Introduction

The avalanche of data at ever increasing speeds creates greater corporate ADHD. The result is decision making suffers from “24×7 news cycle” thinking where now is better than later. Competitively, it means increased market stress and rapid cycles of wicked problem solving. So, what can we learn about remaining competitive?
It’s 20 years since I produced my Masters Thesis on managing change for competitive success based on Pettigrew & Whipp’s research of the later 80s and 90s. Since that time, strategic planning was reborn in the 1990s. New approaches for strategy focused on growth through mergers/acquisitions and joint ventures, generation of innovative ideas through decentralized strategic efforts within the company, emergent strategy, and the leveraging of core competencies to create strategic intent. By the start of this century the focus shifted to strategic and organizational innovation, including reconciling size with flexibility and responsiveness. New alliances mean cooperative strategies, complexity, changes in commitments of corporate social responsibility, etc. Today’s strategic planning and execution requires new models of leadership, less formal structures, and more commitment to self-direction.
Unfortunately, both strategic planning and implementation’s effectiveness leaves a lot to be desired with 60% of all change initiatives failing. Sydney Finkelstein summarizes areas of most strategic planning failure: launching new ventures, promoting innovation and change, managing mergers and acquisitions and responding to new environmental pressures. So in this era of dramatic change, global alliances, and a variety of environmental pressures, the potential for failure is very real.
This blog looks at what leaders need to consider to avoid being another survey statistic.

Binding competition and strategic change together

What competitive agility does it take to compete in unstable economies and markets. Two things stand out:

• Understanding the competitive forces at play and how they change, linked to

• Mobilizing the resources necessary to respond competitively.

Competitive sustainability relies on binding competing and strategizing together. This is a shout-out to the company politicians that the internal and external pressures of the marketplace will be an open and continuous dialogue. Strategies do not move forward in a straight line or through neat phases.  The pattern really is continuous, iterative and uncertain. (BTW: they never have really!)

The problems of creating strategy

Too often strategic planning is a prescribed sequence of goal setting and resource allocation. It suffers from:

• Underestimating the importance of internal operations and resolving misalignments
• Ignoring the critical dimension of open process
• Isolating the planners from the doers
• Managing the tensions between deductive and inductive reasoning.

Let’s unpack this last point:
Logically we often refer to the two broad methods of reasoning as the deductive and inductive approaches.
Deductive reasoning works from the more general to the more specific.

Sometimes called a “top-down” approach. We might begin with thinking up a theory about our topic of interest. We then narrow that down into more specific hypotheses that we can test. We narrow down even further when we collect observations to address the hypotheses. This ultimately leads us to be able to test the hypotheses with specific data — a confirmation (or not) of our original theories.
 
 
 

Inductive reasoning works the other way, moving from specific observations to broader generalizations and theories. Informally, we sometimes call this a “bottom up” approach. In inductive reasoning, we begin with specific observations and measures, begin to detect patterns and regularities, formulate some tentative hypotheses that we can explore, and finally end up developing some general conclusions or theories.
 
 
These two methods of reasoning have a very different “feel” to them when you’re developing a strategy. Inductive reasoning, by its very nature, is more open-ended and exploratory, especially at the beginning. Deductive reasoning is more narrow in nature and is concerned with testing or confirming hypotheses.
With a deductive approach people prefer:

• Showing evidence (e.g. facts, details, examples, etc.)
• Being practical and realistic; grounded
• Having a well-thought-out plan with details worked out in advance
• Being direct
• Show logical sequence of steps
• Use concepts and strategies sparingly — concentrate more on the day-to-day consequences of a plan.

With an inductive approach people prefer:

• Presenting ideas and global concepts first, then draw out the details.
• Not giving details unless asked.
• Providing ideas or summaries and not providing detail; accepting intuitive conclusions as working hypothesis.
• Being patient; working spurts or bursts of energy.
• “Blue skying” to encourage imagination.

Here’s the “rub”. Strategic change involves activity streams where

managerial ability to cope with ambiguity is paramount.  There is no easily isolated logic. Dealing with strategic change competitively relies on a process of opposing reasoning held in open dialogue. Recognizing and valuing opposing forces gives an opportunity for conflicts being resolved in greater understanding of different positions while managing the politics involved positively. It is a difficult process whose complexity cannot be avoided. Holding open and not placating or railroading one side or the other to allow all parties to jointly understand the main change components and grasp the competitive landscape is crucial. Managing these tensions is critical to achieving competitive advantage
“Achieving competitive advantage rests on creating new knowledge and transferring it across the firm, faster than the competition. Formulating and implementing strategy more than ever means knowledge management is a key strategic task. The challenge facing leaders is developing individual and group knowledge that builds better strategies and commitment.”

