Managing Growth
Managing Growth
1
Course Objectives
1. Appreciate why some organizations have managed to stay relevant for decades
2. Why some have failed, despite all the resources at their command they were unable
mitigate risks associated with the uncertainties in the business world
3. New dynamics of the technology led business world and the strategic choices
organizations are called upon to make.
4. Identify drivers responsible for anomalous behavior of the market and plan future
strategies more confidently.
2
2021 Fortune World’s Most Admired Enterprises ( Among Top 50)
Moving from advantage to advantage is seen as quite normal, not exceptional. Most important, companies
develop a rhythm for moving from arena to arena, with each one being managed as its particular life cycle
stage suggests.
• Continuous Reconfiguration – Balance between Stability and Agility ( Resources and Management
processes)
What do you understand by Core Competence ?
A core competence has three characteristics :
1. Core competences is the (specialized) available knowledge in the corporation that is difficult to
imitate by other organizations. It will be difficult if it is a complex harmonization of individual
technologies and production skills. A competitor may acquire some of the technologies but will find it
difficult to duplicate in totality. Example –For Honda, design and development of Automotive
Engines is its core competence.
2. It provides potential access to a variety of markets thus enhancing opportunities for success.
Competence in display systems for example enables a company to participate in diverse businesses/used
for diverse products such as calculators, TV sets, monitors for laptop computers, automotive dashboards --
which is why Casio’s entry into handheld TV markets was predictable.
3. A core competence should make a significant contribution to perceived customer benefits of end
products. Example Honda’s engine expertise contributes significantly to perceived customer benefits of the
car. ( in terms of reliability , functioning etc.)
What do you understand by Business Model ?
Business Model: A Definition
A business model, consists of four interlocking elements that, taken together, create and deliver value. The
most important to get right, by far, is the first.
•1 Customer value proposition. The model helps customers perform a specific “job” that alternative
offerings don’t address.
Opportunities for creating a CVP are at their most potent, we have found, when alternative products and
services have not been designed with the real job in mind and the company can design an offering that gets
that job—and only that job—done perfectly.
The better the company’s solution is than existing alternatives at getting the job done (and, of course, the
lower the price), the greater the CVP.
Example: MinuteClinics enable people to visit a doctor’s office without appointments by making nurse
practitioners available to treat minor health issues.
2. Profit formula. The profit formula is the blueprint that defines how the company creates value for itself
while providing value to the customer. It consists of the following:
• Revenue model: Price x Volume
• Cost structure: Direct costs, indirect costs, economies of scale. Cost structure will be predominantly driven
by the cost of the key resources required by the business model.
• Margin model: Given the expected volume and cost structure, the contribution needed from each
transaction to achieve desired profits.
• Resource velocity: How fast the company needs to turn over inventory, fixed assets, and other assets—and,
overall, how well the company needs to utilize resources—to support the expected volume and achieve
anticipated profits.
3. Key resources. The key resources are assets such as the people, technology, facilities, equipment, channels,
and brand required to deliver the value proposition to the targeted customer. The focus here is on
the key elements or having key resources that create value for the customer and the company and the way
those elements interact. (Every company also has generic resources that do not create competitive
differentiation.)
4. Key processes. Successful companies have operational and managerial processes that allow to deliver
value in a way they can successfully repeat and increase in scale. These may include such recurrent tasks as
design, product development , training, hiring, manufacturing, marketing , sourcing etc.. Key processes also
include a company’s rules, metrics, and norms.
Example: For Tata Motors to fulfill the requirements of the Nano’s profit formula, it had to reconceive/reinvent
how a car is designed, manufactured, and distributed. It redefined its supplier strategy, choosing to outsource
a remarkable 85% of the Nano’s components and to use nearly 60% fewer vendors than normal to reduce
transaction costs.
Leadership Capabilities to lead in Dynamic Business Environment ( Volatile and Uncertain)
To be successful in today’s dynamic business environment, special leadership capabilities are required as
follows :
Strategy: Understand that strategy is not just a deliberate choice anymore but that it emerges and evolves
based on changing business realities. Strategic decisions should be based on real-time customer input.21 q
Adapting and refining business models: This is the ability to fine-tune company’s business model to stay
relevant and includes making changes in customer value proposition, the company’s profit formula, and
the value chain.
Disruptive innovation: Look for un-served/underserved market segments and identify quick innovation
opportunities that are in alignment with the company’s strategy.
Leading proactive change: This is the ability to lead change agendas through consistent, transparent
communication and a clear vision or roadmap.
A strong leadership mindset: Leaders in these fast-changing times need to more quickly embrace their new
leadership roles—truly thinking of themselves and behaving as leaders, which is a more time-consuming
and challenging transformation than learning discrete skills.
