Understanding the new frontiers in corporate strategy and innovation was a key theme University St. Thomas Spring Seminar focusing on Risk Leadership. The event was hosted April 25, 2018 on the UST campus located in downtown Minneapolis Minnesota. The event featured keynote speakers and several breakout tracks focusing on Risk Leadership and Risk Managment. The attendees were primarily senior practitioners from twin cities corporations, as well as, SMEs from consulting firms and university students are in the UST Risk Management programs.
After many years of significant invest, Microsoft has announced that Windows 10 Mobile will no longer be a focus for the company. Though, they will continue to release bug fixes in the near term. Microsoft was early in the mobile space with its CE operating system but was caught unprepared for the launch of Apple iOS in 2007 followed by Google Android in 2008.
At this time Microsoft has not achieved any appreciable market share:
The device partners did deliver good equipment, but at the center of the failed strategy was the target focused on chasing a large volume of applications at the expense of all quality. Each year excessive amounts of incentive money were poured into developer incentive programs, literally buying apps for the app store, there was no emphasis placed on quality. So the store quickly earned a bad reputation. The advertising platform was also a crippling factor in not being able to adequately support apps that were popular.
The missed opportunity was in not leveraging Microsoft’s enterprise strength. Microsoft was already starting far behind Apple and Google. By blindly chasing a parity play of consumer applications they were guaranteed to always be trailing and created no real incentive for a consumer to switch platform. A consumer app based store was always a long-term play that could have developed over the long term. If Microsoft could have built the 10 – 20 most critical enterprise applications that supported back-office integration, dashboards, reporting, and integration into critical 3rd party enterprise software it may have become the indispensable device for all corporate employees. It could have been licensed in packages with existing enterprise software. It may have created a market of its own that everyone else would struggle to catch up.
Now history has been written, goodbye windows mobile….
As the speed of business and disruption of innovation increase so does the rate that long-standing companies are being replaced in the S&P500. The rise of the internet is an example of a game-changing disruption that has seen the rise of many new business models like Amazon or Netflix. Traditional companies, not used to change as a core competency of their business, have struggled to adapt and are often left behind before they even understand the shift that has occurred. By the 1950s, many companies would last 50-60 years in the S&P. In that past decade, that number has dropped to around 15-17 years. Currently, the churn rate is around 75% with today’s S&P being fully replaced by 2030.
Source: Professor Richard N. Foster, co-author of Creative Destruction
Apple has enjoyed access to the Chinese market in where other major use companies like Facebook and Google have been blocked. Now China is taking a closer look at how Apple is competing within its market. Developers have enjoyed building local apps for the Chinese markets. Now threats are coming from multiple sides. A law firm representing several dozen developers have asked the Chinese government to look to see if Apple is violating and anti-trust laws or regulatory pricing in the app store. Large internet giant company, Tencent Holdings, has also had public friction with Apple. Local device manufacture’s devices are scavenging market share as Apple has struggled to meet the demand from waiting consumers for new iPhones. This increased scrutiny has caused Apple to continue to shift its business model towards services vs. a primary focus on devices alone. If the Chinese government intervenes with new regulation or penalties to Apple it could set a new president for US companies to compete in China’s markets.
I was one of twelve members invited to a meeting with a top innovation consultant at the Pentagon. His mission was visiting cities in the USA meeting with innovation leaders and defense contract companies. Both my work in innovation at Microsoft and the University of Minnesota provided rich content for the discussion.
The Pentagon / DOD is interested in several key topics:
What are the current challenges and improvements that need to be made to the defense contracting processes to speed innovation
How can the federal government say more plugged into innovations across all market sectors
What are future trends in innovation from a corporate, government, and academic perspectives.
The initial topic delved deeper into the challenges MN defense contractors are having in the current system. Much of the difficulty centered around funding programs not being efficient or timely enough to support the speed of business and innovation. Many of the processes and systems are not well integrated and communication and feedback is poor throughout the process.
The second topic I presented on the work of developing innovation ecosystems and the best practices we where finding looking at innovation center development around the globe. This model would provide both the portfolio level data of innovation by sector that could help map areas of federal programs to private sector advancements. It would also proved a platform in which federal programs could fund prioritized areas of innovation through the network of centers & services they provide.