Leveraging Cognition for Competitive Advantage: A Knowledge-Based Strategy Process Senthil K. Muthusamy, Ph.D. Ramarajlanisamy, Ph.D. (Journal of Information & Knowledge Management, Vol. 3, No. 3 (2004) 259–272)

Here’s a sobering analysis of strategic planning’s track record to date.

Why Strategic Planning Fails

(based on The Higher Ed CIO, August 16th 2011)

Why strategic planning fails – because we impose a rigid linear methodology to produce a linear plan that does not reflect the world we operate in. We waste time and energy on strategic and tactical plans that never get activated and for which there is no accountability. According to several surveys of top executives only 19% of strategic plans achieve their objectives and only 25% are even motivated by the plans they create. Here’s some more findings:

• 85% percent of management teams spend less than one-hour a month on strategy issues
• 27% of a typical company’s employees have access to its strategic plan.
• 92% of organizations do not report on leading performance indicators.
• 90% of well-formulated strategies fail due to poor execution.
• 60% of typical organizations do not link their strategic priorities to their budget.
• 66% of HR and IT organizations develop strategic plans that are not linked to the organization’s strategy.
• 70% of middle managers and more than 90% of front-line employees have compensation that is not linked to the strategy.
• Most devastating, 95% of employees do not understand their organization’s strategy.

From the list above there are two reasons why strategic planning fails that stand out the most.

• First, that organizations cannot consistently describe their own strategy.
• Second, that 66% of IT and HR departments continue to develop plans that are not linked to the organizations strategy.

The fact is business and organizations don’t move in a linear fashion. Nor do it’s employees or customers behavior. Yet, our strategic planing processes and templates presuppose a linear world, For example:

Mission > Vision > Values > Goals > Objectives > Tactics > KPIs

The reality of our world for business, organizations, employees and customers is high degrees of unpredictability, randomness and chaos. How do you allow for the unpredicted unfolding and fluidity changing situations. Yes, you can still do integrated planning, and poor tons of time into making SMART goals, but it is more important that you build into your plans for creating and maintaining options for uncertainty and for possible changes.

Getting to Grips with the Competitive Landscape

Pettigrew and Whipp’s findings of the late 80’s still holds. Stand-out organisations handle five interconnected change competencies better than their competitors

Competitive Environment Assessment

Businesses that do not keep pace with the changing environment typically face a loss of strategic direction in terms of where and what they want to be and how they should compete. They find themselves serving unattractive markets, offering obsolete products, employing obsolete technology or dissipating its resources in diversified and non-core operations.
To prevent reduced competitive advantage you need to maintain clear customer value propositions that fully exploit core competencies and position your business best in its competitive environment. So competitive environmental assessment requires a sustained open learning system which is not reliant on a specialist function.  Strategy creation tends to emerge from the way a company at all levels, processes information about its environment. So you need to keep track of:

• Market demand trends
• Forces driving industry competition like:
  • competitive rivalry
  • bargaining power of buyers and suppliers
  • new entry and substitute products
• Political, economic, social, technological, legal and environmental nature. (PESTLE)

This assessment needs to recognize that:

• It does not occur at one point in time
• It lacks innocence or isolation which means people influence what and how it is analyzed
• People’s beliefs affect their view of the environment
• Identifying competitive strengths implies choices between often controversial alternatives
• Different function’s interaction with the environment means different and contradictory ideas emerge
• Individuals sense, groups make sense
• This can only be done if you create a learning organization

Successful sensing and sense making is based on five factors:

• Leaders embedding the belief that sensing and sense making are essential to competitiveness
• Champions advocating assessment techniques which increase openness
• Building a structure and culture that encourages outward-facing behaviors and beliefs
• Recognizing that market & competitive pressures are recognized as dynamic
• Exploiting and building networks which link key stakeholders and interest groups

Section Conclusion

In the last 20 years research continues to show the competitive firms develop open learning systems.  Assessing the competitive environment cannot be done by one function or person.  Nor does it occur via isolated acts.  Strategy creation comes down to assessments at various levels, using different processes to processes environmental information.
This is much deeper strength: the competence for the whole organization to learn from its environment.  It means that environmental sensing is rendered useless if collective learning is not an embedded within the firm. Only then can such learning ensure the full implications of the firm’s environment be captured, understood and retained at all levels

