Competitive advantages are often fleeting, according to Rita Gunther McGrath, a professor at Columbia Business School and a globally recognized expert on strategy in uncertain and volatile environments.
Companies need to adopt an entirely different set of practices--a new playbook for strategy--than those they used when competitive advantages were more easily protected, McGrath told attendees this morning at WOBI’s World Business Forum in New York City’s Radio City Music Hall.
“Leadership must move from an assumption of stability to an assumption of change, and from reinforcing existing perspectives to challenging the status quo,” McGrath told attendees. “They need to understand it is better to be fast and roughly right than it is to be precise and slow, and companies need to move from being internally focused to externally focused.”
Here are the components of McGrath’s new playbook for strategy:
• Continuous reconfiguration: According to McGrath, continuous reconfiguration means that companies are adapting naturally via a pattern of continuous, small changes that aren’t visible to the naked eye. Many times companies will reshuffle the marketing organization or completely overhaul strategy. While in some cases that might be necessary, companies that make continuous changes are the ones keeping up and adapting to new business realities all along.
• Healthy disengagement: A great example of healthy disengagement is what Verizon’s CEO did when he first took office a few year ago, McGrath said. He knew that the company needed to shift to become future-oriented, and so he made the decision to sell off Verizon’s phone book business. He also placed less of a focus on the company’s landline business, and more of a focus on Fios and improving Verizon’s LTE network.
“Today that is seen as strategic brilliance, but people were not happy then,” McGrath said.
• Deft resource allocation: Deft resource allocation, according to McGrath, means changing the power structures in an organization in terms of the resource allocation process.
“Imagine you are Mr. Sony Walkman,” McGrath said, “and you’re right at the height of your business success. You own the space of portable music playing. Then one day you invite R&D to show you what’s in store for the future, and they tell you there’ll be no batteries, songs are going to fly through the air and end up on people’s mobile phones, and basically your product won’t be [relevant].”
McGrath's point: Organizations must know when to shift resources from core initiatives to new ones, as well as which resources to shift.
• Innovation proficiency: Innovation proficiency is exactly what it sounds like, McGrath said. It’s thinking of innovation as a proficiency, or even a unit within the organization, with a budget, accountability, and actual processes, she said.
• A new leadership mind-set: According to McGrath, leaders need to be candid, disconcerting, and willing to make changes. Doing business the old-world way isn’t going to work today, she said.
• Entrepreneurial career management: Entrepreneurial career management means moving from careers where people think they’ll be with their employer for a long time, to a more entrepreneurial approach to career management, with individuals running their careers as "tours of duty" rather than being cogs in a hierarchical system, McGrath said.
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