Course Objectives
1. Appreciate why some organizations have managed to stay relevant for decades
2. Why some have failed, despite all the resources at their command they were unable
mitigate risks associated with the uncertainties in the business world
3. New dynamics of the technology led business world and the strategic choices
organizations are called upon to make.
4. Identify drivers responsible for anomalous behavior of the market and plan future
strategies more confidently.
13
Changes in the external environment create uncertainties for the organizations .---
Continued Relevance of their existing products/services , Technologies , processes, policies ,
strategies---
.
Course Objectives
1. Appreciate why some organizations have managed to stay relevant for decades
2. Why some have failed, despite all the resources at their command they were unable
mitigate risks associated with the uncertainties in the business world
3. New dynamics of the technology led business world and the strategic choices
organizations are called upon to make.
4. Identify drivers responsible for anomalous behavior of the market and plan future
strategies more confidently.
25
Technological Forces ( T)
The Internet has changed the nature of opportunities and threats by altering the life cycles of products, increasing the speed of
distribution , creating new products and services, ( ecommerce, Netbanking --) erasing limitation of traditional geographic
markets etc. It has lowered entry barriers and redefined the relationship between industries , various suppliers , creditors,
customers and competitors.
Papa John’s international a few years ago received more than 50 % of pizza orders through its website up from 30 % in 2011 and
far more than industry average of 10%. Technology is a key to Papa John’s success as it strives to compete with Domino’s pizza
and Pizza hut. Pap John’s website is interactive where customers can see a picture of their pizza as they decide upon toppings.
Amazon, Flipkart , Jiomart, Pharmeasy , 1 mg , Uber , Swiggy, Zomato, Grofers , BigBasket , Medlife etc. – are utilizing the
Technological opportunity.
Technological Innovations ,( Uber, Ola ) Use of Technology for automation(UPI Payments, Netbanking etc.) , production, quality
control, communication, sales ( company websites , ecommerce) , decision making , Disruptive innovation.
Technological forces represent major opportunities and threats that must be considered in formulating strategies. ( Brand Japan ,
Sony , Motorola etc.) They can create new markets ( tier 2/tier3 ) , result in proliferation of new and improved
products( electronics) , change the relative competitive cost positions, render existing products and services obsolete( postal
for letter , typewriter etc. ) . Technological advances can create new competitive advantages that are more powerful than
existing advantages. ( Uber, M & M)
No company or industry today is insulated against emerging technological developments. In hi-tech industries , identification and
evaluation of key technological opportunities and threats can be an important part of external strategic management audit.
Reference Books:
The Definitive Drucker, Elizabeth Haas Edersheim, McGraw Hill Education, 2017.
The Individualized Corporation, Sumantro Ghoshal, Christopher A. Bartlett, Harper Collins, 1999.
Breakout Nations, Ruchir Sharma, Penguin Books, Limited, 2013.
Black Swan, Nassim Nicholas Taleb, Penguin UK, 2008.
The Attackers Advantage, 1e, Ram Charan, Hachette UK., 2015.
ICA – 60 marks
Case Study discussion – 30 marks
Group Projects – 30 marks
Please divide your self into groups and let me know by 18.12.2021
What happened to companies like Onida , Videocon and Micromax ?
Videocon has Rs 90,000 crore of debt and filed for bankruptcy
Micromax valuation crashes 93% in 4 years. Investors are exiting taking a dip in
valuation as they seem to think that the company is unlikely to recover.
In 2005, six Japanese brands - Hitachi, JVC, Panasonic, Sharp, Sony and Toshiba -
were among the top-10 global TV makers.
34
• Sony made losses from 2007-08 till 2014 -15 with the exception of 2013 which was helped by the sale of two
landmark properties in New York and Tokyo. Returned to profit in 2015-16 after massive re- structuring
• In response, they launched wide-ranging restructurings that have included layoffs and asset sales in a bid to
restore their fading glory.
•Over time, Sony cut thousands of jobs, sold off the Vaio PC unit, separated the ailing TV business into its own
company and overhauled the smartphone lineup.
•Sony along with still-struggling Sharp , stumbled in the consumer electronics business that built their global
brands,.
Emerging from years of restructuring, the consumer electronics giant is refocusing its business to concentrate on
videogames, entertainment and camera sensors and the sale of its battery business was part of that effort.
Sony is committed to making sure they innovate on both fronts - traditional products and also really new ideas that
really wow customers
•
• Sharp teetered on the edge of bankruptcy for years, with banks bailing it out twice.
It announced huge losses and slashed some 5,000 jobs from its global workforce in
2015.
• That doesn't sound like a lot. But it's a big number in a place like Japan. In a humbling
comedown, Sharp was bought out by Taiwanese electronics manufacturer Foxconn
in 2016.
