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A New Agenda For Strategy in a Shifting Economy

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A few weeks ago a client asked me to frame my project advice in terms of Porter’s Five Forces. It was a significant project – framing a business platform for the future – but Porter’s five forces? Really? I had no idea that there are executives still dependent on knowledge frameworks developed in the 1980s. Something’s wrong. Gigaom’s role has to be to put it right – to take the cumulative knowledge of technology on this site and turn it into a new strategy framework.  What might that look like?

Over the past two years we’ve been doing a lot of thinking about how disruption happens. You can trackback to this report on Decoding Disruption and this one on disruption frameworks.  Last year we were looking at disruption and new process models – the new enterprise operating system, in fact. But we have to get these models down to five forces, or some aphoristic mantra for the modern economy, right?

That would be the ideal end point for disruptive strategy research. But pending that end point here are some thoughts on why a new strategy framework is an urgent piece of work.

1. The need for speed. Change really is happening too fast now – we have heard a lot about it down the past decade but now it is real. Any company embarking on a 3 – 5 year strategy exercise is going to be overtaken by events before the ink dries on the new plan.

It is both easy and very difficult to get the knowledge to do strategy. Easy in the sense that information is abundant. Difficult in the sense that there are few good guides to what really matters.

And the case studies that might help executives with decision making?  Many of them are hackneyed, under-explored and misunderstood – Kodak and Nokia are good examples. Go here for a deeper analysis of the former.

In a world where information is a torrent, nailing down solid cases, considered over years rather than minutes, will be a hallmark of value. And that’s what Gigaom should be. We have to be ambivalent about business velocity. Most of the people that I know in Gigaom have grown up professionally with the new economy so it’s in their blood. They can make quick judgments because they’ve thought about these issues for a long time.

On top of speed, western companies face extreme cost challenges. China’s Alibaba, for example, has a 75% cost advantage over western companies as it moves into banking and a x 4 – 8 market scale advantage. It can employ literally hundreds of small teams of bright grads to start running new projects and see where they go. You cannot do lean cheaper and smarter than that, so what is exactly is the right response?

2. THE RIGHT PEOPLE. It is difficult to know who should pick up the baton for this. I see firms now where the CFO heads innovation; or it can be the CIO or the CMO; or there is a chief digital officer or a chief innovation officer. High level responsibility is in flux because of the problem in 1 above. Increasingly the knowledge problem extends right down into operational roles – thinking of new software methodologies like lean there is a big competency gap. Most companies have it half baked. Meanwhile executives are inundated with formulaeic answers from the major consultancies.

One thing I’ve learned from talking to people in the banking sector, an industry in the eye of the disruption storm, is the need for unique solutions for unique circumstances. We read a lot about the future of banking but the truth is the future will be defined by groups within Citi, Bank of America, Barclays etc, who have their own agendas, competencies, constraints and knowledge, in markets that are being actively reshaped by tech giants across the globe.

There is no generic answer but there are the right people, people who can bridge the gap betwee the existing generation of leaders (those who dare often dependent on outdated ideas) and the future generation of millenial leaders eager to refresh their businesses.

Strategy in disruptive times increasingly comes down to these key groups – today’s leaders and the ones to follow. We, here in Gigaom, need to work with readers to figure out how the upcoming generation can influence their businesses because that influence is the key to change. Can we develop the right dialogues to help bridge the knowledge gaps out there?

3. THE RIGHT MODEL. Finally the decision process is still to complex in most enterprises because of complex ownership structures (stock owernship) and complex responsibility divisions. All the startup liaison, accelerators and labs that companies invest in are counting for little because companies don’t have a Larry or a Jack Ma to  make decisions off the bat.

This “right model” problem needs some deep analysis.

We have been schooled into believing that a business needs to be more adaptive with its business models. My feeling is busineses need process model innovation. This does not imply business process re-engineering. That is too scary and often irrelevant. But we need to take stock of where new opportunity is best exploited with new process models. I’ve explored this in a variety of publications.

It looks right now that the business platform is the new enterprise operating model. But Netflix is showing every company willing to listen how to do continuous process model innovation around internal platforms; TenCent showed how to abandon one business model and rebuild compeltely, in record time; Ericsson is showing us how to turn from R&D based infrastructure play to a global business services giant. Xiaomi is showing us that there need be no division between hardware, software, services, verticals and retail, that everything is up for grabs.

These are examples of firms where a leader is determined to redefine how business is done, what it means to be an enterprise. For many of the disrupted companies out there there is no alternative but to find those types of leaders. Well there is.In 2013,  Alix Partners’ 2014 Global Consumer Electronics Outlook spelled it out:

“Fifty-six percent of companies in this technology sector—representing a full 88% of overall sector revenue (excluding Samsung and Apple) —have already fallen into financial stress or are at high risk of doing so.”

We will see more sectors divide between the extremely profitable and those struggling to survive, unless we quickly educate more leaders about the process of disruption and the new process models that enable prosperity. Behind all that are the new micro-processes that make people feel good about interacting with each other every day and pursuing  a purpose defined by the guy at the top getting rich from our creativity. Matching model to market to people to purpose is one more work in progress.