Strategic Agility by Bettina Büchel and Rhoda Davidson - Preview

Introduction

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Strategic Agility: The Art of Piloting Initiatives

Stacking the odds in your favor

Distilling strategy into a few core initiatives that focus on improving existing operations and exploring new possibilities for driving growth is difficult enough, but it is during the execution phase that things get even more difficult and derailment often happens, so quick learning is essential. Just 18% of strategic initiatives succeed; by this, we mean they were actively adopted and widely implemented in their organizations or introduced into the market. 1 Why are so few strategic initiatives successful in generating commitment and delivering value to their businesses? Our

experience indicates that the successful outcome of a strategic initiative is largely linked to a successful start – namely a pilot. So, here is our message: Pilots showcase a new practice to the rest of the company or introduce a new product to a customer. On the one hand, they are about quick learning, but they are also about creating widespread commitment to a strategic initiative or getting a customer excited about a new

“ Our experience indicates that the successful outcome of a strategic initiative is largely linked to a successful start – namely a pilot.  ”

product. A well-managed pilot offers many tangible ways of increasing the chances of success of an initiative. So, plan to be successful from the start. We wrote this book to help you stay competitive by launching strategic initiatives that improve your business and deliver innovative ideas for new products or services through successfully sequencing and learning from the early implementation of these initiatives – the essential ingredients for strategic agility. By strategic initiatives, we mean action-oriented choices – exploitative or exploratory in nature – that matter to the organization’s success over the next few years. Piloting a strategic initiative is the process of creating a new 1  S&P 500 companies use a variety of labels for strategic initiatives ranging from strategic priorities, areas of focus, strategic objectives, ambitions, etc. (Source: Sull, Donald, Stefano Turconi, Charles Sull, and James Yoder. “Turning Strategy into Results.” Strategic Management Journal , Spring 2018: 1–12.)

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Introduction

practice or product in a subsidiary location or locations where a routine or business model is developed for subsequent subsidiary- by-subsidiary scaling. We see piloting as a key tool in the arsenal of multinational organizations; it is a capability that – when mastered – enables organizations to reduce the risk of failure, as they test concepts that will help them make the quantum leaps in performance. Through piloting multinationals learn and can, if necessary, shift resources – including cash, talent and managerial attention – which is the core of strategic agility. By allowing organizations to develop a blueprint that they can replicate in other parts of the organization and by building support for strategic initiatives at the operational level among employees that will execute the programs, piloting helps organizations maximize the gains achieved from the initiative. But, when done poorly, piloting can have devastating consequences, consume vast amounts of resources, discredit initiatives or stunt organizational learning. One growth initiative that failed miserably was Motorola’s $5 billion investment in satellite-based phones. The phones, which had a price tag of $3,000 each and came with hefty monthly charges, were ultimately rejected by customers. The business line was closed after a year, and the company filed for Chapter 11 bankruptcy. The problem: Motorola ignored the early warning signs around the shortcomings of the technology and the practicalities of selling the phones on the open market. A pilot was not conducted. In another example, Avon, as part of a global “Service Model Transformation” (SMT) initiative, tried to introduce a new sales order management system in 2012. i The new system was intended to streamline the ordering process, thereby allowing Avon to reduce costs and better meet customer needs and expectations. By utilizing a new back-end enterprise resource planning (ERP) system and a new tablet enabled e-commerce front end, the SMT system was supposed to allow sales agents to showcase products on their tablets and

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Strategic Agility: The Art of Piloting Initiatives

then immediately check inventory and secure orders online. Dubbed the “Promise,” the SMT initiative was expected to save approximately $40 million per year. According to a Securities and Exchange Commission (SEC) filing made by Avon on December 9, 2013, the project was abandoned with a write-off of between $100 and $125 million. The system was piloted in Canada, but it “caused significant business disruption in that market.” The SEC filing revealed that the system “did not show a clear return on investment” and that the decision to stop the project “was made in light of the potential risk of further disruption.” Reports available in the press indicated that there were issues with the front-end e-commerce components rather than the back-end systems. Basic functions such as logging in, saving orders and checking inventory were not working properly. Furthermore, complaints about usability surfaced. Users of tablet devices had become accustomed to easy-to-use apps that could be navigated with the touch of a finger. Reports indicated that the Avon user interface was poorly structured and did not meet users’ expectations for a modern tablet app. While back-end systems were typically more clunky and more difficult to use, apps were becoming simpler and easier. Previous apps involved typing, picking from lists, filling in forms, etc. The more recent apps aimed to get the job done in as few steps as possible by using graphics, images and icons to make the journey from start to finish as simple as possible. Although the intent was there, design issues resulted in a system that did not meet the agents’ expectations of how the app should function. The net effect was disastrous. One senior sales executive lost more than 300 of her sales agents because of the project (1/3 of her total sales team). Although many of the agents that were lost had smaller volumes, and their lower levels of income may not have warranted them battling through the deployment glitches, the SEC filing revealed that the impact was clearly significant enough for Avon to decide to back away from further deployments.

