of transport. Other modern-day examples are Kodak, blockbuster, blackberry etc.
Navigating SIP: Traditionally thedecisions are based on mind map which is made by our perceptions, learning, experience, and history. As the experience goes long, executives tend to believe that mind maps and very difficult to change. A process of thinking differently for the future is required to succeed. The intended strategy and emergent strategy always differ because of environmental forces. We have to make our organization and ourselves for SIP ready. Organizations can successfully navigate through SIPs by strategic recognition and resolving strategic dissonance.
Detecting SIP signals: There are four basic stages in the development of inflection points: hype, dismissive, emergent, and maturity. It is the people who are directly in contact with the phenomenon who usually notice changes early like the sales people, scientist, customer services team etc. For example, when Lou Gerstner was running IBM, he spent his first months in office visiting customers and talking to frontline employees to get a feel for what was really going on.
Strategic Recognition: This is the foundation for exerting strategic leadership. This will encourage debate to a conclusion that realigns the basis of competition and distinctive competence, and strategy and action. Traditional planning and Scenario planning are the two methods to analyze. Scenario planning will help to think and consider different scenarios or multi paths and take hypothesis against each scenario. This is designed to help explore various weak signal. Scenario thinking is a tool for overcoming the decision traps. This will help to prepare for a range of alternatives and different futures. For example, Shell is practicing scenario planning for the past 70 years. In the traditional planning, we will be analyzing only one path. For example, in the IBM PC forecast, they followed the traditional planning. They would be much successful if they would have adopted the scenario thinking.
Strategic recognition can be enhanced through various ways like understanding the dynamic forces of firm’s evolution, noticing the various anomalies or trends in the industry, leveraging the networks like forums or market research, monitoring rivals and competitors etc. Building a monitoring system is also very helpful for enhancing strategic recognition. For example, Satya Nadella after took over the Microsoft CEO position decided to develop a market intelligence monitoring tool to get the outside in vie from the market. This helped him to formulate the new business strategies and started busines like cloud, workplace solutions etc.
Strategic Dissonance: This is the organization’s ability to formulate new strategic intent of business to stay relevant in the industry. we should look for leading indicators. Here we will be analyzing what will happen one or few years before an event happens. Then plan the investments accordingly to stay relevant. The Strategic dissonance can be resolved by accepting the ambiguity, tolerating the dissent, getting more insights and through deliberate practice. An implementation mind set is essential to resolve it. Fair process is very critical while implementing the strategies which includes the principles like stake holder engagement, Explanation, and expectation clarity. This is by identifying the right strategic choices.
For example, Hewlett Packard is moving towards health care and 3D printing business leveraging the existing IPs. Because they found that the traditional print business is declining as the end users are moving towards digital prints. They have collected these signals from their clients, marketing team, support team, researchers, market trends and effectively utilized to make the right strategic choices.
References:
https://leadchangegroup.com/strategic-resilience
https://gocardless.com/guides/posts/what-is-an-inflection-point
https://www.linkedin.com/pulse/test-learn-approach-business-innovation-christopher-baird
