Getting the Growth Strategy Right: In industries ripe for supercompetitors, adopting the right growth strategy is key

Say you’re a company looking to grow. You do not just want to be big. You want to dominate your industry. You are not just looking to compete. You are looking to be a supercompetitor. What does it take to make that leap?

In a recent article on the evolution of supercompetitors across various industries, three Kellogg School professors—Thomas Hubbard, also Senior Associate Dean of Strategic Initiatives, Paul Leinwand, a senior partner with Strategy&, and Cesare Mainardi, CEO of Strategy&—argue that becoming (and competing with) a supercompetitor requires new ways of thinking about strategy. Firms must adopt a laser-like focus on their capabilities, or the specified outcomes relevant to their business that they can consistently deliver.

“It’s a different internal and external analysis than people have done in the past,” says Hubbard. The new analysis requires forming a distinct identity, staying coherent, seeing industry-wide, and finding enduring advantages.

1. Know Thyself

“For too long, the strategy question has been, ‘where should we grow?’ as opposed to ‘who are we going to be?’” says Mainardi. Too many companies today simply try to “benchmark the broad market—they look at what others do and then they replicate or try to match those benchmarks,” he argues. This strategy tends to put too much emphasis on things that are important to other companies and not enough on a company’s own unique strengths. “But if you know what you do incredibly well, if you have a strong sense of identity as a company, then you can look at these different market opportunities and get it right in terms of where you will attack. Everything you do day in and day out will align with that strategic intent.”

Thus, any analysis should begin with capabilities blueprinting to provide a clear-eyed assessment of the company’s most vital systemic strengths. “We’re not talking about a list of fifty capabilities, but of three to six put together into a capabilities system” where they operate in a distinctive, powerful, and mutually reinforcing way, Mainardi says. The resulting self-knowledge comes in especially handy during periods of disruption—the regulatory shift, the new game-changing technology.

“Everybody’s talking about dynamic strategy, agility, and chasing opportunity,” Mainardi says. “That’s all well and good. But if you aren’t operating from a base of who you are, you will likely not realize what the real risks you’re facing are because you aren’t focused on your core strengths, and therefore you will be less clear-minded about how best to respond.”

2. Stay Coherent

The flip side of being clear about what you do well is recognizing what you do not do exceptionally well, cannot do well, or should not be doing at all.

Hubbard describes traditional growth strategies as akin to “letting a thousand flowers bloom” on the front end and then cultivating what succeeds while attempting to clean up what does not on the back end. With this mindset, it is no wonder companies become incoherent fast.

“Having well-honed, scalable capabilities provides for the growth potential of the business,” Hubbard says. “So one of the first lessons is orienting your business around the set of key capabilities that you have.” This means making some difficult decisions, even around profitable aspects of the business.

“You might have a profitable business that is not aligned with your capabilities,” Hubbard says. “You might look at selling it off to another firm whose capabilities are a better fit. You’re probably going to get more in that sales price from the business than the profit stream from that business looking forward.”

Consider supercompetitor General Electric. GE has had great success with businesses that fit most clearly into their capabilities systems. These include include businesses—such as engineered products—that are heavily reliant on management techniques including Six Sigma and Lean. “When GE started to be great was when they divested a whole bunch of businesses that didn’t fit with their mantra of being number one or number two in all these different markets,” Mainardi says. “That’s the magic of an internal view combined with a market view.”

3. Look Outward

Once an internal analysis gives a company a clearer look in the mirror, the firm should survey the industry to gain a better picture of its competitive makeup and opportunities. It is this analysis that determines to what extent the industry’s competitive logic encourages competition on highly scalable capabilities, making it ripe for supercompetitors.

So which companies—in which industries—will make the leap?

“If a firm has a set of key, well-developed capabilities that create value, it is beneficial for the firm to orient its strategy around those capabilities, focus on businesses where those capabilities create value, and essentially narrow its focus to that,” Hubbard says. “Its growth potential is limited by the extent to which the company develops those capabilities and the extent to which those capabilities are scalable.”

Some industries are going to have an inherently difficult time offering scalable capabilities or making scale relevant. Take the dry cleaning industry. Even if a dry cleaner knows what it does well, the industry’s technology is readily available and affordable to many small shops, so local businesses can effectively compete. “No amount of investment is going to allow you to be a global dry cleaner,” says Mainardi.

At least for now. “What’s interesting is when the situation in an industry changes,” Hubbard says. “This is a situation where circumstances present a growth imperative and the best companies are able to recognize it, react, develop, and compete.” This is often where supercompetitors arise.

In industries where capabilities are, or are on the verge of becoming, easily scalable, growth can be fostered internally—via investment that directly builds capabilities systems—and externally through investment in mergers and acquisitions that will thrive in those systems. Strategy& has found that acquisitions narrowly focused on capabilities outperform non-capabilities-related M&A in total shareholder returns by about 12 percentage points over two years. “That means that over time, companies that are coherent and consistent this way will have a leg up over everyone else just by acquiring what fits in their portfolio,” Mainardi says.

