How to Develop Strategy in a Turbulent World

Synopsis Its a Wild New World

Sustained competitive advantage (SCA) is the dream of every CEO, every strategist. The challenge, especially in todays business environment, is that the world is turbulent. Changing technological platforms, the vagaries of globalized markets, unpredictable competition and a host of similar factors create not only a constancy of change but also impose an ever accelerating speed of change. SCA requires two characteristics of organizations: longevity and consistently outstanding short-term performance. A focus on embedding and fostering intelligences in the organization gives companies the capabilities to develop strategic agility and resilience.

Sustaining Competitive Advantage in a Turbulent World

Every CEO, every strategist dreams of his or her company outperforming competition and achieving a sustained competitive advantage (SCA).The challenge, especially in todays business environment, is that the world is tremendously turbulent. Changing technological platforms, the vagaries of globalized markets, unpredictable competition, and a host of similar factors create not only a constancy of change but also impose an ever-accelerating speed of change on businesses. SCA requires two characteristics of organizations: longevity and consistently outstanding short-term performance. An analogy will illustrate both the concept and the inherent contradiction of SCA. Just like an athlete skipping rope, companies achieve the balance and stability needed for SCA only by being in constant motion. Strategy can no longer afford to be just deliberate, but has to be emergent. But it cannot afford to only be emergent either. What companies need in todays business climate are the capabilities that enable strategic agilitythe ability to move from one kind of strategic thinking to another seamlessly and with speed. In the skipping rope analogy, then, the turning rope represents the changing market conditions that call for short-term strategic corrections, and the staying-in-place represents the long-term strategic vision which rests on the organizations values, culture, and habitsthe ethos of the company. As companies manage for short-term performance, the focus is on operational performance: how to extract more from less. However, as we understand the firm as being intelligence-driven, operating in dynamic, rapidly changing environments, the traditional focus on efficiency become insufficient; in fact, it becomes limiting and has to be let go. Instead the focus is on strategic agility. The development of long-term value takes timesticking to principle and purpose, building customer loyalty, or establishing a reputation cannot be achieved overnight. However, this does not mean that companies can afford to consider the drivers of

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long-term value to be static and set in stone. Indeed, the lesson from rope skipping is that in order to achieve long-term success firms need to be continually dynamic. This calls for a radical change in corporate attitudesmanagers will need to change the mindset that allows only one of the two alternativesshort term or long-term. They will need to understand that both these components of SCA need to be fostered and managed in the organization. At Vivekin, we believe that in order to achieve sustained competitive advantage, it is essential that companies develop organizational cultures that embed and continually foster intelligences

Embedding Intelligence
By embedding and fostering intelligences in their cultures, organizations transform themselves in powerful ways: Every employee becomes a leader, every process and product becomes open to innovation, initiative-taking becomes a daily habit in the organization, innovation is not just a one-time radical breakthrough but becomes a dynamic everyday activity. Ultimately, flexibility or nimbleness becomes a characteristic of the company. And as a result, the company acquires strategic agility, and thus, strategic resilience. When intelligence becomes enabled in an organization, employees follow simple rules to achieve dramatic results. The classic example of complexity science comes to minda flock of birds flying in formation across the sky, dynamically altering course, maintaining almost faultless coordination even as the birds swoop and turn. Craig Reynolds discovered that each bird in his computer simulation follows three simple rules: (1) fly in the direction of birds around you (2) match their velocity as closely as possible (3) avoid bumping into others. When intelligence becomes embedded in organizations, leadership and innovation follow a set of such natural simple rules. Contrary to popular thought, leadership and innovation do not demand huge investments, acts of genius, or radical breakthroughs. More often, they require collective action and collective purpose that come from a shared commitment to the core purpose of intelligence to be aware of all possible options in a given situation, to choose the best option that addresses the situation in the given context, and to be able to arrive at a decision that keeps in mind the greatest good of everybody concerned.

For the Mathematically-Minded

In an interesting parallel to enduring excellence, the generalized Wiener process in stochastic calculus combines a slow-moving (organizational) drift process and a more dynamically adjusting (market) variance process. A companys health in the future is dependent on its present health, and so, enduring excellence may be best imagined as following a geometric Brownian motion, a process in which the expected drift is a proportion of the current value. It is perhaps not so surprising then that the geometric Brownian motion has been used for decades to model stock prices.

Dr. Baba Prasad (Ph.D., The Wharton School) is President & CEO of Vivkin Group. www.vivekingroup.com

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