Are we all entrepreneurs now?
The pursuit of sustained competitive advantage has long been the aim of business strategy. It can be a trap.
Rita started with a fascinating video of a rather self-confident Jim Balsillie being interviewed in April 2008 – he is the former CEO of Research in Motion (the company behind Blackberry). In it he admitted their strategy ment they would either “made it to the moon or crashes back to earth” – and they were pretty much on the way to the moon. RIM hit its top share price in June 2008 – it was a stunning success story. But not sustainable, as we all now know.
The issue is that thinking that stability is going to be with us and we don’t need to do things differently. What does strategy look like in a world where nothing stays the same for long?
Rita gave the example of Fujifilm and Kodak in the 70s. There was a sea change in the ownership of the raw materials to make film and the industry went into crisis. Eventually, things evened out and in 1980 went back to normal. The Fuji CEO said “if it can happen once, it could happen again. How did we miss this as an industry? We need to start paying attention.” His resolve crystallised when Sony produced a camera that didn’t use film. The Fuji CEO said “we need to change right now – this is a critical inflection point”. They pulled back from film and underwent a huge transformation. Today Fuji is worth $27bn and is number 400 in the top 1,000 firms. Kodak is literally blowing up its factories because it can’t afford the real estate charges. All Kodak has is “nostalgia as a business strategy”
The challenge now is how do you step back and see the silver in your industry?
Rita gave the example of computer gaming – you can see there’s a peak moment and then things move on.
The former CEO of Nokia was on the cover of Forbes with the headline “1bn customers: can anyone catch Nokia?” All the business case studies at that point said that Nokia was some sort of magic company. Again, we know what happened next.
We used to think of competition largely being from within our industry. The most significant often come from other industries. Google didn’t mean to put a paper company out of business – but it did.
Apple have launched a new pay system that shakes up the long established “interchange fee” when you use your credit card. It’s not a bank hurting banks – it’s Apple!
A lot of the tools we have to develop business strategy (eg Michael Porter’s five forces model) were invented at a time when India and China were closed – there wasn’t global competition. We need to be thinking in a radically different way. The tools are no longer up to the job.
So what does the new “strategy playbook” look like?
- Stability is seen as the normal thing and change as the weird thing. The successful organisations are doing continuous reconfiguration, not making huge organisational changes.
- Healthy disengagement – if you have your resources in an advantage that is waning, you need to be able to extract them and repurpose them. If we need to disengage, let’s do it in a proactive and healthy way.
- We need to get better at moving resources around organisations. The head of Sony Walkman at the height of its success invited a small group from R&D. What got him where he is? AA batteries and cassettes. R&D tell him there’ll be no more AA batteries, no cassettes, the music will fly through the air onto devices and the quality will be lower than you can get at the moment. The head of Sony Walkman sent the R&D people back to their office! Powerful people will tend to protect their own vantage points.
- We need to do innovation as routine. Not innovation boot camps or innovation jams – the processes of getting ideas, incubation and accelerating them need to be in place.
- We need new leadership mindsets – the old leadership model is not sustainable. They have to focus on candour – be willing to change direction as new information comes in. We still rate leaders on “did what they say would happen, happen?” This is Industrial Age thinking.
This has huge implications for people and HR. Today’s careers will be fundamentally differently built. The emphasis on managing your on career is even stronger.
“Fast and roughly right often beats precise but slow”: AOL took 19 quarters to penetrate 60m households. Apple”s iOS did it in 9 quarters.
Seeking out tough to hear information is critical. Rita told the story of how Alan Mulally came into Ford and everyone told him everything was fine. He knew this couldn’t be the case – they were losing money. One manager was brave enough to identify an issue at a meeting and the CEO gave him a round of applause. He said “you can’t manage a secret”. You have to get problems out in the open.
We are moving from organisational systems and hierarchies towards individual skills. Future careers will not be a straightforward upward trajectory. A lot of people that are valued won’t need traditional HR interventions – we’re all entrepreneurs now. We are increasingly ending the trade off stability for loyalty. We’re looking more at an alliance. Both parties need to have their needs met. 45% of work in the US is not fixed and permanent. The appropriate metaphor in the new world is making a movie or putting on the Olympics. You bring together the critical skills to accomplish a defined task, then when the task is accomplished they go back into the pool.
Who knows where the skills are within the organisation? HR.
How do we manage our external networks? One of the problems at IBM during its turnaround was that everyone was looking to the CEO’s office. If you’re facing the CEO, what part of your anatomy is facing the customer?
The organisation should be thought of as a magnet for talent, not a trap to keep hold of talent!
People who worked for you can be a an extremely powerful resource – we have to actively manage our alumni networks.
Is there any good news? HR has an unprecedented opportunity to be proactive and define its new offer. Careers are like a ratchet – if you miss a step, you get shunted off to the side. You lose out if you have a break, for whatever reason. We can unlock potential by looking at this.
We’re at the forefront of an unprecedented number of new business models. There is a massive amount of potential out there.
In conclusion, Rita said she foresees:
- Transient rather than sustainable competitive advantages.
- Lots of opportunities for HR
Lots to think about!