4. Find Enduring Advantages

Finally, firms need to stay focused. Once a company has identified and refined their critical scalable capabilities, it must build capacity by directing capital investment toward those capabilities.

In a Capabilities-Driven Strategy, a firm should first consider its own core. What would happen, companies should ask, if we doubled-down on what we do well? Walmart is an example of this “sharpening the pencil” strategy, having achieved significant growth by improving both in-store assortment and making a famously lean supply chain even leaner.

Next, companies should identify where the capabilities systems will reward them in their markets and dedicate resources there. Apple, for instance, gauges consumer need and brings easy-to-use products to consumers through its marketing prowess.

Third, companies can consider international expansion: How do a company’s capabilities play across geographic markets? Frito-Lay used its capability to operate highly responsive product-feedback systems to become essentially unbeatable in the salty-snack market in the United States; it then used that capability to foray into Mexico.

Building a capabilities-based strategy differs from executing a short-term growth strategy in that capabilities systems are slow moving, and they outlast the industries that they serve. They are also very complex. “It’s not an easy thing to do,” says Mainardi. “It’s this messy, complicated combination of people, processes, systems, know-how, and tools all coming together. You can’t just go buy that. You have to build it and that takes time. The good news is that once you’ve built it it’s a true advantage, because nobody else can go buy it. It’s at the heart of real differentiation.”

Artwork by Yevgenia Nayberg

Go to Source

m4s0n501
Tags:

Ambidextrous leadership and team innovation

Leadership & Organization Development Journal, Volume 36, Issue 1, March 2015.

Purpose This paper reports the first empirical test of the recently proposed ambidexterity theory of leadership for innovation (Rosing, Frese, & Bausch, 2011). This theory proposes that the interaction between two complementary leadership behaviors—opening and closing—predicts team innovation, such that team innovation is highest when both opening and closing leadership behaviors are high. Design/methodology/approach Multi-source survey data came from 33 team leaders of architectural and interior design firms and 90 of their employees. Findings Results supported the interaction hypothesis, even after controlling for leaders’ transformational leadership behaviour and general team success. Research limitations/implications The relatively small sample size and the cross-sectional design are potential limitations of the study. The findings provide initial support for the central hypothesis of the ambidexterity theory of leadership for innovation. Practical implications The results suggest that organizations could train team leaders’ ambidextrous leadership behaviors to increase team innovation. Originality/value This multi-source study contributes to the literatures on leadership and innovation in organizations by showing that ambidextrous leadership behaviors predict team innovation above and beyond transformational leadership behavior.
Go to Source

No tags for this post.

From relevance to relevate: How university-based business school can remain seats of “higher” learning and still contribute effectively to business

Abstract

Purpose – The purpose of this paper is to tease out the real value-adding contributions university-based business schools can make to the business community and to society at large without compromising in any way its own ethos of academic rigour and scholarship in seeking knowledge and understanding for its own sake. Design/methodology/approach – This is a discursive discussion piece that excavates and examines the philosophical and historical underpinnings of universities as places of “higher” learning with a view to interrogating and clarifying the unique role university business schools can play in straddling the university/industry nexus. It draws from the author’s extensive hands-on experiences in business, from the author’s philosophical interests honed in academia, and from the author’s wide-ranging experiences of being involved in bespoke executive education provision for senior business practitioners in large multinational corporations. Findings – The paper concludes with the view that paradoxically, university-based business schools must resist the temptation to capitulate to the demands to teach only what appears immediately “relevant” to the business world in order to be actually useful to business. Instead, they must rigourously seek to expand horizons of comprehension amongst students and business executives through the process of relevating the seemingly irrelevant. This way they can genuinely help prepare students and business executives for the challenges and exigencies of a dynamic and fast-changing world. Research limitations/implications – The paper points to a need for reframing and refocusing the aims and agenda of management education such that greater pedagogical priority is placed on refining perceptual sensibilities and expanding horizons of comprehension over that of content-knowledge dissemination. Practical implications – Business schools will have to revise their curriculum from a conventional emphasis on teaching functional business disciplines to include drawing from the wider humanities fields of study in order to emphasize the cultivation of aesthetic sensibilities and a deeper awareness of underlying global trends, patterns of relationships and social forces shaping business priorities and perceptions. Social implications – An enhanced sensitivity and awareness of the interrelatedness of socio-political, cultural and economic contexts, and managerial situations leads to more effective executive decision making that is economically sustainable, ethically informed and more attuned to the collective common good. Originality/value – There has been much debate surrounding the rigour/relevance issue within business schools. This paper shows that this false distinction is created by an insufficient examination of the underlying commonality mutually shared by both the very best of rigourous scholarship and the very best of business practices.
Go to Source

No tags for this post.