The discussion also included dialogue around future trends. My role at Microsoft, as a strategy advisory, across so many companies and international projects provided me an opportunity to share many of the business and innovation practices I had scene in the past decade. There are many cultural differences that span how innovation in both the public and private sectors. Also is the nature of global business competition and the diversity of approaches and funding that other nations must explore in order to compete against today’s leading companies. One of the key aspects is the work we are doing in the area of co-opition and how that model of collective innovation both accelerates the scale of innovation through support of a larger ecosystem of services, but also the competitive advantage individual companies still can attain while participating in more collaborative models. Much of this discussion has factored into the designs of the future innovation centers and regional ecosystem models being current proposed for development in North America.
This was the beginning of a much larger dialogue that has continued with our initiatives as federal agencies.
Even the best Strategic Planning methodologies can be at risk of common pitfalls when it comes to execution. I’ve been involved in both help corporation evaluating methodologies and building out their internal practices over several decades, but this experience was really rich in seeing how they executed their plan. The University ran a really deep internal strategic planning workshop to chart the course of new an innovative business services in a mission to become more directly involved in the business community. I was very impressed with the format, methodology and rigor put into a week long process, with follow up on a reoccurring basis over the weeks as execution began. The sessions where very collaborative combining internal faculty & staff, external practitioners, and inviting historic leaders to return to share their insights into the business. The sessions where well facilitated featuring both prepared materials that where designed for interactive and direct collaboration. An example of this is the image on the post featuring a historical timeline of the business where historical speakers and team feedback could be recorded as the session was presented. As the days progressed, team members and new employees where integrated into the format to both present, facilitate, and run breakouts creating a deeper vesting into the process. The days progressed covering the setting of goals & objectives, exploring new opportunities, and detailing out the investments and impact to the organization to pursue traditional and innovative paths forward. Each days artifacts, scribe notes, and team voting scores where digitized into the online repositories for continued reference and to historically be made available for future governance points when the need to review the inputs and context into decision making processes. While the process and methodology where impressive, many learnings and insights jumped out going through this exercise that I wanted to share.
Best Practices: ( What was done well in this session ) 1. Spend the time doing strategic planning with the entire leadership team ( and even better the entire team at planning points.) While this is quite an investment the benefits can be extraordinary in terms of the team building, alignment and the insights the full team can bring into the effort. 2. Invest in covering the history of the organization. Look at the politics, leaders, funding, results and general economic factors that shaped the formation of the business and how those factors are still shaping and / or constraining the business today. 3. Methodology matters. You have to build the capability to plan effectively. The process, artifacts, facilitation and knowledge management all matter. The style really effects how well the team collaborates and participates. It is also important to note that planning and execution never stop. A formal strategic planning session is just the kickoff to ongoing and continuous planning and adjustment to driving effective execution. Don’t leave the strategic planning session without an ongoing plan for continuous planning and reflection. 4. Ongoing planning and capability development require metrics and measurements. Track on how well you plan, how many iterations it takes to prioritize and build out the execution plans. How aligned or desperate team voting is during the process, etc. How many times does the plan pivot throughout the year? Build trend lines to how well the organization can plan. Don’t leave the strategic planning session without a capability and metrics plan to further the group’s capability. 5. Build a strong external communication plan to share your strategic plan for the greater organization and include representatives outside the group in the sessions and ongoing methods of managing the execution. This requires a strategic relationships plan and communication plan across the larger organization and identify key intervention points for senior management to course correct if needed.
Pitfalls & Learnings ( Where execution did not follow the plans )
1. Decision making: While the methodology and team voting were very strong in the formation of the plan, the leadership completely failed to ratify decisions and seek alignment for the upper management of the larger organization. This completely fractured the execution of the plan with team members all heading off in different directions based on what they thought were the agreed directions from the planning sessions.
