How to develop a Realistic Strategy
In 2018, at Global Peter Drucker Forum, world-renowned academic and corporate strategist discussed on how to develop and execute strategy amid rising economic pressure and instability.
The discussion centred on the evolution of the business ecosystem and the conceptual framework of competitive arenas. Here are the key takeaways from the discussion.
How to develop a Realistic Strategy – Key Takeaways
Every leader should rethink and refresh on their strategic planning amidst the shifting business environments. Failure to act might lead to the end of their business.
Take digital technologies, for example, the rise of online shopping might lead to the end of local businesses and even shopping malls. In a global sense, digital technologies create more possibilities in term of connectivity, a new and different “business ecosystem”, which include not only digital marketplace and apps but also hardware, software and other intelligent capabilities.
Today’s business ecosystems include collaborating firms and influential customers and competitors. Consider how Nokia, the once inimitable smartphone has faded into the background while Apple, Google, and other ecosystems continue to rise. Competing today means reaching beyond your industry’s boundaries to create, merge with or influence an ecosystem.
“If business realities [are] changing, so, too, must our approach to strategy.”(Tony O’Driscoll
Meanwhile, as industries lose influence, “arenas” are the new competitive framework. In effect, your firm can’t afford to compare its performance only to others within its industry. Instead, take a broader view of consumer spending to understand who are competing against you and how.
Look for cross-industry overlapped and market-trend. For example, brands from the teenage apparel industry must understand that smartphone firms are competing against them by giving young people a better way to convey identity. The conceptual framework of arenas might even help you discover new business ecosystems you can join. An opportunity which once unknown to our organization.
“Industry analysis is dead…Companies that define themselves as belonging [to] an industry [are] going to die.”Alexander Osterwalder
The panel suggest that if we were to define our company by its industry is actually a recipe for failure. Hence, our organizational strategy must evolve to become a continual assessment of “innovation, execution [and] projects.”
Optimize your organization spending for new ventures by phasing-out the low performing offerings. Hence, by making numerous small investments in new ideas will give your organization abundant options, and increase spending on the most promising projects.
Generally, companies must make 250 “small bets” to hit upon a single multibillion-dollar idea, hence, the spending need to be optimized. This grim ratio reflects the flaws in how established firms innovate. Improving the conditions for innovations to flourish and to fail may yield better outcomes.
Already, firms that harness business ecosystems can let other collaborators make the small bets for them, decreasing that ratio and its related costs. Amid dissolving industry boundaries, firms no longer merely compete against the next-best company.
The competition extends across industries, and so must innovation, value and identity. Rather than preserve product-based identities, firms must form and communicate identities around an innovation “playground.” Amazon’s identity, for example, is built on the playground of “growth.”
- Savvy companies are dropping their single-offering focus in favour of creating, joining or influencing “business ecosystems.”
- Business ecosystems include hardware, software, digital marketplaces and apps, and other capabilities – as well as collaborating firms and influential customers and competitors.
- Competition now reaches across industries, and so must your firm’s competitive analysis, innovation, value proposition and identity.
- Rather than preserve a product-based identity, form and communicate a brand identity around an innovation “playground.”
- Companies must make 250 “small bets” before they hit upon a single multibillion-dollar idea. This ratio will improve as firms harness business ecosystems.