Showing posts with label Strategy. Show all posts
Showing posts with label Strategy. Show all posts

Thursday, March 5, 2015

Managing Strategic Knowledge


Two knowledge management researchers present a strikingly simple framework to visualize what organizations can do with their strategic knowledge assets. In Harvard Business Review (Jan-Feb 2015), Ihrig and McMillan suggest that every organization plot their knowledge assets along two dimensions – the extent to which the knowledge is distributed (undiffused to widely diffused) and the extent to which the knowledge is codified (unstructured or tacit to structured).

For example, a company may have proprietary expertise that is in key people’s heads (unstructured and undiffused),   proprietary process documentation (structured and undiffused), product usage guides (structured and diffused), and so forth.


The authors suggest four ways to manage knowledge assets, each visualized as a movement along the horizontal or vertical axis. 

Contextualize. Take some codified process and apply in new setting. For example, P&G uses its brand building process in new markets. This is indicated by an arrow pointing down vertically.

Codify. Make explicit the product knowledge – and leave process knowledge sharing informal – to protect against leaks. Combine people networking with knowledge codification to dig deeper into tacit knowledge. Use structured knowledge as hook to get to the right person. Codification is indicated by an arrow pointing up vertically.

Diffuse. Diffusion works best at the top where knowledge is structured. You can diffuse knowledge either inside the company (through apprenticeships and other knowledge sharing practices) our outside by licensing (the way Du Pont or  Harvard Business Publishing do) or by giving away strategically (the way Tesla does with patents, Adobe with the pdf format, and Mckinsey with ther Insights newsletter).

Gain insights from big data. This is the hardest to systematize, but successful examples include Rolls Royce (who use engine sensors for scheduling preventive maintenance), and Subway (who capitalized on low-cal trend). 

Monday, April 30, 2012

About Purpose, Priorities and Alignment

Some of the healthiest debates in an organization are about its priorities. Here is an exercise your organization could do, to develop a better sense of alignment.


1. Define your purpose.

Answer these five questions briefly (typically in 1 line.)

  1. Who are you? (This question is not as simple as it seems to be. This is a question about your organization's identity, its self-perception. Many times it is extremely hard to get the right answer. )
  2. What do you do? (List the products or services you offer, or better, say what outcomes you help achieve)
  3. For whom? (If you were not around, who would miss you? Would there be a tear in the universe? Where? Who will mourn you? This could be customers, community and other stakeholders)
  4. What difference do you make? (Obviously you make some difference in a unique way for those who will miss you. What difference is that?)
  5. Using what unique competencies? (What is it about you that helps you make that difference year-after-year? What is your unique strength? Your secret sauce?)

2. Define your priorities.

Use a table such as the one below. Too many priorities are no good.

Short Term (3-6 months)
Medium Term (1 Year)
Long Term (3 Years)
1.
6.
10.
2.
7.
11.
3.
8.
12.
4.
9.

5.



3. Check alignment.

Now answer the following questions

  1. Are your priorities aligned to your purpose?
  2. Have you allocated resources (time, people) in line with priorities?
  3. Have you prepared yourself to change resource allocation as you transition to mid-term and long-term?
  4. Do you feel you can make some changes to align yourself with the priorities?
  5. What are those changes, if any?

Monday, October 4, 2010

Escaping the Competitive Herd

In her book expressively titled Different, Prof. Youngme Moon of Harvard Business School offers a refreshing insight into what makes some brands stand out as truly different. She argues that while companies understand they must differentiate, they compete head-on and unwittingly become more like each other. Feature-matching and product augmentation has the perverse effect of making a company similar to its competitors, not different.

Youngme Moon's book does not read like a business book - it rather is like talking to her, and understanding her views. You come away thinking that business is at its heart a profoundly human endeavor - urging us as businesspersons to focus on what makes people tick.

The book is organized in two parts. Part 1 is a critique of the herd and Part 2 is the celebration of those that rise above it.

When you ask consumers what they want, they will ask for what they are not getting, and their request will be driven by what competition is offering. Thus, market research has the perverse effect of driving your product to sameness. So Volvo drivers want sex appeal, Audi drivers want safety. A marketer's knee-jerk reaction is to round out the product by correcting weakness, rather than to  play to its strengths and make it stand out. So, well-meaning efforts to monitor your competitive position lead to homogenization.

Herd behavior demands very little of its participants. Don't collide with your neighbor, follow the general direction and speed, and drift in the average direction of nearby birds.

Product augmentation leads to competitors copying it, and the whole category is back to square one. It is an expensive way to commoditization. Now you have a hyper-mature category on your hands, where there is frenzied competitive hyper-activity, but slow overall growth. The customer satisfaction treadmill is ceaseless, and you are at a standstill.

Fortunately, there are exceptions to this. We live in a world where conformity reigns, but exceptions rule. Moon therefore celebrates a handful of brands that rise above the clutter - these are reverse brands, breakaway brands and hostile brands.