2. Group dynamics: After the amazing team building and planning sessions, the fact that no decisions where made left the team without out shared values around priorities and goals. The hierarchical structure also prevented any level of empowerment leaving the team without direction or empowerment to move on their own. This eventually tore the team apart as different groups were moving in separate directions, based on assumptions, and not supporting each other. People’s expectations where being violated at a basic understanding level. This was greatly compounded by failing to have continuous planning sessions where the team could align and readjust plans and commitments. The team proactively attempted this early on, but the effort was continually confounded by the lack of decision making. As team dynamics fell apart and friction grew, the team meetings were abandoned and replaced with 1:1 meetings. While these had tensions, they resulted in private conversations and individual plans that continued to draw the team apart and management never reconciled the goals, promises, and agreements they made with individuals.
3. Alignment with upper management: the team’s leadership failed to execute the communications plans to senior organizational management and with the board. This left the team greatly exposed and without any air-cover to execute the plan. While there where routine status meetings, as execution failed to produce results, status was white-washed. Another pitfall was failing to have the metrics in place to trigger an intervention point of senior management and the board to engage directly with the team to see how or why operations were suffering. Much less senior management never seeing the original plans and metric evolve from the initial session should have been an obvious red flag. If you truly own developing a strategic plan, you have to also establish the conditions where intervention points are critical and usually in 30 – 90-day increments. The sooner you can correct the plan or the support needed the better vs. driving the team into the ground with a failing execution.
4. Year Two: Given such a robust strategic planning process was conducted in the first year it was amazing to see both the complete lack of replacing and then the entire omission of planning at the kick-off of the second year. The burning red flags of failing to meet metrics, terrible team dynamics, and lack of decisions would have been time for an intervention and investigation to realign execution to the plan. By this point, team members are leaving and team moral had plummeted. If all of these red flags didn’t trigger a response, then it displays a need for HR to be integrated into strategic planning. At some point, if none of the conditions of the plan, execution, metrics, reporting, and failing performance reviews should kick HR into action to engage the team in a supporting role. Rarely is HR been included in the process. This is a key opportunity to have personnel and talent managers plugged into the goals of the organization but to also provide a fail safe to the many layers of management that can misfire. Performance reviews should also be a key time when HR checks into the team to see how they would evaluate how well planning and execution are functioning in their departments. What a critical safety value for the organization and senior leadership to put in place to keep tuned in, especially if they are too busy fight fires to genuinely pay attention themselves.
5. Leadership & Management: The road to failure is also paved with good intentions. This team was filled with good people and good intentions along its entire journey. Its organizational structure was very hierarchical with a complete lack of management and leadership talent at the top. This created an enormous communication and visibility barrier to senior management. When putting a team together, realize the difference between management and leadership. Teams require both, but they are very different. Lacking one or both will clearly doom the effort. Most important for senior management is to be sure to have a communication plan that encompasses both the leadership and the execution members. If you are not directly talking with the execution team, you really do not have complete status – period.
Take Away 1: The Value of Organizational History – Remember this post began by calling out the act that the strategic planning process began with deeply reviewing organization history. Now that this team’s management have all been removed and the team is rebooting, would they revisit their own recent history to glean these lessons learned? Organizations must be able to embrace their failures and leverage the insights to initiatives that have not succeeded. As organizations are being required to be more innovative and agile they need to be able to fail faster and then learn from those attempts. Usually, the insights are critical to the success factors going forward and need to be captured, documented, shared and actually celebrated as effectively maturing the organization.
Take Away 2: Think beyond managing the planning process to the team planning for the capabilities around metrics, communication, and governance of the execution model the planning really needs. This is at the hard of enterprise capability building and management.
A Joint Venture can be a strategic and required method for companies to enter international markets. For the past several months we have been working with North American companies looking at employing that method strengthen their manufacturing and supply chain options in southeast Asia. The engagement started early in the business lifecycle where some potential partners had been identified, but the entire process of defining the business model, negotiation, and overall planning was yet to be pursued. Determining the right type of partnership would be critical, because it would have long term implications around the development and integration of both organizations.
