Nonlinear Thinking

Recognizing Strategic Dissonance

Operating in a world where the competitive landscape is ever more ephemeral, challenges to the status quo ever more profound, and the life of a successful business model ever shorter, aligning a corporation’s strategic intent and strategic action becomes ever more critical.  The more dynamic the industry, the shorter the duration such alignment is likely to be.  As intent and action become misaligned, that divergence creates what Andy Grove termed “strategic dissonance” in a California Management Review article he co-authored as well as his 1996 book Only the Paranoid Survive.

Arriving at a point of strategic dissonance suggests that the incumbent strategy no longer works as the underlying market and competitive dynamics have shifted enough to require a new strategy.  Grove termed these “strategic inflection points” to describe the giving way of one type of industry dynamics for another.  Strategic inflection points signal fundamental change in a business and require a new strategy, a modified business model, and a change in the way business is conducted.  The driver might be new technology, new regulations, emergent competition, or any structural dynamic that obviates the current environment.

The challenge for anyone, management or otherwise, is to recognize the strategic dissonance and, more importantly, to perceive the opportunity being created by the strategic inflection point and requisite new strategy.

 

Recognition that the changing nature of the enterprise’s operating environment is a true strategic inflection point occurs in stages:

• Initially, identifying and articulating the existence of strategic dissonance – the growing divergence between what the company views as its strategy and the actual actions of its management team.
• Then, confirming and accepting that the new set of circumstances is indeed a strategic inflection point that will require changes to the old way of business.
• Finally, understanding the new strategic priorities, creating a framework for overcoming the strategic dissonance, and formulating a new strategic intent.

To manage through the envelope of strategic dissonance that is driven by the emergence of a true strategic inflection point requires the management insight and discipline to see that during this period of transformation, both the old and new basis of competition, distinctive competencies, strategies, and strategic actions will need to coexist.

That is a distinctive competency in and of itself.

Sensing the Shifts and Taking Advantage

The analysis of trends and external drivers plays a critical role in my process for developing strategies and scenarios for industries and markets, products and services.  In a world that is moving/evolving/changing as rapidly as ours, it is fundamental to the construct of a viable and adaptable path forward that we incorporate an assessment of the potential and/or probable impacts that trends and drivers might have on our planning assumptions.

External driving forces are things/situation/events that manifest outside of the company and are by and large beyond the control of company leadership. Examples of external driving forces include changes to industry structure, revolutionary technologies, dynamic economic activity, evolving demographics, non-traditional competition, and political interference.

Trends very often emerge as the result of external drivers.  Identifying and assessing emerging trends is fundamental to establishing some understanding of new market opportunities that lead to innovation in products and services.  For a corporate strategy to remain reliable and relevant it must integrate a recognition of the company’s internal drivers and core competencies with knowledge of industry structure and the external drivers/trends that create change and opportunity.

 

McKinsey and Company have always possessed the intellectual bandwidth to identify the macro-level trends that will impact our lives, business and governments before most others see them.  They have recently identified five forces, or crucibles, where the stresses and tensions will be greatest and thus offer the richest opportunities for companies to innovate and change:

The great rebalancing. The coming decade will be the first in 200 years when emerging-market countries contribute more growth than the developed ones. This growth will not only create a wave of new middle-class consumers but also drive profound innovations in product design, market infrastructure, and value chains.

The productivity imperative. Developed-world economies will need to generate pronounced gains in productivity to power continued economic growth. The most dramatic innovations in the Western world are likely to be those that accelerate economic productivity.

The global grid. The global economy is growing ever more connected. Complex flows of capital, goods, information, and people are creating an interlinked network that spans geographies, social groups, and economies in ways that permit large-scale interactions at any moment. This expanding grid is seeding new business models and accelerating the pace of innovation. It also makes destabilizing cycles of volatility more likely.

Pricing the planet.  A collision is shaping up among the rising demand for resources, constrained supplies, and changing social attitudes toward environmental protection. The next decade will see an increased focus on resource productivity, the emergence of substantial clean-tech industries, and regulatory initiatives.

The market state. The often contradictory demands of driving economic growth and providing the necessary safety nets to maintain social stability have put governments under extraordinary pressure. Globalization applies additional heat: how will distinctly national entities govern in an increasingly globalized world?

 

Are We Melting Yet?

 I understand and accept that the science surrounding climate change often appears to be inexact and that has driven some extraordinary polarization in the debate on the long term impacts, if any, that a changing climate might deliver.  However, I do believe that prudence should require every organization, and individual for that matter, to execute some scenario planning around the potentiality that a warmer planet might become the "new normal".  Personally, I think the Twin Cities have never looked better.