“In a world of overlapping industries,” says Jeff Callander, Executive Fellow of Henley Business School, “disruption and uncertainty are the new kind of normal.” It’s more important than ever for companies and their strategic advisors to widen the strategy lens on the broader business operating environment.
“Someone might be stealing your lunch right now!” says Jeff. “We’ve seen this precedent over and over since iTunes came into the music industry causing a massive overnight disruption. In this case it was a complete outsider, who said we know a way to do this differently.”
Jeff goes on to talk about other new business models like Airbnb, which began with two guys with space in their room who couldn’t make rent. “They’ve not only transformed the travel and hotel business,” Jeff explains, “but their model has cascaded into a growing new industry of collaborative consumption ideas.”
At Google Earth, 20 years of research is set to be made obsolete by the rise of electric cars, with sophisticated car cameras set to be the next big thing in landscape mapping. “It won’t be long,” Jeff predicts, “before Volkswagen will be selling real time information to transport ministries on the location of pot holes on city roadways.”
Strategy can be a leadership tool
So, how can we avoid becoming someone’s lunch? Strategy needs not only to be an analytical tool, it can also be a leadership tool. Companies need to work harder to align strategy with the market conditions. Jeff cites Netflix as a success story. “They began as a DVD distributor and the rise of streaming could have put them out of the game, but Netflix knew their customers and their market and had the disruption factored into their strategy early.”
This is where scenario planning comes in. No one in the oil industry had foreseen oil prices dropping to under 50 dollars a barrel but they went all the way down to under 25 dollars. “There was no contingency plan in place,” says Jeff. “Now the industry is doing scenario planning for price dips as low as 12 dollars.”
Are you overpromising and under-delivering?
Finns may love hockey and thus hockey-stick growth projections, but another common failure in today’s strategic-planning is the hockey-stick forecast showing only a brief dip before soaring up into a confident growth projection. “These typically overpromise and under-deliver,” warns Jeff. “Over the years, the unrealised hockey-stick forecasts string together to produce one of the most common charts in strategy planning – the hairy back!”
Is your data out of date?
Strategy planning needs not just to be an annual thing either. The shelf life for information is getting shorter and shorter. Jeff recently worked with a client company that was eight months into their annual strategy with still no strategy in place. “Separate divisions delivering on narrow visions based on convenient inward looking plans,” says Jeff, “but in the meantime, there’s a good chance the industry has moved on.”
Speed is about velocity and direction
Strategy has to design in agility as a constant. Companies need to be agile and ready to operate in high-velocity mode. But Jeff reminds us that velocity in the pure sense not only means speed but also direction. Setting up market surveillance groups is a good way to find direction, as well as linking, validating and updating your business strategy information as often as possible.
Most of all keep questioning. Know where you’re going is important but also looking back to where you’ve been. “Don’t bury your hairy backs in the bottom drawer!”