• This was the first foreign acquisition of a major Japanese electronics firm and marked
the watershed for Japanese once mighty home to electronics sector . Still, Sharp
remains on a recovery path as it continues to benefit from restructuring since it came
under the wing of Taiwan-based Hon Hai Precision Industry Co. in 2016. For the first
half to September, 2018, Sharp posted a consolidated net profit of ¥40.93 billion, up
17.8 percent from a year earlier, remaining in the black for the second year
Japanese brands continue to struggle with Sony the only remaining manufacturer in top-
Panasonic is no longer a dominant force, and Sharp, Toshiba, Hitachi, JVC and Pioneer
are no longer relevant in the global TV market.
What are the reasons for downfall of globally established Japanese electronic goods brands ?
Why did they fail in the very business that built global brands ?
1. Core competences is the (specialized) available knowledge in the corporation that is difficult to
imitate by other organizations. It will be difficult if it is a complex harmonization of individual
technologies and production skills. A competitor may acquire some of the technologies but will find it
difficult to duplicate in totality. Example –For Honda, design and development of Automotive
Engines is its core competence.
2. It provides potential access to a variety of markets thus enhancing opportunities for success.
Competence in display systems for example enables a company to participate in diverse businesses/used
for diverse products such as calculators, TV sets, monitors for laptop computers, automotive dashboards --
which is why Casio’s entry into handheld TV markets was predictable.
3. A core competence should make a significant contribution to perceived customer benefits of end
products. Example Honda’s engine expertise contributes significantly to perceived customer benefits of the
car. ( in terms of reliability , functioning etc.)
Business Model: A Definition
A business model, consists of four interlocking elements that, taken together, create and deliver value. The
most important to get right, by far, is the first.
•1 Customer value proposition. The model helps customers perform a specific “job” that alternative
offerings don’t address.
Opportunities for creating a CVP are at their most potent, we have found, when alternative products and
services have not been designed with the real job in mind and the company can design an offering that gets
that job—and only that job—done perfectly.
The better the company’s solution is than existing alternatives at getting the job done (and, of course, the
lower the price), the greater the CVP.
Example: MinuteClinics enable people to visit a doctor’s office without appointments by making nurse
practitioners available to treat minor health issues.
2. Profit formula. The profit formula is the blueprint that defines how the company creates value for itself
while providing value to the customer. It consists of the following:
• Revenue model: Price x Volume
• Cost structure: Direct costs, indirect costs, economies of scale. Cost structure will be predominantly driven
by the cost of the key resources required by the business model.
• Margin model: Given the expected volume and cost structure, the contribution needed from each
transaction to achieve desired profits.
• Resource velocity: How fast the company needs to turn over inventory, fixed assets, and other assets—and,
overall, how well the company needs to utilize resources—to support the expected volume and achieve
anticipated profits.
3. Key resources. The key resources are assets such as the people, technology, facilities, equipment, channels,
and brand required to deliver the value proposition to the targeted customer. The focus here is on
the key elements or having key resources that create value for the customer and the company and the way
those elements interact. (Every company also has generic resources that do not create competitive
differentiation.)
4. Key processes. Successful companies have operational and managerial processes that allow to deliver
value in a way they can successfully repeat and increase in scale. These may include such recurrent tasks as
design, product development , training, hiring, manufacturing, marketing , sourcing etc.. Key processes also
include a company’s rules, metrics, and norms.
Example: For Tata Motors to fulfill the requirements of the Nano’s profit formula, it had to reconceive/reinvent
how a car is designed, manufactured, and distributed. It redefined its supplier strategy, choosing to outsource
a remarkable 85% of the Nano’s components and to use nearly 60% fewer vendors than normal to reduce
transaction costs.
In today’s uncertain and volatile environment , organizations need New Strategic Frameworks to ride the
wave from one transient advantage to another (navigating from advantage to advantage ) , rather than
sustainable, competitive advantage --- as competitive advantages are temporary.
Moving from advantage to advantage is seen as quite normal, not exceptional. Most important, companies
develop a rhythm for moving from arena to arena, with each one being managed as its particular life cycle
stage suggests.
• Continuous Reconfiguration – Balance between Stability and Agility ( Resources and Management
processes)
Japanese electronic goods companies failed to seize the opportunity to ride some of
the biggest waves of technological innovation in recent decades: digitalization, a shift
toward software and the importance of the Internet.
Strategy: Understand that strategy is not just a deliberate choice anymore but that it emerges and evolves
based on changing business realities. Strategic decisions should be based on real-time customer input.21 q
Adapting and refining business models: This is the ability to fine-tune company’s business model to stay
relevant and includes making changes in customer value proposition, the company’s profit formula, and
the value chain.
Disruptive innovation: Look for un-served/underserved market segments and identify quick innovation
opportunities that are in alignment with the company’s strategy.
Leading proactive change: This is the ability to lead change agendas through consistent, transparent
communication and a clear vision or roadmap.
