by Roderick McInnes0
Do Traditional Business Strategies Still Work?
Despite the uncertainty of Brexit on the horizon and the fall of familiar high street names, businesses are still seeking growth through innovation. More, however, could be done to accelerate innovation if traditional business strategies made room for agile operational models.
It is widely accepted that businesses operate in virtually new, and increasingly unstable environments. Revenue is less predictable. The digital transformation is already changing how business is done, making companies more efficient in the process. Customer demands have changed. New generations are assuming leadership roles. Entrepreneurs continue to take innovative leaps forward.
Businesses and countries are also more interdependent and connected than ever before. A macroeconomic slowdown in one region can have global ripple effects at a speed that wasn’t possible only a few decades ago.
Business Strategies: Benefits of the Traditional Approach?
Despite these changes, business leaders still operate using strategic positioning, planning, and implementation models. Strategic management worked. It has been working for the past few decades, but times have changed. That model stood firm upon a bedrock of certainty, the predictability that has been eroded.
The traditional approach starts with the company vision, mission, and the strategic objectives. This could be for the whole company, a division, or a particular product/service or market. A detailed internal and external analysis follows the high-level overview, leading to a SWOT analysis. There are several other models for evaluating options, including PESTLE, Porters Five Forces, value chain, or the 7-S-Model. The aim is to attempt to test a theory before committing resources.
With that data in hand, senior managers can consider the various options, which can include tools that help business leaders assess the impact of each option before picking a choice that aligns with the vision, mission and objectives. In the past, this approach worked. Business schools still sell this model to students.
In some sectors, traditional business strategies may still work. But what if you are a taxi company fighting the rise of Uber in your city? Or a hotel that appeals to Millennials, when there are hundreds of Airbnb hosts in your area? Or a freight forwarder who can’t compete with new online booking services? The media is another example. Around the world, even local and national print media, can’t compete with new online brands, such as BuzzFeed, unless you have a billionaire backing your brand. Entrepreneurs driving forward disruption have investors behind them that are more keen than ever to get a return. This means innovating quickly, forcing companies who can’t move as fast to keep pace or lost customers and market share.
Protecting your market share was easier when businesses knew their competitors. These days, that is not as easy to determine, not when startups can appear overnight with challenger products and services. If the last decade has taught businesses anything: conditions of stability and shelter from external storms and changing winds aren’t guaranteed.
Agile management: For changeable business environments?
New management theories have emerged from the tech community, from startups and entrepreneurs, from scientific and engineering universities that are challenging the strategic status quo. These theories are founded on iterative learning, instead of top-down strategy and participative management.
Agile is a tried-and-tested approach that emerged from Silicon Valley, used by managers and business leaders for over a decade. Agile is also known as Lean, Radical, and Scrum – all coding/startup terms – given this management practice was created out of computer programming and software engineering models. Companies worth billions, including Facebook, Google, Uber, and Airbnb have been built and strengthened when managers implement this approach. Facebook’s CEO, Mark Zuckerberg isn’t considered radical for using the “move fast and break things” mentality. In startup terms, this idea is old news.
These ideas have been in circulation long enough to have been field-tested within some of the largest organisations in the world, including GE, Bank of America, the US Department of Defence, BAE and the creation of UK.Gov, to replace thousands of inefficient British government websites. Two of the leading theorists and advocates of this approach are Steve Denning, author of The Leader’s Guide to Radical Management (Jossey-Bass, 2010) and Eric Ries, founder of the Lean movement. Denning worked at the World Bank for decades, before becoming a management theorist, author and keynote speaker.
When Zuckerberg promotes the “move fast and break things” idea, he is promoting “Lean methodologies”; which Ries, a Silicon Valley entrepreneur turned CV turned author, has been writing about for nearly a decade.
That’s all very well for Silicon Valley, but what about more traditional corporations? Can Agile work, and if so, how?
Agile isn’t about throwing out the rule book. Or adopting a startup mindset; although some aspects of this approach, in practice, would save large corporations time and money. Hence the uptick in recent years of tens of millions of corporate pounds pouring into accelerators, hackathons, and the startup community.
For some businesses, buying innovation is easier and less disruptive than attempting to make internal changes. That may work for a while, but change must eventually take place inside an organisation; otherwise it will fail to evolve, and growth will slow. Japan is a prime example of what happens when innovation can’t keep pace with a changing environment, with a “lost decade” that has kept this countries GDP and purchasing power parity below that of other rich economies, until 2010, when it finally caught up again.
Denning believes the solution is creating smarter working practices. Solving problems faster through small, nimble learning and solutions groups with enough resources and senior support to implement changes and challenge orthodox approaches.
Larger organisations often have bigger problems, which means these small teams need members from various levels, across numerous divisions and departments. Agile works when management supports the testing of theories, which should be easy and quick to implement, to gather the data that supports a solution a company can implement, thereby driving innovation faster.
Please share your thoughts and experience on this subject in the comments box below. If you are an interim who has experience working with organisations on implementing more agile strategies and would like to contribute a blog post on the subject, please get in touch with me directly: email@example.com