Setting Your Organisation on a Trajectory to an Improved Future

Foreword

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.

Introduction

Have you ever wondered where your organization is headed? Have you ever asked yourself why some companies are more successful than others? Have you ever reflected on why once-great companies like Pan American World Airways (Pan Am), Lehman Brothers, Woolworths Group, Blockbuster, General Foods and Marconi no longer exist? Why companies like Xerox, Blackberry, Kodak, Royal Bank of Scotland and Yahoo are a shadow of their former selves, and others like Rolls-Royce, Hewlett-Packard, Anglo American, Standard Chartered Bank and Tesco are struggling to regain their once dominant position? And yet others, for example IBM, Apple, GE, Amazon, Walt Disney, BBVA, Jaguar Land Rover and Lenovo, continue to go from strength to strength.

We’ve asked these questions many times over the past three decades. Initially, when we were younger and, yes, less experienced, we thought it was simply due to the calibre of the organization’s leadership and the strategies they pursued. Then, for a period of time, we thought it was because successful organizations applied the latest management thinking, whether it was TQM (Total Quality Management), Business Reengineering, LEAN, Employee Engagement or Core Competencies. But, experience has shown that it’s not as simple as that. While such initiatives can undoubtedly bring some benefit, they rarely deliver the ‘silver bullet’ that their advocates promised. Equally, while the calibre of leadership is important, along with the strategies they pursue, they in themselves were not the answer to our questions. Eventually we came to the conclusion that there must be something more fundamental at play – something that ultimately determines the destiny of an organization. But what is it? And, can it be controlled in a way that increases the chances of success?

We don’t claim to have the complete answer, but we have, over the years, gained a number of insights and developed a point of view on this important question. This idea was born from the realization that leaders have less control over the destiny of their businesses than they think they have or would like to have. While these individuals are perceived to be very powerful, in reality their strategies and policies rarely change the course of their organization to the extent they had hoped.

The reason for this is that the context within which they operate is more powerful than the strategies (and supporting resources) they deploy. All too often leaders focus on the future they would like to have, rather than the one they are likely to get: a future that is determined by a set of factors, some of which are completely outside their control.

Those factors that are, in theory, within their control are generally so powerful and embedded within their organization that their influence is often ignored or underestimated. Strategies that are not cognizant of the context within which they are being executed have very little chance of success.

The organizations we are referring to are well established and have been successful in the past, but are now struggling to find renewed success in the ever-changing environment within which they operate. Without necessarily knowing it, they rely on strategies that have served them well in the past. They often have very skilled, experienced and dedicated people who have benefited from the successes of the past, and who very much hope that these successes will continue into the future. While our perspective does not directly relate to start-ups or newer organizations that are enjoying early growth, one day they too will become ‘established’ and morph into the type of organization our point of view relates to.

Our view has been formed through experiences as practising consultants and trusted advisors, rather than as academics – though one of us did spend six years as a Research Fellow and Senior Lecturer at a leading UK postgraduate university. While practitioners at heart, we also consider ourselves to be students of management and organizational leadership. Over the years we have read hundreds of books and thousands of articles on strategy, leadership and organizational change, and our conclusion is that there are as many answers to our question as there are academics, management gurus, consultants and leaders. If indeed the answer to our question ‘why are some organizations more successful than others?’ lies in the published body of knowledge, we have not yet found it.

Our resultant hypothesis is that all organizations, whether they are commercial or not-for-profit, are on a trajectory towards what we call their default future – where they will end up if they do nothing beyond their currently planned course of action. If the default future is an acceptable future state, then no further action is needed – just enjoy the journey. If, however, this is deemed unacceptable, then decisions need to be made and actions taken to change the trajectory to an improved future. In many respects, there’s nothing new in this thinking – it’s always been the role and accountability of leaders to steer their organizations to a better future. What’s different is accepting that organizations are on a given trajectory for a reason. Only by understanding and addressing these factors can leaders stand any chance of successfully changing their organization’s default future.

This thinking has led us to believe that the purpose of strategy is simply to change an organization’s trajectory to one that will take it to an improved future.

In essence, we have developed a new approach to the practice of assessing, developing and executing strategy. It is an approach that begins by identifying and assessing the factors that define the current trajectory and the default future it will bring. Only then can alternatives be explored and informed choices made about which trajectory to pursue.

We begin by making the case for a different approach to assessing, developing and executing strategy. In chapter 1 we look at evidence indicating that over the past three decades the success rate of organizations changing their trajectory to an improved future has not significantly improved. We argue that most companies continue to confuse ambition and targets with strategy, and we present evidence to indicate that most mergers and acquisitions (M&As) destroy rather than create value, and that the majority of transformation programmes fail to deliver their target outcomes. This evidence makes a compelling case for a different approach to assessing, developing and executing strategy.

In chapter 2 we explore this notion further by arguing that it’s the accountability of leaders to confront their organization’s default future. Furthermore, it’s equally important that they understand the exogenous (external) and endogenous (internal) navigating forces that determine the current trajectory – what we call the trajectory of strategic reality. Only by understanding the nature and influence of these navigating forces can informed choices be made to change the organization’s direction.

In chapter 3 we focus on one of these endogenous navigating forces – the capabilities that an organization has built up over time. Acting like strong muscles, these organizational capabilities can serve as powerful anchors, keeping an organization on its current trajectory of strategic reality. In chapters 4 and 5 we explore how exogenous forces ultimately shape strategic opportunities and present this as an organization’s trajectory of strategic opportunity.

In chapter 6 we introduce the notion of an organization’s trajectory of strategic intent. This is informed by strategic opportunities and takes into account what is practically possible by assessing the forces that determine the current reality.

In the last three chapters we offer some approaches for changing an organization’s trajectory of current reality to bring it in line with the trajectory of strategic intent. In chapter 7 we explore how to make strategic intent more meaningful to others, and in chapter 8 how ‘pulling from the future’ is more effective than ‘pushing from the present’. We conclude with chapter 9, in which we argue that successfully changing an organization’s trajectory begins with exercising collective – as opposed to individual – leadership.

This book will not tell you what your strategy should be, nor will it aim to present a multi-step methodology for developing a strategy. Its purpose is to share insights that explain why developing and executing strategy is such a challenge. We certainly wouldn’t presume that we know enough about your organization, or the context within which it operates, to know what you need to do to put it on a trajectory to a better future. However, we do believe that we know what questions to ask and what conditions need to be put in place for an organization to have any chance of successfully changing its trajectory.

We must thank the many CEOs and executives with whom we have worked over the years. We value the opportunities they presented to us and their trust and confidence in our ability to help them succeed. We are also indebted to our colleagues, past and present, whose input, constructive challenges and candid feedback helped shape our thinking. As we argue in chapter 4, the most powerful form of learning is experiential, and we are grateful for the learning experiences we have had over the past 30 years and the insights they have brought us.

Finally, we know that some of the content of this book will be familiar to you – for which we make no apology – and that some of it will be new. What is different is the way we have brought it all together, so that it is both relevant to the challenges today’s organizations face, and of practical value to today’s leaders. Our goal is simply to share our thinking in the hope that it will inspire and help those who are passionate about changing their organization’s future for the better.


Awards

Beyond Default was named:

  • finalist in the Business & Economics category in the 2017
  • finalist in the Leadership category in the 2018 National Indie Excellence Awards.
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 Manager
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