A strong leadership mindset: Leaders in these fast-changing times need to more quickly embrace their new
leadership roles—truly thinking of themselves and behaving as leaders, which is a more time-consuming
and challenging transformation than learning discrete skills.
Changes in the external environment/factors/forces create uncertainties for the
organizations ( provide opportunities and create threats )
So there is a need to constantly scan the external environment including the competitive
environment to identify these changes and review existing strategies for their relevance.
How can organizations carry out competitive analysis / analyse the competitive
environment ?
Carry out competitive analysis using Porter’s 5 Forces Model-- the way the 5 forces
operate in an Industry shapes competition, impacts profitability and provides
vital inputs for taking appropriate strategic actions.
Key learnings from last session
In today’s uncertain and volatile environment , organizations need New Strategic Frameworks to ride the
wave from one transient advantage to another (navigating from advantage to advantage ) , rather than
sustainable, competitive advantage --- as competitive advantages are temporary.
Moving from advantage to advantage is seen as quite normal, not exceptional. Most important, companies
develop a rhythm for moving from arena to arena, with each one being managed as its particular life cycle
stage suggests.
• Continuous Reconfiguration – Balance between Stability and Agility ( Resources and Management
processes)
Japanese electronic goods companies failed to seize the opportunity to ride some of
the biggest waves of technological innovation in recent decades: digitalization, a shift
toward software and the importance of the Internet.
Strategy: Understand that strategy is not just a deliberate choice anymore but that it emerges and evolves
based on changing business realities. Strategic decisions should be based on real-time customer input.21 q
Adapting and refining business models: This is the ability to fine-tune company’s business model to stay
relevant and includes making changes in customer value proposition, the company’s profit formula, and
the value chain.
Disruptive innovation: Look for un-served/underserved market segments and identify quick innovation
opportunities that are in alignment with the company’s strategy.
Leading proactive change: This is the ability to lead change agendas through consistent, transparent
communication and a clear vision or roadmap.
A strong leadership mindset: Leaders in these fast-changing times need to more quickly embrace their new
leadership roles—truly thinking of themselves and behaving as leaders, which is a more time-consuming
and challenging transformation than learning discrete skills.
Changes in the external environment/factors/forces create uncertainties for the
organizations ( provide opportunities and create threats )
So there is a need to constantly scan the external environment including the competitive
environment to identify these changes and review existing strategies for their relevance.
What do you understand by Core Competence ?
A core competence has three characteristics :
1. Core competences is the (specialized) available knowledge in the corporation that is difficult to
imitate by other organizations. It will be difficult if it is a complex harmonization of individual
technologies and production skills. A competitor may acquire some of the technologies but will find it
difficult to duplicate in totality. Example –For Honda, design and development of Automotive
Engines is its core competence.
2. It provides potential access to a variety of markets thus enhancing opportunities for success.
Competence in display systems for example enables a company to participate in diverse businesses/used
for diverse products such as calculators, TV sets, monitors for laptop computers, automotive dashboards --
which is why Casio’s entry into handheld TV markets was predictable.
3. A core competence should make a significant contribution to perceived customer benefits of end
products. Example Honda’s engine expertise contributes significantly to perceived customer benefits of the
car. ( in terms of reliability , functioning etc.)
What do you understand by Business Model ?
Business Model: A Definition
A business model, consists of four interlocking elements that, taken together, create and deliver value. The
most important to get right, by far, is the first.
•1 Customer value proposition. The model helps customers perform a specific “job” that alternative
offerings don’t address.
Opportunities for creating a CVP are at their most potent, we have found, when alternative products and
services have not been designed with the real job in mind and the company can design an offering that gets
that job—and only that job—done perfectly.
The better the company’s solution is than existing alternatives at getting the job done (and, of course, the
lower the price), the greater the CVP.
Example: MinuteClinics enable people to visit a doctor’s office without appointments by making nurse
practitioners available to treat minor health issues.
2. Profit formula. The profit formula is the blueprint that defines how the company creates value for itself
while providing value to the customer. It consists of the following:
• Revenue model: Price x Volume
• Cost structure: Direct costs, indirect costs, economies of scale. Cost structure will be predominantly driven
by the cost of the key resources required by the business model.
• Margin model: Given the expected volume and cost structure, the contribution needed from each
transaction to achieve desired profits.
• Resource velocity: How fast the company needs to turn over inventory, fixed assets, and other assets—and,
overall, how well the company needs to utilize resources—to support the expected volume and achieve
anticipated profits.
3. Key resources. The key resources are assets such as the people, technology, facilities, equipment, channels,
and brand required to deliver the value proposition to the targeted customer. The focus here is on
the key elements or having key resources that create value for the customer and the company and the way
those elements interact. (Every company also has generic resources that do not create competitive
differentiation.)
