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.
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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.

Work skills for the future: tolerating uncertainty and ambiguity

In today’s NY Times Maureen Dowd was musing about the shifting sense of American identity. She cited Ben Domenech (without attribution) about Millennial’s awareness of living and working precariously:

It heightens the level of uncertainty, anxiety and risk aversion, to know that you’re only a bad day and half a dozen tweets from being fired.

But that is only a heightening of the background level of uncertainty and ambiguity that we all experience in the new economy, the postnormal, and the level of uncertainty and ambiguity is increasing.
People have different levels of tolerance to uncertainty, but even those most likely to tolerate chaos have limits. And once people are pushed past their limits, they tend to become anxious and frustrated, and to freeze. In the corporate setting this leads to unwillingness to take risks, try new things, and use new approaches.
My theory is that disengagement is not some isolated phenomenon, it is built into the machinery of today’s business (see Disengagement is not a flaw: It’s built into the system). And businesses are embedded in a world of uncertainty, so people at work are confronted with the need to tolerate uncertainty rather than attempting to ‘fix it’ with an intensification of techniques that work in situations of higher certainty. This is the source of  the frustration and anxiety, and if the organizational culture amplifies the stresses of uncertainty, disengagement happens.
F. Scott Fitzgerald was close to this when he wrote,

The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.

Perhaps, today, we have to go even further.
Cultures differ widely in their avoidance of uncertainty. Scandinavian countries, for example, are among those with the lowest uncertainty avoidance measures, meaning the cultures there have effective mechanisms for tolerating uncertainty, such as the reliance on more ‘informal, unstructured, and fluid roles and behaviors’, while those with low uncertainty tolerance rely more on rules and rigid hierarchies [Wikipedia].
So, the most critical step a company can take to accept uncertainty is to relax the cultural norms: to become more fluid, egalitarian, and informal. And at the personal level, we should aspire to Fitzgerald’s claim of a first-rate intelligence, only more so.
And how does someone with tolerance for uncertainty and ambiguity act? They rely on connections to others to openly discuss the uncertainties and ambiguities that confront them. They experiment with ways to move forward even when they may have insufficient information or unreliable information: they seek to take action rather than freeze. They accept the fact that they don’t have all the answers. And they are aware that sometimes problems are actually dilemmas that cannot be solved.
As I wrote some time ago, in the characterization of the new way of work, which I call leanership,

Leanership values experimentation over execution, places agility above process, and puts learning ahead of knowing.

Those are the companion attributes of a healthy tolerance for uncertainty and ambiguity.