Everyone has a plan until they are punched in the face
Change is accelerating. Our connected world is giving rise to unparalleled opportunity. And unparalleled disruption. In just 10 months, Yue Bao, AliPay’s money market funds business garnered 80 million customers and USD 90 billion under management to become the fourth largest money market fund business in the world. 10 months. No prior experience. What was the value of their competitors’ strategic plan? How long do you stay the course when you are punched in the face?
Business cycles are changing. Compressing. It’s easy in hindsight to see the impact of technology over the past five years. But we have almost no idea what will happen in the next five. It took Uber just five years to disrupt the transport industry as we know it and create a USD$50 Billion company. In just five years fintech has disrupted the strategic plans of the banks around the world. The rate of change is accelerating. How we adapt is simply more important than what we plan to do. Mike was right.
Harvard Business School Professor Michael Porter stated there are two fundamental strategies. Differentiation or cost leadership. These strategies implied divergent approaches. In the digital world, they harmonise. Good design creates differentiation. Great design delivers cost leadership and differentiation.
Within the five forces of competition, value chains are disassembling and re-assembling in new forms with increasing speed and impact. The collaborative economy blur these value chains further and accelerate their dynamics. Open innovation ecosystems are beating containerised corporations. As transaction costs lower, the long tail becomes commercially viable. How valuable is dominating scarce market resources when resources are no longer scarce?
In a slow cycle world, strategic planning and persistent execution makes sense. In a fast cycle world, continuous learning and adaptation subordinates strategy. Doers are defeating dreamers. Edison was right. Execution is everything. 1% inspiration. 99% perspiration. In the startup world this is known as growth hacking. Rapid customer validation to continuously course correct to improve growth. Less strategic direction and more tactical adaptation. Agility is the new strategy. Few corporations have this competence.
Strategic plans should neither be carved in rock nor written in sand but must change with the inevitable demands of a dynamic marketplace.
- Adapted from Dick Wirthlin
You’ve heard it before. “You don’t understand, this is strategic”. Does it make sense anymore to look to the past to create the future? Would we give the Space X the green light if we based our analysis off Nasa’s track record? Would we recognise the magic of Tesla if we benchmarked them against the engineering prowess of BMW. Tactical adaptation is more important than strategic planning. Few ‘strategic plans’ consider these fundamental shifts. Nuts!
It is well established leading strategy consultants have no better insight into the future than you or I. Indeed there has been a persuasive argument they underperform the market. Simply, the rigid construct of strategic thinking limits our ability to respond to a world changing faster than we do. The results are obvious. Life spans of companies are in perilous decline because we are focused on the wrong thing. We have Chief Strategy Officers who plan strategic offsites to discuss strategic initiatives at exotic locations. Disconnected from customers and disconnected from reality. It’s a surreal experience.
Strategy marshals and focuses scarce resource. The question, is resource scarce anymore? In the connected economy, resource is abundant if given the right motivation. ROPA. Return on other peoples assets. Uber, Facebook, Air B&B, Amazon. These companies simply lower transaction costs, unlock the creativity of the long tail and design a great customer experience. Cost leadership and differentiation. It’s a potent mix.
We revere strategy as a quazi exercise in intelligence, hypothesizing outcomes that rarely eventuate. Meanwhile, do’ers are working directly with customers testing hypotheses thousands of times a day. Continuously learning. Continuously adapting. Continuously improving.
If strategy is not dead, it’s on the ropes. The simple reality is we are over-invested in strategic intelligence and underinvested in responsive adaptation. Charles Darwin understood this well.
but the ones most responsive to change.