Leading change

Of course it’s not just about making sure the environment is understood; the vital need is to ensure that the organization learns and acts on such analysis repeatedly.
The unpredictability of change has made the prospect of control remote.  Assertive action by itself is of limited value and may well be dangerous.  Paradoxically, it indicates that the gradual accumulation of more modest preparatory actions is all-important.  This includes assessing the political implications of a given strategy for instance, through problem-sensing and climate setting within the firm.  Effective leadership lies in the ability to shape the process in the long term rather than push through a single initiative.

“The days of ready, aim, fire have long gone, it’s been ready, fire, aim for some time. Few startups succeed – e.g. new restaurants close before their first anniversary. The change paradox is this “hurry slowly” – radical gradualism is a simple concept rigorously implemented.” Have you got your Change Shoes on?

Effective leadership remains what Manz defined 20 years ago:

“Combining different types of leadership influence over time as different needs arise”

Leading change does not imply one leader.  It means leaders need to reflect on the following:

• How much of my needs to control are bound up with my own insecurities and ego?
• How much control do I really need to produce the right outcomes?

• How well do I really engage those I lead? (If you think this is the same as participation, you are wrong!)
• How aligned are my people with Managing Competitiveness and where we need to go?

The key is “inter-reaction” when teams who are closest to the “coal face” can openly discuss wins and losses. The purpose is to take lessons learned and use them to repeat success and avoid competitive failure. Such outcomes are the foundation of “inter-reaction” that ultimately creates rewarding relationships.
Benefits of Inter-reaction

• Understanding more clearly original intent, what thought processes drove decisions, what outcomes resulted, their real and likely consequences. So, as much attention is devoted to the “Why” as the “What”.
• Developing better solutions because of understanding the reasoning used. So, future mistakes will decrease.
• Reporting outcomes of such reviews to make recommendations that increase others learning. So, avoiding mistakes and capitalizing on successes.
• Embedding regular open communication and knowledge-sharing nurtures strengths and remedies shortcomings that improve morale,
• Building distributed leadership and growing the next leader generation

Above all, inter-reaction creates the synergies needed to develop best-of breed customer value, competitive immunity and most of all great people. Successful inter-reaction ensures the team produces greater impact than individuals could do on their own.

Section Conclusion

Effective change leadership is incremental not spectacular.  It involves linking actions at every level in the organization.  Early and bold actions can be counter-productive.  The focus is on simultaneously creating a change climate and laying out new directions, but without actions being taken.
Sounds strange in this ADHD corporate world? Yes, but preparing for leading change is vital. Bold precipitate leadership is costly if there is no change climate of raised energy levels and articulated new directions.  This requires:

• Building change receptivity by justifying the needs for change
• Building capacity to mount the change
• establishing a change agenda which sets direction, visions and values

Then you can set up more direct mechanisms to lead change that can cope with the dualities and dilemmas to come.

Linking strategic & operational change

This linkage is both intentional and iterative.  The cumulative effect of different yet coherent acts of implementation can be immensely powerful.
Pettigrew & Whipps’s remains valid today is:

“translating strategic intent into operational form is not occur a single step, or a neat sequence; (because it has to) brake through ignorance or resistance…. enduring of aborted efforts or ….slow incremental phases which only then allow short bursts of concentrated action”

Leaders need to;

• Open up the organisation to the need for change
• Reach closure and reinforce the changes made
• Sustain the change’s pace and energy – momentum cannot be taken for granted
• Re-formulate a given strategy as new learning demands

Iterative, cumulative and reformulation-in-use of processes (from strategy to operations) builds competitiveness. So, as new knowledge and insights arise during implementation they have to be captured, retained and diffused within the organisation.

