“The essence of strategy is coping with competition.”
The business reality of today is that the only safe place against the raging innovation is to join it. Instead of seeing business -and strategy-_ as a matter of figuring out how to defeat one’s known rivals and protect oneself against competition, if a business is to survive, it must aim to add value to customers through continuous innovation and finding new ways of delighting its customers. Experimentation and innovation become an integral part of everything the organization does.
Firms like Apple, Amazon, Salesforce, Costco, ALDI and IKEA are examples of prominent firms pursuing this approach. They have shifted the concept of the bottom line and the very purpose of the firm so that the whole organization focuses on delivering steadily more value to customers through innovation. Thus experimentation and innovation become an integral part of everything the company does. Companies with this mental model have shown a consistent ability to innovate and to disrupt their own businesses with innovation.
Thus what is striking about continuous innovation is that the approach is not only more innovative: it tends to make more money. The latter point is important to keep in mind. For all the hype about innovation, unless it ends up making more money for the firm, ultimately it isn’t likely to flourish. Making money isn’t the goal, but the result has to be there for sustainability.
Is continuous innovation sustainable? Firms like those I mentioned have been at it for one or more decades with extraordinary results. What’s interesting is that they are consistently disrupting others, rather than being disrupted themselves. Will they survive for 50 or 100 years? Time will tell. What we do see is that they are doing a lot better than firms focusing merely on defeating rivals.
Strategy meetings leads to “the division of management into two classes: “top management” and “middle management.” Top management takes responsibility for deciding on the mix of products a company ought to pursue and for judging the performance of business unit managers. Middle management is merely responsible for the execution of activities within specific lines of business. That which is done at the top of an organization is strategic management. Everything else is the more menial task of operational management.
Two classes of management.
Practitioners of strategy meetings generally insist on the distinction between strategic management and operational management. Strategic (i.e. top) management is a complex, reflective, and intelligent activity that involves interpreting multidimensional matrices. Operational management, by contrast, requires merely the mechanical replication of market practices in order to match market returns. It is a form of action, suitable for capable but perhaps less intelligent types.
This picture of CEO-superdeciders helps justify their large salaries but it has little foundation in fact or logic.
This strategy theory is also wrong. The ceremonies are ultimately about the divine right of the rulers to rule. Ultimately they are “like a ritual rain dance. It has no effect on the weather that follows, but those who engage in it think that it does.”
The future of strategy meetings.
When rightly conceived as the art of thinking through how companies can add value to customers–and ultimately society–through continuous innovation, strategy meetings have a bright future. The market is vast because most large firms are still 20th Century hierarchical bureaucracies that are focused on “the dumbest idea in the world”: shareholder value. They are very weak at innovation.
For strategy meetings to succeed however, the participants need to know something both about innovation and about the sectors in which they operate and the customers who populate them. Merely rejiggering the financials or flattering the CEO as the master strategist is not going to get the job done. Managers are going to have to get their hands dirty understanding what happens on the front lines where work gets done and where customers experience the firm’s products and services.
To prosper, everyone has to become both more creative and more down-to-earth.
Also, lieber der Kunde begeistern als der Mitbewerber Platt machen!