CO-OPERATION – THE MISSING VALUE OF BUSINESS EDUCATION

Abstract

Purpose – The article demonstrates that co-operation is a vital behavioural skill that should be developed in educational systems, particularly business and management programs, because it is an intangible factor that boosts productive output.Design/methodology/approach – The article explains why cooperation is an important intangible factor for organizations and the larger economy. It recommends the development of educational designs to remediate the pedagogical lack of focus on the cooperative disposition. Findings – Co-operation is contingent on trust – an indispensable factor to engage in distant relations, accept rule of law across nations, and confer in intermediaries the authority to arbitrate unresolved differences between organizations. In other words, without cooperation, people within organizations commit themselves to parochial concerns, inhibiting efforts to combine resources towards a collective goal. The lack of a cooperative attitude is not destiny – it can be forged through careful educational designs and organizational strategy.

Research limitations/implications – There is little empirical data available to measure co-operation in a diverse environment and co-operation is an intangible concept that is difficult to pin to specific organizational habits. The concepts developed here based on broad social science data would do will to be tested in an empirical framework at the micro level.Practical implications – Low co-operation arises in an environment which does not foster trust. Management might inadvertently reward low organizational capacity by not evaluating cooperation and monitoring narcissism. Recruiters need to adapt recruitment strategies that pinpoint individuals capable of managing the specific cooperation needs of situational organizations, especially in diverse situations. A successful managerial education program will target training that optimizes thoughtful and sustainable co-operation.Originality/value – Formal management training to instill a thoughtful sense of co-operation would complement the current emphasis on teamwork and leadership. Without the moral and methodological goal of being co-operative for the greater good, organizations waste human resources and fail to reap benefits from collective productions.
Go to Source

Tags: ,

What’s in there for me? Individual readiness to change and the perceived impact of organizational change

Abstract

Purpose – The readiness level may vary on the basis of what employees perceive as the balance between costs and benefits of maintaining a behavior and the costs and benefits of change. The aims and objectives of this study is to examine the concept of individual readiness to change and the impact of perceived impact of organizational change on its relationship with personality and context characteristics. Design/methodology/approach – 183 employees of a technological company based in Greece completed a questionnaire. This company was implementing a large scale restructuring change project. Findings – The results show that perceived impact of change mediates the relationship between the pre-change conditions and work attitudes and individual readiness to change. Practical implications – Employees who are confident about their abilities they experience high levels of readiness to change and therefore managers may want to examine this variable when selecting people for jobs entailing change. Creating a climate of trust and enhance positive communication also have an influence on individual readiness to change. Satisfied employees are more ready to change because they weigh the positive consequences of changing as significant and therefore decide to embrace change. Originality/value – This research addressed the need for a more person-oriented approach in the study of change, exploring the concept of individual readiness to change and the perceived benefit of this change.
Go to Source

No tags for this post.

On the origins of the worldwide surge in patenting: an industry perspective on the R&D-patent relationship

This article decomposes the R&D–patent relationship at the industry level to shed light on the sources of the worldwide surge in patent applications. The empirical analysis is based on a unique data set that includes five patent indicators computed for 18 industries in 19 countries covering the period from 1987 to 2005. The analysis shows that variations in patent applications reflect not only variations in research productivity but also variations in the appropriability and filing strategies adopted by firms. The results also suggest that the patent explosion observed in several patent offices can be attributed to the greater globalization of intellectual property rights rather than to a surge in research productivity.

Go to Source

Tags: , ,

Management Learning, Performance and Reward: Theory and Practice Revisited

Abstract

Purpose – Purpose: This paper explores the extent to which organizational learning is recognised through performance management systems as contributing to organizational effectiveness and competitive advantage.

Design/methodology/approach – Methodology: It reviews several pieces of research, employing a wide range of methods, including: content analysis of managers’ reflections; questionnaires completed by managers and mentors; a large scale survey involving ethnography, interviews and questionnaires and; analysis of documents from professional bodies and management delivery centres.

Findings – Findings: Genuine integration of individual and organizational goals or transfer of learning from the individual to the organization is not evident. Few qualitative measures of organizational performance are employed. The impact of metrics such as IiP or EFQM on organizational effectiveness is nor discernible. Management Learning and Development is rarely measured even when it is encouraged by the organization. There is a clear divide between research, teaching and learning and, workplace practice. Performance management systems create perceptions of unreliability and inequity.Research limitations/implications – Research implications: Espousing the value of learning and learning to learn, measuring them accurately and rewarding them with meaningful changes to working life can only improve organizational effectiveness. Research into the few organizations that have successfully embraced triple loop learning in their development of managers may offer a template for transformational learning to sustain competitive advantage.Originality/value – Originality: Management Development processes have been successful in developing individuals but less successful in achieving organizational development. This paper offers new insights into that gap and the omissions in the metrics by which performance is measured.
Go to Source

Tags: , , , ,