4. Key processes. Successful companies have operational and managerial processes that allow to deliver
value in a way they can successfully repeat and increase in scale. These may include such recurrent tasks as
design, product development , training, hiring, manufacturing, marketing , sourcing etc.. Key processes also
include a company’s rules, metrics, and norms.
Example: For Tata Motors to fulfill the requirements of the Nano’s profit formula, it had to reconceive/reinvent
how a car is designed, manufactured, and distributed. It redefined its supplier strategy, choosing to outsource
a remarkable 85% of the Nano’s components and to use nearly 60% fewer vendors than normal to reduce
transaction costs.
Leadership Capabilities to lead in Dynamic Business Environment ( Volatile and Uncertain)
To be successful in today’s dynamic business environment, special leadership capabilities are required as
follows :
Strategy: Understand that strategy is not just a deliberate choice anymore but that it emerges and evolves
based on changing business realities. Strategic decisions should be based on real-time customer input.21 q
Adapting and refining business models: This is the ability to fine-tune company’s business model to stay
relevant and includes making changes in customer value proposition, the company’s profit formula, and
the value chain.
Disruptive innovation: Look for un-served/underserved market segments and identify quick innovation
opportunities that are in alignment with the company’s strategy.
Leading proactive change: This is the ability to lead change agendas through consistent, transparent
communication and a clear vision or roadmap.
A strong leadership mindset: Leaders in these fast-changing times need to more quickly embrace their new
leadership roles—truly thinking of themselves and behaving as leaders, which is a more time-consuming
and challenging transformation than learning discrete skills.
Changes in the external environment/factors/forces create uncertainties for the
organizations ( provide opportunities and create threats )
So there is a need to constantly scan the external environment including the competitive
environment to identify these changes and review existing strategies for their relevance.
Carry out competitive analysis using Porter’s 5 Forces Model-- the way the 5 forces
operate in an Industry shapes competition, impacts profitability and provides
vital inputs for taking appropriate strategic actions.
Changes in the external environment create uncertainties for the organizations .---
Continued Relevance of their existing products/services , Technologies , processes, policies ,
strategies ….
•1Walmart
•2Sinopec Group
•3Royal Dutch Shell
•4China National Petroleum
•5Exxon Mobil
•6BP
•7State Grid Corporation of China
•8Volkswagen
•9Toyota Motor
•10. Glencore
Fortune Global 500 list of 2020
Rank Company Country Industry Revenue i
1 Walmart United States Retail $523 billion
2 Sinopec Group China Petroleum $407 billion
3 State Grid China Energy $383 billion
China National Petr
4 oleum China Petroleum $379 billion
5 Royal Dutch Shell Netherlands Petroleum $352 billion
6 Saudi Aramco Saudi Arabia Energy $329 billion
7 Volkswagen Germany Automobiles $282.7 billion
8 BP United Kingdom Petroleum $282.6 billion
9 Amazon United States Retail $280 billion
10 Toyota Motor Japan Automobiles $275 billion
What are your Observations ?
2021 List of the top 10 countries with the most Global 500 companies.
Breakdown by country
Rank Country Companies
1 China 135
2 United States 122
3 Japan 53
4 Germany 27
5 France 26
6 United Kingdom 22
7 South Korea 15
8 Switzerland 13
9 Canada 12
10 Netherlands 11
Fortune Global 500 Companies
Since 2001, there has been a significant change in the geographical distribution of the
companies in the Global 500 rankings. The number of North American-based companies
decreased from 215 in 2001 to 138 in 2020 and the contribution of Asian-based
companies increased rapidly from 116 in 2001 to 200 in 2020. Most of this growth is
accounted for by the rapid increase in the number of Chinese companies in Global 500,
of which there were 124 by 2020, increasing from only 10 in 2001. The share of
European-based companies also declined, from 158 to 143, over the same period.
Over time there has been a major shift in terms of growth
centers/opportunities and wealth to Asian countries and within that China.
It is uncertain which will be the next growth centers. Which will decline ?
There is no magic formula, only a long list of known ingredients: allow the free-market
flow of goods, money, and people; encourage savings, and make sure banks are
funneling the money into productive investments; impose the rule of law and protect
property rights; stabilize the economy with low budget and trade deficits; keep inflation
in check; open doors to foreign capital, particularly when the capital comes with
technology as part of the bargain; build better roads and schools; feed the children; and
so on.
How these factors will or will not combine to produce growth in any given country at any
given time.
Emerging markets were spoofed in investment circles as an inversion of the 80/20 rule, which
states that 80 percent of your profit comes from the top 20 percent of your clients. For much of
post– World War II history, emerging markets accounted for 80 percent of the world’s population
but only 20 percent of its economic output.
When Latin America was on the rise in the 1960s and 1970s, Africa and large parts of Asia were
on the decline, and when broad swaths of Asia were growing at a rapid clip, in the 1980s and
1990s, Latin American nations could not seem to get their growth act together, while Africa was
dismissed as the “Hopeless Continent.” Even as late as 2002 the big money investors—pension
funds, college endowments—saw emerging markets as too small to move the needle on
multibillion dollar funds, or just too dangerous, because vast countries like India were seen as the
“Wild East” of investing.
