For Online E-newspaper
The East African : June 16th 2014
The EastAfrican 48 BUSINESS JUNE 14-20,2014 MANAG E R St≥ategy is now about connections, not chess By GREG SATELL Special Correspondent LEGENDARY STRATEGISTS have long been compared with master chess players, who know the positions and capabilities of each piece on the board and are able to think several moves ahead. It’s time to retire this metaphor. Strategy is no longer a game of chess, because the board is no longer set out in orderly lines. Industries have become boundless. Competitive threats and transformative opportunities can come from anywhere. Strategy is now a process of deepening and widening connections. The first person to think seriously about how businesses function was Ronald Coase. In his 1937 paper The Nature of the Firm, he argued that companies gain competitiveness by reducing transaction costs, especially those related to information. In his view, firms could grow until the point at which organisational costs cancelled out transactional benefits. In the 1980s, Michael Porter built on this idea with his concept of value chains. His ideas provided managers with a blueprint for building competitive advantage. By increasing scale, companies could create efficiencies along the value chain through either operational excellence or bargaining power with suppliers and customers. In effect, competitiveness was the sum of all efficiencies, and managers could create those by building greater scale. The world envisioned by Coase and Porter was relatively stable. Transaction costs were like weeds that managers could gradually root out. Once the lines of competition were drawn, strategy was mainly a matter of bringing “relative strengths to bear against relative weakness,” as Richard Rumelt, a professor at UCLA’s Anderson School of Management, has put it. Yet today we live in a world of accelerating returns, where cost efficiencies can improve exponentially, nullifying scale advantages. Further, technology cycles have begun to outpace planning cycles. So in the course of planning and executing any given strategy, relative strengths and relative weakness are likely to change — sometimes drastically. We find ourselves in an age of disruption, where agility trumps scale and strategy needs to take Competitive advantage is no longer the sum of all efficiencies; it is the sum of all connections.” on a new meaning and a new role. We can no longer plan; we can only prepare. When Jeff Bezos started Amazon, his goal was to sell books and compete with traditional businesses like Barnes & Noble. Yet today, Amazon is much more than a retailer. It offers cloud computing services to enterprises, builds computer hardware and develops TV shows. It directly competes with firms as diverse as Microsoft, Wal-Mart and Netflix. However, Amazon is not a conglomerate; it is a platform. Not only does the cloud architecture that runs its online store also distribute entertainment to consumers, but Amazon offers cloud architecture as a service to other enterprises. As it expands connections into new areas, Amazon deepens capabilities at its core. If you’re looking at the competitive landscape, it doesn’t make sense to talk about Amazon’s “industry position” as much as it does to examine its ecosystem. Corporate resources When Coase wrote his famous paper in 1937, transaction costs were a much heavier burden. Today’s most valuable corporate resources aren’t tied to a physical place, don’t diminish with use and are easily distributed. The world has changed, and strategy must change too. Many have argued over what this shift should entail. For instance, Rita Gunther McGrath, a professor at Columbia Business School argues in her excellent book The End of Competitive Advantage that sustainable competitive advantage is no longer possible and that we must be content with achieving transient advantage. In her view, rather than focusing on a distinct set of capabilities, firms must constantly move on to greener pastures. And yet I’m not sure that this part of her argument holds up. Clearly, there are firms such as Amazon, Wal-Mart and Apple, that are able to not only maintain, but also deepen their advantages over time. Sure, they’ve increased their scope as well as their scale, but their core businesses have also improved. What’s changed is that competitive advantage is no longer the sum of all efficiencies; it is the sum of all connections. Strategy, therefore, must be focused on deepening and widening networks of information, talent, partners and consumers. Brands, in effect, are no longer just assets to be leveraged; they are now platforms for collaboration. G≥eg Satell w≥ites the blog “Digital Tonto.” NYTS Why you≥ employees a≥e leaving, and what you can p≥oactively do to keep them strategy. It is not just about keeping talented workers within your organisation. When an employee leaves, the exit can negatively impact the team’s morale as well as create expenses as the organisation has to recruit, interview, hire and train new people. Keeping team members is a mat- W ter of talent management; not just something the HR professionals who process applications and exit interviews have to worry about. Engagement surveys at some organisations suggest that most employees are considering leaving their current employment. At the root of this issue is a lack of commitment to organisations. Companies must proactively con- sider how they can foster loyalty and engagement that leads to long, successful careers and powerful employee engagement and commitment. Organisations should know why their employees are leaving or considering leaving, understand the conditions in their organisations and — most importantly — take action to make a difference. Sometimes people are hired and they are not the right fit. Common causes of employee turnover include poor management or supervision, lack of effective employee retention strategies, and frustration and tension with superiors or team members. Others orkforce turnover is expensive — which is why employee retention is a critical management COMMENTARY NAOMI MBOGUA “The last thing you want is to find out your talented workers are dissatisfied only when they give notice.” are low salary or inequitable salary distribution among staff in the same grade. A negative workplace atmosphere, few opportunities for growth or professional development, office politics and complex hierarchies or unchallenging opportunities also contribute to employees leaving. A proactive management ap- proach as well as an engaging, supportive workplace environment are therefore crucial. The last thing you want is to find out your talented workers are dissatisfied the moment only when they give notice. By then, they have already wrestled with the decision and weighed their options. Training supervisors to be attentive to signs of disengagement and empowering them with tools to monitor their team members are essential steps to take an active stance against employee turnover. Communicating effectively with employees can build trust and make them comfortable discussing their concerns. In addition to holding discussions around what would make your employees stay, soliciting feedback about workers’ experiences can empower managers with insights to boost retention. Employee engagement surveys that ask meaningful, strategic questions can be a powerful resource in this regard. Once you have an un- derstanding of the factors that could be causing your workers to think about taking their talent elsewhere, it is time to take steps to address the issues. Real change Avoid throwing perks at the is- sues. Instead, facilitate real change. The action must hit at the core of the organisation culture and worker motivation. Line managers may be better poised to lead by example and get involved in the day-to-day activities of their teams. Every organisation requires a unique approach to reach out to its employees and create a supportive, dynamic atmosphere. Therefore, a comprehensive employee engagement platform that gathers meaningful information about staff members is best. If you wait for your workers to put in their notice before talking to them, it is already too late. The time to act is now. Naomi Mbogua is a di≥ecto≥ at thinkPeople Consulting Ltd, a human ≥esou≥ces management and o≥ganisational pe≥fo≥mance consultancy based in Nai≥obi.
June 9th 2014
June 23rd 2014