While other portals tried to cram as much content on their home pages as possible, Google competed by deleting all those things and making its start page really simple, focused on search. While furniture shops competed on the basis of durability, ease of purchase and shipping - IKEA did the opposite. IKEA made it plain that buyers need to haul the furniture themselves, assemble it at home, and the resulting ware would not necessarily survive a move. Yet, buyers flocked the shop for its ambiance, shopping experience, food, play areas for kids, excitement of assembling furniture and so forth. These are reverse brands.

When Sony created AIBO the household robot, in a stroke of genius they fashioned it as a pet. All of a sudden, AIBO's quirks were construed as a pet's idiosyncrasies, and customers loved the product. Cirque Du Soleil misses several key elements of a circus - the animals, the ringmaster and so forth. Yet, it calls itself precisely that - a circus, rather than position itself as a blend of theater, dance, opera. Why? Because CDS wants to position itself as a player in the category that is venturing out of bounds. Here, CDS is trying to redefine the category. Swatch, the bestselling watch brand in history, made watches into seasonal fashion accessories. These are breakaway brands. They challenge classifications. They offer alternate category rubrics in place of existing ones. That is why Kimberly Clark fashioned diapers as "Pull-Ups" and positioned away from diapers, and more as big-kid underpants.

When Red Bull excludes those consumers who don't like its taste, does not squash rumors about what it is manufactured from, and builds a fanatic follower base that spreads the word of mouth, you are witnessing a hostile brand. A hostile brand tells the consumers what they are in for, and if they don't like it, shows them the door - quickly. These are "take it or leave it" brands. They refuse to sand away the rough edges. Their attitude is - if Red Bull makes you nervous, don't drink it. They polarize. They summon resistance. MINI says loud and clear: The SUV backlash starts here.

Contrast these bravely positioned products with the countless breakfast cereals, detergents, family cars, laptops and many other categories where me-too competition has resulted in a category continuum to a point of  no differentiation - which by definition means the products are all but commoditized. Unless you are a category connoisseur, you cannot navigate the category, nor understand the differences.When product alternatives within a category explode, the differences become meaningless, the category attains heterogeneous homogeneity. The differences are there, but they are lost in a sea of sameness.

Youngme Moon has done a great service to marketing professionals, innovators and entrepreneurs by highlighting the idea brands that dare to be different.

Wednesday, September 1, 2010

Why Care for Corporate Social Responsibility

A recent article  in the Wall Street Journal by the University of Michigan professor Aneel Karnani builds on the premise that the business of business is business. The article, titled The Case Against Corporate Social Responsibility, makes a strong argument  that the idea (of CSR) is an illusion, and a potentially dangerous one. The idea that companies have a duty to address social ills is not just flawed, according to Professor Karnani, it also makes it more likely that we'll ignore the real solutions to these problems.

The topic of CSR is debated hotly in online media, colleges and boardrooms.There is plenty of recent literature offering insights into the interaction between CSR and strategy.Two areas stand out.

CSR and Marketing
In their MIT Sloan Review article Does it Pay to be Good?  authors Remi Trudel and June Cotte advise corporate marketers to pursue a socially responsible differentiation strategy. They point out that consumers will punish the producer of unethically produced goods to a greater extent than they will reward a company that offers ethically produced products. The negative effects of unethical behavior have a substantially greater impact on consumer willingness to pay than the positive effects of ethical behavior.


CSR and Talent Management
CSR's effectiveness as a lever for talent management is explored by Bhattacharya, Sen and Korschun in Using CSR to Win the War for Talent. They propose how business leaders can make CSR effective in attracting and managing talent. The payoff, according to the authors, is in the area of employee perception of the company. To effectively use CSR as an internal marketing lever, however, companies must make sure to:

  1. Consistently communicate CSR efforts to employees
  2. Consider employee need diversity in designing CSR initiatives
  3. Understand the psychological underpinnings of pro-company behaviors, higher productivity, longer tenures and so on
  4. Involve employees on their own terms - not by forcing CSR top-down
Whether you agree with Professor Karnani's viewpoint or not, the two concrete examples above should serve to help make a case for CSR initiatives - in a manner consistent with his premise. Do you see additional areas where the link between social responsibility and positive business outcomes can be explicitly illustrated?

Friday, August 27, 2010

Strategy and Implementation Must Co-exist

The Mind of the Strategist, Kenichi Ohmae's classic on corporate strategy,  makes several important points. There is a huge difference between the mindsets required for strategic decision making and tactical decision making. (See my earlier post: Strategic vs Tactical). The strategist looks for relative superiority over competition to create a competitive advantage. Superiority is created by exploiting various strategic dimensions of differentiation.


One important point Ohmae makes concerns the relationship between strategy and execution. It is best to present it in his own words.


Corporate performance is the result of combining planning and execution. It resembles a boat race. No matter how hard each crew member rows, if the coxswain doesn’t choose the right direction, the crew can never hope to win. Conversely, even if the coxswain is a perfect navigator, you cannot win the race unless the rowers strive hard and in unison.

- Kenichi Ohmae (The Mind of The Strategist)

Saturday, July 10, 2010

Revenue Modeling for Software as a Service

The difference between Software as a Service (SaaS) and packaged software goes beyond the method of distribution. Obviously, SaaS is delivered over the internet on-demand, and packaged software is installed on user computers (desktops or servers). However, SaaS enables a whole variety of revenue streams that need to be considered carefully when determining its revenue model.