Private capital flows into developing countries had surged from an annual pace of $200 billion in 2000 to
nearly a trillion dollars a year in 2010. Even on Wall Street, all the experts were saying the West was in
terminal decline, so the money was bound to flow east and south.
A nuanced perspective on individual nations may not have mattered so much even a decade ago, when
developing economies represented less than 20 percent of the global economy and merely 5 percent of the
world’s stock market capitalization. As of 2011 emerging markets represented nearly 40 percent of the
global economy and just under 15 percent of the total value of the world’s stock markets. These
economies are now too big to be lumped into one marginal class, and are better understood as individual
nations.
Which are the key countries among the emerging markets ?
The mania at the start of the 2010s was the big emerging markets, in particular the belief that the
economies of China, India, Brazil, and Russia would continue growing at the astonishingly rapid pace of the
previous decade. This was a unique golden age, unlikely to be repeated yet widely accepted as the new
standard by which poorer nations should measure growth. The emerging-market mania began with China,
which for two decades starting in 1978 grew rapidly, but erratically, anywhere from 4 to 12 percent a year. Then
in 1998 China began an unbroken run of growth at 8 percent or more each year, almost as if the lucky Chinese
number 8 had also become an iron rule of Chinese economics. Starting in the year 2003, an underappreciated
turning point in the course of the world, this good fortune suddenly spread to virtually all emerging nations, a
class that can be defined a number of different ways but here broadly means countries with a per capita
income of less than $25,000.† Between 2003 and 2007, the average GDP growth rate in these countries
almost doubled, from 3.6 percent in the prior two decades to 7.2 percent, and almost no developing nation
was left behind.
In the peak year of 2007, the economies of all but 3 of the world’s 183 countries grew, and they
expanded at better than 5 percent in 114 countries, up from an average of about 50 countries in the prior two
decades. The three outliers were Fiji and the chronic basket cases of Zimbabwe and the Republic of Congo, all
exceptions that proved the rule. The rising tide lifted nation after nation through a series of normally difficult
development stages: Russia, to cite the most dramatic example, saw its average annual income soar effortlessly
from $1,500 to $13,000 in the course of the decade.
Emerging Markets
Emerging Markets
The current debate on China’s future has two basic camps: the extremely bullish camp and the bearish
camp. The extremely bullish camp likes to extrapolate past trends endlessly into the future, forecasting
continued growth of 8 percent or better. The economists who are most bullish on China predict the
economy will grow by 15 percent in dollar terms every year, or 8 percent growth in GDP plus 5 percent
appreciation of the yuan and 3 to 4 percent inflation, which would be enough for China to “eclipse” the
United States in a decade. The bulls leave no room for recession or reversal, and they forecast a kind of
endless boom in the urban real estate market, assuming that tens of millions of
rural Chinese will migrate to the cities over the next two decades as they have done in the last two.
The bearish camp was a shrill minority until recently, but it’s growing. One common line of the bearish
argument is that China’s over-investment, surging debts, and rising home prices are very similar to what
occurred in Thailand and Malaysia before the 1997–1998 Asian crisis, which brought those economies to a
grinding halt. The truth probably lies in the middle.
The most likely path for China is the trajectory Japan followed in the early 1970s, when its hot
postwar economy began to slow sharply but still grew at a rapid clip, an entirely expected course for
any maturing “miracle” economy.
China is on the verge of a natural slowdown that will change the global balance of power, from
finance to politics, and take the wind out of many economies that are riding in its draft. The signs of
the coming slowdown are already clear, and it is likely to begin in earnest within the next two or
three years, cutting China’s growth from 10 percent to 6 or 7 percent. As a result the millions of
investors and companies betting on near-double-digit growth in China could be adversely
impacted/wiped out.
The shifting fate of the nations creates uncertainties for organizations and investors.
While India is widely touted as the next China, the odds are even that India could regress to be
the next Brazil. While in recent years Brazil has been widely touted as a rising regional superpower,
on the relevant fundamentals Brazil is the anti-China, a nation that invested in the premature
construction of a welfare state rather than the roads and wireless networks of a modern industrial
economy. Nations that have grown dependent on booming prices for raw materials such as oil and
precious metals—namely, Russia and Brazil—face a hard decade ahead. These countries had two of
the world’s top stock markets in the last decade.
The next decade(s) is full of bright spots, but you can’t find them by looking back at the nations
that got the most hype in the last decade(s), and hope they will hit new highs going forward.
