Financial Daily from THE HINDU group of publications
Tuesday, Nov 02, 2004
Corporate - Insight
Forces driving the New Economy
Nevertheless, after the dawn of the 21st century, it has become fairly clear and certain that the traditional methods of business strategy will no longer work. Running a business today is harder than ever before, because of the speed and complexity of change in the New Economy. The nomenclature "New Economy" does not simply connote the hi-tech sector or the dotcom bubble; it refers to the complete and comprehensive change-process covering the world of business, its rules and rudiments.
To create a winning strategy, people in an organisation must understand the forces driving the New Economy how they impact business, and how to utilise them to their best advantage. What is more important is that this understanding must be obtained, before the competition gets on to it. The corporate chieftain must take the initiative in this issue, because all other employees look up to him for guidance to understand the competitive scenario. A major force in the 21st century is the Internet. It connects people and promotes globalisation. Conversely, globalisation pushes people to connect and do business via the Internet. On the one hand, Internet is simply a tool. It happens to be a fast medium of disseminating information from one desk to another, across the town, throughout the country, and around the world. On the other, Internet relentlessly and ruthlessly eliminates inefficiency.
Internet provides everyone with equal access to a wealth of information. It is this transparency which is behind the shift in the power base.
Trade and commerce have the onus of responsibility to deal with the future of society compared to any other avocation. Strategy offers the ways and means by which companies can create and procreate that future. To achieve this objective, the corporate must step out of its conventional static planning model, and adopt a daring and dynamic disposition.
This is particularly relevant in the contemporary context, wherein shifts and discontinuities are the order of the new economy. In the words of Willie Pietersen, the time has arrived for Reinventing Strategy (the title of his book), as a process to generate continuous self-renewal. The ultimate challenge is to build an organisation which constantly learns new things and translates them into breakthrough strategies.
Hence, finding methods to transform companies into adaptive organisations creating in them an ability to respond intelligently to an ever-changing environment has become the top priority. The focus is on foresight the art of forecasting the always uncertain future and going even beyond that, by converting that foresight into insight, which is the faculty to understand the present business environment better and faster than the competitors, so as to gain a crucial strategic edge over them; and finally, producing a practical and pragmatic blueprint to turn that insight into an action programme.
Some companies flounder under the fallacy that change is a one-time event. Such a point-to-point movement may have been in vogue and valid in the traditional economy, but it is lethal in the new economy. The management is, now, exposed to disruptive technologies, perpetual uncertainty, and a demand for speed and innovation. The slogan on the signpost is clear, and reads, "Change or perish".
Commencing in the last quarter of the last century, innovation and development of new technology has been taken out of the realm of serendipity, but brought within the purview of a conscious action plan and programme for regular incorporation. "As a result, technical advances no longer happened randomly, but could be systematically planned. In the twenty-first century, economic leadership would become a matter of systematic investment in R&D to deliberately invent new technologies." (Lester Thurow)
In the same way, strategic innovation must become part and parcel of a premeditated campaign. It is far too important to be left to any ad hoc initiatives or chance endeavours. Just as companies invest in and budget for R&D activities to spur technical progress, so also they ought to create space for spearheading strategic improvement. Strategy determines how an entrepreneur will use his scarce resources in the best possible manner. Strategy is the intelligent deployment of limited resources. If resources were unlimited, then there would be no need for any strategy. In this context, Willie Pietersen suggests a classic metaphor. Chess is a typical game of strategy. The players begin with identical situations the same number and assortment of pieces, arranged on the board, in the same and identical way. Nevertheless, one player gradually manoeuvres to capture control of more and more space on the board. Eventually, he outwits his opponent by checkmating the king. In the language of business, the winner has used his resources carefully and effectively. In other words, he has employed the winning strategy.
But this analogy can be pushed only this far, and no further. In chess, the goal is to preserve the resources especially the king whereas in business, the resources must be employed and leveraged to create value.
The volatile and unpredictable business climate confronting companies today makes a demand on their capacity to create a band of workable and winning strategies. The premier challenge is to build and sustain an adaptive enterprise. By definition, an adaptive enterprise has the inbuilt ability to renew itself, over and over again. To win once is not enough; the company must be able to repeat the performance on a regular and recurrent basis.
What are those few things which an organisation must do to win, and keep winning, in this turbulent environment? How to galvanise a company to make things happen faster and better than its competition? Specific answers to these questions may vary from company to company. But there are certain common elements and basic parameters, which Willie Pietersen refers to as "Killer Competencies". They are: Insight, focus, alignment, execution, and renewal.
The competition for a superlative insight is, perhaps, the most decisive battle today. In a world of devastating speed and complexity, an infallible attribute which a company needs first and foremost is the ability to make sense of the changing environment.
Strategy must create an intense focus on the right things. "You can do anything. But you cannot do everything." (David Allen) In order to make an intelligent and strategic choice about how and where to deploy the available scarce resources, it is vital to translate the insight into an accurate focus.
The company must demonstrate a clear propensity to align behind its strategic focus, all the other systems in an organisation such as measurement/reward schemes, organisational structures, company policies and procedures, corporate culture, and so on. This is a monumental task for the top management, but without success here, however, no strategy can win.
The next step in this process is the competence to implement the corporate strategy, fast and first. Speed in implementing the strategy confers the advantage of increasing the distance between the company and its competitor. Further, this provides an opportunity to anticipate the next change earlier than others.
Finally, the company will need the stamina and genius to go through this process over and over again. The real challenge is to create an ongoing cycle of learning, focusing, aligning, and winning. The competence to continuously renew the organisation separates dynamic companies from those doomed to extinction like the dinosaur.
(The author is a freelance writer.)
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