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Introduction

Strategic initiatives – exploitative or exploratory endeavors that utilize cross-functional competencies to support the organization’s corporate and business strategy – are usually intended to improve efficiency or boost growth. As such, strategic initiatives are often aimed at improving productivity or building new markets, creating new products. And both types of initiatives are key to an organization’s competitiveness. The purpose of strategic initiatives is to focus strategy execution on exploitation and exploration – both are a high priority for ensuring an organization’s sustainable competitive advantage. They require change and, therefore, risk. As such, they can fail – and often do. However, the potential returns of strategic initiatives are enormous. They can jumpstart growth as well as help an organization achieve economies of scale and scope. Throughout this book, we will focus on how both growth initiatives and business efficiency initiatives can be successfully sequenced through piloting in order to achieve strategic agility. By strategic agility, we mean the capacity to learn and then shift resources – including cash, talent and managerial attention – quickly and effectively. Our hope is that this book will help leaders build their own piloting capabilities, which will allow them to experiment in an agile, low- risk manner and enhance the likelihood that business efficiency and/ or growth strategic initiatives will be successfully scaled and adopted (or killed if the pilot deems they are duds). Chapter 1 explores what constitutes a strategic initiative in a multinational firm and provides a framework for both exploitative business efficiency and exploratory growth initiatives that are either global in nature or may need to be adapted to local environments. We propose that quick learning in the early phase of a strategic initiative is required before fully scaling across multiple locations. Piloting is an essential part of agile execution as it stacks the odds in favor of success.

Chapter 2 discusses the concept of piloting, the goals and business value that can be gained and how these differ by initiative type

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Strategic Agility: The Art of Piloting Initiatives

Driving Performance with Strategic Initiatives

Why work with Strategic Initiatives?

Value creation from Strategic Initiatives

Types of Strategic Initiatives

Implementing & managing Strategic Initiatives

Chapter 1

What is Piloting?

Chapter 2

Piloting for Success

Chapter 3

Pilot Implementation

Chapter 4

Strategic Initiative Scaling

Chapter 5

Governance of Strategic Initiatives

Chapter 6

Leading Strategic Initiatives

Chapter 7

Figure 1: Overview of the book

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Introduction

(i.e. business efficiency vs. growth). We also look at the geographic dimension, and how this may differ according to the pilot objective, i.e. whether it is driven at the corporate level and pushed out to local geographies (top-down), or whether it is initiated by one of the local geographies and replicated at the corporate level (bottom- up). We then examine the criteria for piloting growth and business efficiency initiatives. Chapter 3 provides guidance on how to select pilot locations and what key conditions need to be in place before they are initiated. The chapter includes a pilot selection tool for the different types of initiatives and contexts that will help you understand the roles of the sponsor, the strategic initiative leader and the team in setting up the pilot and its goals, so that a post-pilot evaluation can take place before the initiative is scaled across the organization. Chapter 4 focuses on how to implement a pilot, including selecting the right team, managing the key stakeholders, ensuring learning happens and building momentum organizationally by proving (or disproving) the validity of the initial hypotheses and/or by generating credibility and commitment across the organization. Chapter 5 examines how to scale the pilot. We discuss the evaluation of the pilot after having ideally completed an after-action review. Then we discuss the different approaches for scaling the pilot and how to speed up the implementation of both business efficiency and growth initiatives. Chapter 6 focuses on the governance of strategic initiatives. This involves ensuring that the strategic initiative is aligned with the strategy, prioritization occurs and is in line with the expected strategic and financial impacts, planning and approval processes are in place, monitoring and controlling are performed and the initiative is supported.

Chapter 7 focuses on leading strategic initiatives. Here we highlight the important role of the execution leaders in providing direction,

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Strategic Agility: The Art of Piloting Initiatives

making critical decisions, following through with the team, helping them learn to execute and monitoring the execution energy. By fundamentally taking a learning approach with the team, both the sponsor and the strategic initiative leader can significantly influence the outcome.

To be continued... buy the book on Amazon