Setting Your Organization on a Trajectory to an Improved Future
BY DON TAPSCOTT
Over the last few decades strategy has been in and out of fashion – for many businesses that followed the trends, mainly out. During the early 1990s, strategy was replaced by ‘reengineering’ – a term invented by the late Michael Hammer that turned out to mean rationalization of business processes and cost cutting. During the mid and late 1990s, strategy was replaced by a get-rich-quick mentality that ‘the internet changes everything’ (which is true) into the hope that ‘all things done on the internet will prove lucrative’ (which was rubbish). There were egregious excesses and spectacular market capitalizations based on absurd or non-existent business models.
Once the dotcoms crashed in 2000, strategy was replaced by ‘execution’, inspired by Larry Bossidy and Ram Charan’s 2002 book of the same title. To be fair, good execution is important, but as an overarching approach to competitiveness this was a bogus view. It led followers to think that all they had to do was execute well to survive, and no doubt many executed bad strategies well, on their way to oblivion. Then the crash of 2008 relegated strategy to the background once again as companies everywhere cut costs to survive the worst recession since the Great Depression.
A number of factors are conspiring today to end these dog days of strategy and move it front and centre again. But the new rules for competing require fresh thinking. Business fundamentals indeed; fundamentalism, no. Which is why Beyond Default is important.
‘The times are a changing.’ I don’t ever remember a time when so many tenets of business orthodoxy were being challenged. A new paradigm in technology is emerging as we enter the Fourth Industrial Revolution. The geopolitical order is being turned on its head by anger, populism and demagoguery. A new generation of digital natives has entered the marketplace, workforce and society, and they are different to anything we’ve seen. And changes to our climate threaten civilization itself.
It was Peter Drucker who observed that in stable times you need good management, and in uncertain times you need good leaders.
Similarly, in relatively stable markets you need good execution on whatever your competitive advantage is, such as differentiated products, low cost or superior customer relationships. Historically, these have been the ways to compete. There have been important contributors to the whole area of business strategy, and it’s generally recognized that two of the most important are Harvard Business School Professor Michael Porter and the former Dean of the Rotman School of Management, Roger Martin.
In Beyond Default: Setting Your Organization on a Trajectory to an Improved Future, David Trafford and Peter Boggis detail how the successful corporation must go beyond execution and tinkering to make strategic decisions to ensure growth of shareholder value. The book lays out the steps necessary for a company to make informed choices on what is required to change the company’s trajectory to one that leads to greater competitiveness. An organization’s trajectory of strategic reality is determined by forces both within (endogenous) and outside (exogenous) the company. Only by understanding the impact of these forces can a company make informed choices on the best trajectory. A strategy’s purpose is to change that organization’s trajectory. To do this, strategies should be operationalized by ‘pulling from the future’ rather than ‘pushing from the present’.
The authors identify a number of exogenous factors that need to be considered: population dynamics of growth, demographics, urbanization and international migration, globalization and international trade, energy usage and availability, climate change, and the internet.
I agree with all of these, but let me comment on one in particular: the internet.
In the past 20 years, we have seen spectacular successes with start-ups seizing the opportunities afforded by the internet. But each of these success stories is also a story of massive failure by existing companies. Huge corporations didn’t realize the opportunities that were within their grasp.
Why didn’t Rupert Murdoch create The Huffington Post? Why didn’t AT&T launch Twitter? Yellow Pages could have built Facebook. Microsoft had the resources to come up with Google’s business model. Why didn’t NBC invent YouTube or Snapchat? Sony should have pre-empted Apple with iTunes. Craigslist would have been a perfect venture for the New York Times or any regional newspaper. As Beyond Default makes clear, most existing organizations are willing to accept the status quo and thus are doomed to be eclipsed.
My son Alex and I are convinced that the internet is currently entering its second era. The first era was the internet of information. The second is the internet of value. This will enable unprecedented opportunities. Blockchain technology will bring profound changes, and few business leaders understand the potential that is waiting to be seized.
Just as there were at the beginning of the first internet era, there are great unprecedented possibilities for creating economic value, customer value, shareholder value, and community value.
After 2008 companies hunkered down and tried to find ways to survive. But that has passed, and we are seeing many new business strategies emerge. Facebook’s impact continues to expand as it uses data fracking to extract value from the information stored on its servers. The company is constantly experimenting and entering new markets. Digital conglomerates such as Google and Amazon are continuously pioneering new services. In Asia there is Alibaba, which is eating up whole parts of the economy. Alibaba has massive data resources that allow it to enter new markets.
Even some of the most recent internet bright lights might soon fade into darkness. Companies like Uber and Airbnb are now threatened by new blockchain business models. Most of what these companies do can be replaced by smart contracts or autonomous agents.
This is not a time for tinkering. Strategy is coming to the fore once again, and Beyond Default provides the tools to take strategy to the next level.
I get asked to comment on business books every day and I take a pass on nearly all of them. It’s tough to come up with an original thesis, let alone one that is probably correct and actually useful. This book has achieved that: read it and prosper.
The content and style of this book conjures more than a lifeboat of ideas and examples; they provide a lifeline of consideration into the future.Dr Peter Cochrane OBE, Consultant, Entrepreneur and Senior ManagerPurchase Now