The New Enterprise Strategy Problem – Too Many Options

In the good old days, when most of today’s most senior executives got their business education, only three ways to acquire sustainable competitive advantage were on offer. At least that was the theory of Michael Porter – they were cost leadership, differentiation and focus.
I guess today you’d have to add: creating a platform that has a committed community, being the modern utility (in other words providing a platform on which other people do business), capturing the high ground in an ecosystem (like ARM, by owning and developing the major design skills in mobile chips), or providing a very high level of integration to the end customer (as Alibaba is doing by covering off merchant sales, financing customers (on the way to its second multi billion dollar business), providing ticket sales, taxi rides (on the way to its third multi-billion dollar business) and being a bank, among other things.
None of these rely on cost advantages. Alibaba’s rapid development is all about ignoring cost (within reason) and delivering new services (profitably). Uber does not obsess on the cost of its payments model. Nor is there a key element of differentiation involved. The core advantages in these companies is speed of execution, the level of security, customer-centricity that is usually data-dependent, the capability to deliver as near to perfect service as possible and an ever expanding offer.
As the old dictates of the industrial age die,  strategists need to do a radical and rapid about turn. Historically, we have thought in terms of severe limits on corporate activity and on scope. The main focus has been on economies of scale. Economies of scale have not exactly gone out of fashion but economies of scope are the new mantra – a trend I analysed in Shift – put succinctly it says: do more, a whole lot more, for customers.
For that reason we also have to question the value of traditional management tools like scenarios and scenario thinking and what these deliver to decision makers.
The disruptive activity around us creates uncertainty and uncertainty = unmeasurable risk. Scenarios suggest the unmeasurable is very knowable, that, actually, risk comes down to two or three knowable threats,  and that we can therefore control the future.
That there is no way to control the future is obvious – who for example would have though that software-driven test manipulation at Volkswagen would, possibly, put electric vehicles on the road to being mainstream? Who could have anticipated file-sharing as a disrupter of the music industry? There is no way to draw up these scenarios ahead of time with any degree of comfort around their likelihood. And of course originally scenario thinking wasn’t intended to – it was designed to explore the unthinkable.
Right now though we are in a period of disruption where markets are reforming and restructuring. The new dimension to this is optionality.
For a long time I thought the problem faced by enterprises was an unwillingness to develop optionality because their decision processes were grounded by a devotion to core competency and linear business models. Put another way, they tamed scenario thinking so that it wold keep them in their comfort zone.
But now something else is happening. Let’s divide the novelty into two parts.
1. The reality is that in a period of disruption companies face too many options.  The fact of being over endowed with options is difficult for people to grasp if they are stuck in the pre-disruption mindset -there you have very limited options.  But my recent conversations inside organizations suggests that there sense too many ways to turn, too many options to chase down, too many technologies to evaluate, too many new skills to learn. So what they need is to find ways to embrace that reality and introduce business discipline to it.
2. The second aspect of this though is the very senior executives live in the pre-options moment. They prefer a limited number of alternatives, the three scenario consultant powerpoint that keeps them close to their core. Yes it does, but it also defers the day when they have to recognize all is changing around them and the core is not a good way of facing the future. Lower down the organisation there is ample awareness of options and the problem lies in this gap – the two broadly different perceptions of what the company faces.
I touched on it in this earlier post – the problem of inter-generational leadership, the need to create leadership teams that embrace different generations of managers.
I’m going to come back to it though because this abundance of options needs new management thinking and technology support.

An excerpt and correction from a recent procast with Adam Lesser

I am pulling this excerpt from a recent procast with Adam Lesser and David Coleman (see Why social business tools matter for the future of the enterprise), partly because it’s a good case study, but also to make a correction. When I spoke about Cablevision, I should have said O2, the British broadband and cell network. The following excerpt has been lightly edited to make that correction.

Adam Lesser: You’re saying that companies feel like they must have social tools in their business, that it’s a must have. How do you measure the value of becoming a social business? Are there metrics to measure an increase in productivity? Is there any way to approach this to ask ‘what’s the value?’

Stowe Boyd: I think [the question of value] is another argument for looking at things in a very tightly focused way, a very functional mindset. For example, O2 is a really great case study.  In July 2012, in Britain there were all sorts of power outages and people were really pissed off, but the company did a great job of dealing with people’s concerns. They were very open, they did a great job of informing people exactly where they were in the fix up. They turned what could be a bad disaster into a masterclass: a case study of how to avert a disaster on the social media side.

What you must have in place to do that is people who are trained, [who] understand how to do it [social customer support]. You have to have the systems in places to keep your several dozen or 50 customer support people connected to twitter or wherever the source of these gripes are that are coming in. And being able to rapidly work with customers and solve their problems.

That works well with very functional and focused tools, so they [the customer support staff] can effectively deal with hundreds of thousands of people who are pissed off. It’s not just pissed off people: [this] can be generalized to average day-to-day dealings — not just emergencies — but having that [social customer support] in place.

And deciding to train and transfer people from the old model, transferring people from a phone bank to a social network, it requires a time commitment and proficiency in middle management to get that to take place.

To measure: that is customer satisfaction. What are the metrics you have from doing an analysis of customers’ emotional state when [they talk] about your products online? You can obviously measure that over time, as you become more and more adept and you become more and more savvy in the social context. You will see the numbers you can track go in the right direction, if you do it right.

I think the metrics — if you are doing social support, selling or HR — you have to do the metrics in the right scope. You can’t adhere to some general idea of productivity or contribution to very vague strategic goals like profits. You have to look at metrics that are more meaningful, like touch points with customers and [track] your interactions on a social level.

This is one of the reasons that tightly focused social activities and tools to support them are so attractive: it is far easier to define success criteria and measure against them when the domain is tightly bounded.