These stars are the breakout nations viz the nations that can sustain rapid growth, beating or at
least matching high expectations and the average growth rates of their income class; for a nation like
the Czech Republic, in the income class of $20,000 and more, breaking out will mean 3 to 4 percent
growth in GDP, while for China, in the class of $5,000 and less, anything less than 6 to 7 percent will
feel like a recession.
History suggests economic development is like a game of snakes and
ladders. There is no straight path to the top, and there are fewer ladders than
snakes, which means that it’s much easier to fall than to climb
A nation can climb the ladders for a decade, two decades, three decades,
only to hit a snake and fall back to the bottom, where it must start over
again, and maybe again and again, while rivals pass it by.
That kind of failure happens a lot more often than making it to the top.
These nations comprise a chaotic Fourth World of “frontier markets” in which political leaders have yet to
buy fully into the global market consensus, and where economic expansion and stock market growth are still
more erratic than the norm.( as per whims and fancies of local leaders) At a time when many investors are
looking for major markets that do not follow all the others, the capacity of the frontier markets to chart an
altogether different path makes them an object of fascination
The frontier markets of the Fourth World are home to one billion of the world’s six billion people, but they
account for just 5 percent of global GDP and attract only 0.5 percent of global investment. An almost universal
assumption holds that this gap will close over time—that the frontier will take a larger share of the global
economic pie and take in more investment. In this case the conventional wisdom is likely to be borne out,
though the fits and starts along the way will make it a volatile ride. The frontier is where the world is likely to
see some of the most explosive growth over the next decade. These are countries where getting a few things
right will make a huge difference.
That’s particularly true in nations that have recently suffered bouts of ethnic strife (like Kenya) or civil war (like
Sri Lanka). Here just the absence of conflict can unleash growth.
The “macromania” that seized observers of emerging markets over the last
decade(s), as major markets rose and fell in unison, did not extend to the
Fourth World, where every market tends to follow its own peculiar rhythms,
often at the whim of local leaders. Cambodia opened its stock exchange in July
2011 for reasons that remain unclear: there were no companies ready to list,
making it the only exchange in the world with zero trading. Neighboring Laos
opened its first stock market in early 2011, and by mid-year had just two
companies worth a total of $265,0
The boundaries of the Fourth World are defined not by poverty but by rule of law or the lack of it.
The frontier is home to countries with average incomes under $1,500, like Ghana, but also the richest
nation in the world, tiny Qatar, where the average income is now about $100,000.
Only about fifty countries in the world are classified as developed or emerging, while around thirty-five
are on the (constantly changing) frontier list‡ and nearly one hundred (including Paraguay, Senegal,
and Turkmenistan) are beyond any category, off the maps of even the most intrepid market players
The frontier nations occupy a world where insider trading can run rampant because it’s officially
tolerated, where financial data are spotty and often unreliable because the authorities don’t always
demand clarity from businesses, and where investors are at times advised to travel in the company of
armed bodyguards. Research on the frontier is often less about number crunching than about pressing
one’s ear to the walls: when one of my analysts recently asked a member of the crowd milling
aimlessly around the Kuwait stock exchange what they were waiting for, the reply was, “Rumors.” The
challenge of understanding reality in an environment like this is huge. The 2009 bursting of Dubai’s
huge debt bubble came only days after the ruling sheikh had personally and passionately assured
investors that his emirate’s troubles were overblown.
The frontier is where the world is likely to see some of the most explosive growth over the next
decade(s). These are countries where getting a few things right will make a huge difference. ( Next
growth centers)
South Korea’s rare ability to stay at the cutting edge of fast-changing industries has put it in a class by
itself . The defining feature of Korea’s success over the past decade(s) has been its ability to move out
of Japan’s long shadow as a manufacturing power. In a recent conversation Un Chan Chung, a former
prime minister of South Korea, reminded me that his country is already the seventh-largest economy
in the world, among nations with a population of more than fifty million and a per capita GDP of over
$20,000. Given how rapidly we have seen political regime change transform Central Europe and now the
Middle East, it is not unthinkable that South Korea could grow significantly larger in a single leap if a
unified Korea emerges within the next five or ten years. Unification would add large coal reserves to
an economy with no energy resources of its own, and a disciplined population of twenty four million
northerners to South Korea’s already considerable labor muscle. Those who doubt how successfully
the South can adopt the shut-in Communist society of the North should consider how quickly it is
adapting to emerging trends all over the globe. That’s why it now stands alone as the sole gold medalist.
Since it is likely that global economic growth will remain sluggish and volatile for the foreseeable
future, the ability of U.S. companies to generate income in hard times is likely to be another
enduring advantage. The dramatically different approaches of the developed nations to the basic
challenges— deleveraging debt and maintaining a technological edge in a globalized world—is
going to put them on very different growth paths. On balance, despite the high government debt
and the risk of a sharp slowdown in 2013 due to a fiscal hit, the United States has more than an
even chance of being a breakout nation for some decade(s).