The work broke down to four major areas:
Looking at the reasons and motivations behind pursuing the joint merger. Knowing the goals, both short term and long term, was critical to the conversation. There are a large number of options in SE Asia when it comes to manufacturing and supply chain partners and the long term goals can quickly rule out attractive short term options. Looking at differences between China and Thailand where contrasts in trade offs and benefits. Both in terms of the labor force, skill sets, and government policies, but also from a supply chain perspective in terms of long term stability. Thailand became the preferable country to seek partnership even in the face of its labor shortages. Supply chain preferences also indicated Thailand as a better option based on government position and stability.
Structure of the partnership proved to be the most complicated area of design. Each company at the table is looking to protect their interests and maximize overall value of the partnership. Fair practice would seem to be the golden rule, but yet not everyone is bringing equal value to the table in many cases, but that doesn’t suggest that gouging is an acceptable behavior as well. The best discussions look at combining assets to maximize the new business model. In most cases the larger opportunity features many “sides” to the business. Whether that is in the designing, building, shipping, selling, supporting, and etc lifecycle of a new product or services. If each partner can see the upside of his side of the business, then they have a genuine vested stake in making that part of the model work, grow, and succeed to the benefit of all. Large partners, who may the capability to do several parts of the model, might want to consider the benefits to let a smaller partner focus on it or the regional benefits a partner may have in a new country of business. Sharing and making the pie bigger is a much better strategy overall. One aspect to consider is that as business grow, age, decline, and pivot. All partners play different key roles. The smallest partner of the first union, may be the key to the next pivot. So seeking pure advantage in the first venture is a short sided perspective that will weaken future deals. Once the roles each partner is playing is defined, then it is possible to move to the next level of discussing investments, expenses, revenue, and equity in the venture.
Building with the business model in place a more detailed look at operating processes can be defined. These are critical success factors to the overall operations of the new venture. Both organizations will need to create new internal capabilities for direct collaboration and potentially for operations in international markets. Planning, Governance, Decision Support, and Knowledge Management will all need to be integrated across corporate boundaries as well as escalation paths. This should be considered a learning effort that will need to iterate. New forms of measurement will be required and a willingness to share data must exist between all partners. Process and measurement lays the foundation for developing trust over time through consistent behavior and honoring commitments. There are many types of trust in business, whether it is based on performance, consistency, incentive building, (etc) the point is that it is built over time and becomes a core component of your brand. When another opportunity arises to pivot or you are disrupted, the strength of trust can be a critical asset to respond and re-negotiate new business models.
Building of cultural competencies and capabilities can be a very new journey for many organizations. Every new market has a distinct culture and landscape. Language itself may be an immediate barrier that will be a part of the partnership ongoing. Differences in values across cultures also can make standard business practices un applicable in a different market. Even basic colors can carry different meanings. A strategic partner, from the region, can help “decode” the cultural gap. Bringing a foreign brand into a new market can be met with resistance. In many cases the partnership involves rebranding, to leverage the brand trust of and existing company in the market. Networking in international circles can also be heavily influenced by partnerships and the credibility they already have in the network. This can be very important when dealing with government policies and regulations and during mitigation and arbitration of issues. Above we talked about the importance of process and operating procedure. Cross team emersion can be fantastic talent development opportunities and growing the depth of relationship across the partners.
Some reflections going through the experience.
During the work I integrated with several American Chamber of Commerce agencies in SE Asia. I was impressed with the insights and networks they had access to that we could bring to the work at hand.
One of the “stickiest” parts of business models revolves around IP. The full spectrum of IP protection, shared IP, new IP, etc. While this landmine of a topic seems like a show stopper, it usually is the multiplier in the business opportunity. Usually combining IP to allow both companies to more into the market in different ways creates synergies to fuel all sides of the business and can create disruptions for competitors.
While all brands what to maximize profits and brand presence. The more successful path can be down the road of Strategic Alliances and Joint Ventures. Keeping focused on the long term growth and sustainability of partnerships seemed key to negotiations and creates a strategic asset when markets shift. A company needs to develop its capabilities around Joint Ventures and be working on them all the time for strategic advantage.
In a world with ever more trends around Co-opition, you no longer competing company vs. company, but consortium vs. consortium.