Sixteen Ventures web site has a presentation titled SaaS Revenue Modeling: Details of the 7 Revenue Streams. The authors classify revenue streams into two:


Scalable Revenue Streams
These revenue streams can scale significantly with the growth of the SaaS venture. Four such streams are identified:
  1. Recurring: This type of revenue comes from site subscriptions. 
  2. Ecosystem: The SaaS vendor realizes revenue by providing APIs to other players providing complementary offerings
  3. Ancillary: Revenue coming for ancillary fees such as setup fee
  4. Network: Anonymized and aggregated data from SaaS users is provided to those who will pay for it. This leverages the multi-tenancy of SaaS ventures.

Non-Scalable Revenue Streams
These are useful revenue streams but harder and sometimes impossible to scale. Three such streams are identified:
  1. Products: Units that are shipped to users of SaaS - these could be devices and gadgets of sorts
  2. Services: Setup, configuration, content development, software development, training
  3. Advertising: Monetizes site by displaying advertisements alongside SaaS user interface

The presentation can be found on Sixteen Ventures site.

Wednesday, June 30, 2010

Can You Sell Something That Is Available For Free?

Setting a price for a product is tricky business. Particularly when a substitute is available for a low price. If you price the product too low, you risk viability. If you price high, nobody wants to buy your product.

As an extreme case of this dilemma, let's ask ourselves the question: Can you sell something for a price if that product is available for free?

Consider photo sharing. With Picasa and numerous other photo sharing sites that are free, is there a business model for a site which charges a subscription fee for photo sharing?

For an answer, we need to look no further than Smugmug, a site that charges you $40 to $150 per year to share photos online. Are they out of their mind? Apparently not. They have 300,000 paying customers, and have nearly a billion photos hosted at the time of this writing.

How do they pull this off? I will let you decide. Here is some messaging from their site.

  • You Look Better Here
  • Your photos look better here
  • Your fans will tell you how great your photos look here
Here is what they have to say about themselves.
  • We dream of an independent company devoted to nothing but your priceless photos.
  • A company that backs up your precious memories so they're safe and sound.
  • A profitable, debt-free company.
  • That earns your fanatical loyalty.
  • We're living that dream.
I am sure there are other examples where people willingly pay more to obtain a product or a service from a provider because they believe - correctly - that they are getting more value.

Wednesday, July 15, 2009

The Innovator's Dilemma

Why do small companies out-innovate large ones? How is it that some of the best innovations in products, services and business models have come from little known companies? Are they somehow more creative? Are they less afraid to try new things? Are they more adventurous? Do they have little to lose?

Clayton Christensen, in his brilliant book The Innovator's Dilemma has analyzed this phenomenon in great depth. Based on research and analysis, the author demonstrates several insights into the dilemma.

Sunday, February 22, 2009

Strategic vs Tactical

Strategic issues have to do with allocating scarce resources to promising opportunities - and consequently, denying those resources to less deserving opportunities.

One aspect of strategic decisionmaking is about competition. You create barriers for competition where competition is imminent, and you obtain relative superiority over competition where the competition is manifest.

Another aspect of strategic decisionmaking has to do with innovation. You think of new ways to create value for customers.

Yet another aspect of strategic decisionmaking concerns itself with reflection. You figure out your own core competencies and play to exploit them. You understand your culture and put its strengths to use.

Strategy alters the strength of the enterprise relative to its competition.

Tactical issues, on the other hand, are about efficient execution. Tactical decisionmaking leads to absolute gain in operational efficiency. It leads to streamlined processes, reduced risk, and so forth.

Tactical decisionmaking can often be incremental: improve utilization, enhance productivity, increase return-on-investment. The metrics it aspires to meet are absolute: efficiency, quality, productivity, profitability.

To quote Kenichi Ohame, from The Mind of a Strategist, his famous strategy classic, "The mind of a strategist functions differently. Gaining relative superiority over competitors is different from making internal improvements with reference to an absolute model. It is the difference between going to battle and going on a diet."

Often then managers who make a transition from a tactical level to a strategic level are quite un-prepared to change to a strategic mindset. Several managers were able to experience this firsthand at a strategy workshop which I will describe in this blog some time soon.

Thursday, January 22, 2009

Why this blog?

Since 1990, I have been involved in growing Harbinger Group, a business that I founded. It has been nearly two decades full of action. This blog is an effort to chronicle some of the insights gained, lessons learnt, values upheld and beliefs strengthened.

The main theme of this blog is entrepreneurship. Posts of this blog will draw on innovation, strategy and leadership. More often than not, the lines are blurred, and indeed these additional themes are sometimes inseparable. In such cases, a post may touch upon two or more of these additional themes.

And again, the past is only a prologue. As we enter next cycles of growth, some reflection upon our ways of doing things is in order. Reflection is a great way to learn, and writing encourages reflection. That is another important purpose of this blog.

Happy reading.