SLID with Cornell University Professor on transforming strategy
Friday, 10 October 2014 09:43
Change is happening all the time. In fact, it is happening faster all the time. The pace of change has left in its wake the shambles of businesses that were once not only viable, but celebrated. What happened?
Dr. Phil Young held forth on how adaptation (or the lack of it) could be the make-or-break factor for an organisation’s success at ‘Strategy Transformation at the Board Level’, a thought-provoking forum organised by the Sri Lanka Institute of Directors in partnership with Next Campus and Cinnamon Grand Colombo.
Dr. Young is a strategy, finance and business acumen guru and visiting professor at Cornell University who was in Sri Lanka to conduct an Advanced Management program.
The problem, he said is very often not the lack of ideas at the Board level, but getting people throughout the organisation to commit to and actively bring about the changes necessary to spell success.
With storytelling being his strength (he also recommends it to companies trying to communicate with their employees), Dr. Young brought to life some great case studies, including that of Avon, which he put in the context of the times.
Behind the numbers
He used the case of Avon to illustrate how important it is to understand ‘what’s happening behind the numbers’. In this case, it was the demographic shift that affected Avon’s business model – as women started working, fewer were at home to receive the friendly door-to-door salespeople that were Avon’s trademark feature.
The CEO at the time, unfortunately, was opposed to retail sales, so although there was nothing fundamentally ineffective about the business itself other than the distribution method, it spelt doom for what was once a vibrant company.
Customers, technology and competition, and in some industries, government regulation, are often the vectors for this kind of change. Some leaders and boards, Dr. Young tells us, don’t recognise the changes until it’s too late (cognitive inertia), whilst others see the changes and their implications but don’t know what to do about it.
Yet others have an accurate vision of the challenges to come but can’t convince employees to get fully behind their plan (action inertia).
Four stages of change
He illustrated the economics of a business in a model: the four stages of change.
The first of these stages is ‘cost plus’, which he refers to as the good old days or the initial stages after introduction of a product.
‘Cost management’ follows, leaving a company dealing with change and competition which often involves downsizing.
‘Revenue management’ shifts the focus to achieving top line growth, and ‘revenue plus’ spells profitable growth.
In the case of Kodak, which is often referred to in this context, he revealed that it was more a case of action inertia rather than not seeing the change ahead.
Kodak in fact was the first to go into digital technology. Unfortunately, their focus was too narrow and they didn’t anticipate exactly how much they would have to change, because of the dominant logic which was hardware focused.
As a less extreme example, he cited Sony, which was once the watchword for electronics in entertainment but has now lost ground to brands like LG and Samsung.
It is this drive to keep abreast of what customers want and may want in the future that led Microsoft to buy Minecraft and that keeps Google constantly extending their reach into new avenues.
Dr. Young explained that hindsight is easy, and that when successful companies are headed for failure, it is rarely that anyone understands the factors involved at that time.
However, he reminded the audience that when obstacles are spotted, effective execution of a recovery or mitigation plan is key, and to achieve those ends it is necessary to communicate with the employees of the business.
This also serves to motivate them because it shows respect for their abilities, and because if they understand the bigger picture, they can make meaningful contributions.
Corporate education (training programmes conducted for those in management – provided by dedicated training institutions or even Ivy League universities), professional and personal development (soft skills training, added job responsibility, etc.) and improving the business acumen of your people gives them all-round knowledge and prepares them to meet current and future challenges. This kind of preparation also helps them understand the utter urgency of change when a threat is spotted.
Serving a challenge to the audience, Dr. Young exhorts them to consider the urgency of their own positions: ‘Anybody can recount what happened. Can you predict what could happen?’