            People as Assets and Liabilities

The relates to the total set of knowledge, skills and attitudes that firms need to compete.  It requires a longer term process of creating successive positive spirals of development.
Specifically:

• Promoting and developing the role of knowledge as a key competitive and differentiating weapon.
• Facilitating learning  that generates, maintains and regenerates that knowledge
• Finding ways of exposing knowledge contained in processes
• Ensuring that the knowledge base of the firm matches changing competitive conditions
• Developing compensation and career planning to support the change

This process is about people collectively changing their knowledge, values and shared views of their company and its competition.  Learning does not preclude training, it simply goes further.  The fallibility of conventional training regimes shows that only between 25%-40% of the intended knowledge is ever conveyed.  The need is for a much broader approach which embraces the themes of structural adjustment, the use of “play” experimentation, the development of appropriate language and the reshaping of attitudes and values.
The second major requirement for developing competitiveness are setting up learning cycles of observation, reflection, hypothesizing, experimentation, action and “hands-on” experience.  Knowledge in the mind of the experimenters, then has to be codified and diffused within the organisation through behaviour and support.  Often overlooked is the crucial ability to shed outmoded knowledge, techniques and beliefs if new learning is to be deployed.  Crucial to do so faster and better than your competitors is a priceless competitive advantage.

Holding it all together

The most searching requirement in managing change for competitive success is holding a firm’s strategic thinking together, while reshaping and adjusting to new or emergent strategies demands.
The challenge of developing coherence in managing competitive change is developing the hearts and minds to act both inside and outside the firm.  Such coherence is not easily attained or maintained.
The challenge of lies in maintaining a clear line of sight between leaders’ goals and routine decisions.   Here are ten “rules for stifling innovation” based on Kanter’s world in 1983 – (yes, they still apply today and yes, they will stop you holding it together!)

1. Measure everything by its impact on the bottom line- who cares about anything else.
2. Keep everyone on their toes- fire people regularly, preferably at random.

3. Assume employees don’t have a private life.
4. Restructure often- it keeps people on alert.
5. Focus on shareholders only- other stakeholders don’t matter.
6. Treat employees as if they were a disposable commodity.
7. Provide bonuses linked to annual performance appraisals. It rewards the 10 top performers and demotivates everyone else.
8. Stifle innovation and challenges to the status quo.
9. Constantly raise performance expectations without adjusting the means to meet them.
10. Assume that a good pay is all it takes to keep people happy- we are all mercenaries.

   Networks

As Charlene Li put it in her book Open Leadership:

“…let’s face it information leakage is everywhere, your company missteps spreading over all the internet to all your customers, business partners and employees….an even if you don’t want their opinions they will be out there.”
“The question isn’t whether you will be transparent, authentic and real but, how much will you let go and be open in the face of new technologies. Transparency, authenticity and …being real are the by-products of being open”

This means that shared clarity and therefore aligning people will be ever more difficult to set up and sustain, especially if people don’t know what their organization stands for.
20 years on Networking has become a norm whether we like it or not. Coherence is only possible if we harness emerging technologies like social media to set up primary and secondary networks.  These networks build up vital complimentary assets to help aggregate competitive.

• Primary networks – those refer to relationships between a firm and others which are directly concerned with generating new knowledge bases.

• Secondary networks– wider collection of relationships which affect the firm’s process of generating and altering its knowledge indirectly

Network relations can lead to competitive advantage through co-ordination.  Not only can they strengthen given value chains, they can also contribute to changing competitive position of firms and industries.  For example, the ability to co-operate.  Co-operation can be learnt including; local cultural and market conditions, techniques of partner relations development, negotiation skills related to joint ventures and structural arrangements
specific to collaboration.  These collaborative competencies are truly invisible assets which aren’t easily copied by the competition
The most complex of the five factors.  In many ways the requirements for coherence arise from the demands of the other four.
Coherence in across the treatment of customers, suppliers, distributors and collaborators the ability to manage a series of interrelated and emergent changes.

Final Thoughts

Findings of researchers and gurus of the 80’s and 90’s basically got it right. Many of their clarion calls for change in how we lead change have stood the test of time. My question is, why haven’t we learnt and implemented more of their gleaned wisdom? Some thoughts:

1. The battleground still belongs to those who have mastery of the traditionally quantitative aspects of keeping score. So, the level of nasty surprises continues as competitors do the unexpected. As long as we cling to deducitive reasoning we will continue to have sleepless nights. Managing uncertainty relies on a balance of inductive and deductive reasoning. The greater the uncertainty the more the analytical pendulum swings to the inductive.
2. Too much reliance on deductive analysis and prediction means we lean toward maintaining silo based thinking. Think of it this way. Deductive analysis favors specialist techniques which resides in functions like IT, HR Finance and so on. It also reinforces “right answers” over “possible options”.
3. Time and again strategies fail because people are not involved in both strategic planning or implementation. The number one reason surveyed executives cite for strategy failure is people.

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