The technology edge is also mitigating the biggest threat to America’s competitive position: debt. Rich
nations have a much worse government debt problem than emerging nations, but the situation is reversed
when you look at corporate debt. Despite slowing global growth, U.S. companies have been able to
increase profits and pay down debt—as we saw earlier—largely because they have been sharply increasing
productivity. This is, in good measure, a story of getting more out of digital technology. In many emerging
markets such as China, where companies generate profit mainly by increasing revenue as opposed to
increasing productivity, corporate profit margins remain low and debts remain stubbornly high.
The perception that the growth game had suddenly become easy—that everyone
could be a winner —is built on the unique results of the last decade(s), when
virtually all emerging markets did grow together. But that was both the first and, in
all probability, the last time we will ever see such a golden age: the next decade(s)
will almost certainly not bring more of the same.
Reading Excel spreadsheets in the office can’t tell you, for example, whether a
political regime gets the connection between good economics and good politics.
Emerging Markets
Emerging Markets
There is a huge pool of competitors, and only a few nations defy the long odds
against success. Those are the rare breakout nations, and they beat the game by
growing faster than rivals in their own income class, so that a nation whose per capita
income is under $5,000 competes with rivals in that class. The growth game is all about
beating expectations, and your peers
We are in a time of extreme turbulence accompanied by rapid evolutionary change.
Becoming preoccupied with the competition is as short-sighted as it would have been for
the dinosaurs to peg their survival on competition with the amphibians.
The dinosaurs dropped out of the picture not because they were beaten by any other type
of creature but simply because they could not respond successfully to the challenge of a
changing environment. Given their large size, their response time from head to tail was
inadequate. The time it took to receive information from their tail-to-brain and back again,
left them completely vulnerable to fatal attack.
. The long-term advantage lies with those organizations that focus on the external
environment as a whole (beyond competition) to identify the new growth centers /
break out nations to capture emerging growth opportunities for managing/sustaining
growth It is not by competing for market share but by capitalizing on change that today's
organizations can survive, achieve sustainability and thrive. Capturing greater market
share from the competition is only of critical importance when the game remains
unchanged. When a business or industry is going through a profound transformation --
and there is hardly one that is not doing so at present given.
Changes in the external environment ( triggered by various categories of forces/ varying
economic growth across nations /shifting growth centres ) create uncertainties for the
organizations .--- Continued Relevance of their existing products/services , Technologies ,
processes, policies , strategies ….
Management processes—the recipes and routines that determine how the work of management gets
carried out on a day-to-day basis. Typical processes include:
Strategic planning
Capital budgeting
Project management
Hiring and promotion
Training and development
Internal communications
Knowledge management
Periodic business reviews
Employee assessment and compensation
These processes establish standard protocols for common management tasks such as evaluating an
employee or reviewing a budget request
Group 2 : - Sustained Global Positioning of Toyota Motors
Sanjanaa Srivatsan , Ishan Jawrani , Malvika Pandey, Garima Singh, Avinash Gangwani
a.Company Overview ( Including Vision and Mission)
b. Key Strengths ( Including Leadership, People capability, Technology, Culture , Core Competencies, Relevant
Business Model , Partnerships and others as applicable )
c. Opportunities and Threats over time
d. Strategies to seize opportunities and mitigate threats including their execution ( Guided by Vision/ Mission)
e. Management of companies ( Management Innovations)
f. Focus on Innovation/Continual improvement
g Advantage of Agility ( as applicable)
h. Conclusion
Group 3: - Sustained Global Positioning of Royal Dutch Shell
Anant Bhardwaj, Atul Singh, Virali Sanghavi, Kshitij Kondawar, Muskan Porwal
a. Company Overview ( Including Vision and Mission)
b. Key Strengths ( Including Leadership, People capability, Technology, Culture , Core Competencies, Relevant
Business model , Partnerships and others as applicable )
c. Opportunities and Threats over time
d. Strategies to seize opportunities and mitigate threats including their execution ( Guided by Vision/ Mission)
e. Management of companies ( Management Innovations)
f. Focus on Innovation/Continual improvement
g Advantage of Agility ( as applicable)
h. Conclusion
Group 4: - Sustained Global Positioning of Samsung
Hansaja, Gunjan, Chintan , Akshita, Swara
a. Company Overview ( Including Vision and Mission)
b. Key Strengths ( Including Leadership, People capability, Technology, Culture , Core Competencies, Relevant
Business model , Partnerships and others as applicable )
c. Opportunities and Threats over time
d. Strategies to seize opportunities and mitigate threats including their execution ( Guided by Vision/ Mission)
e. Management of companies ( Management Innovations)
f. Focus on Innovation/Continual improvement
g Advantage of Agility ( as applicable)
h. Conclusion
Changes in the external environment ( triggered by various categories of forces/ varying
economic growth across nations /shifting growth centres ) create uncertainties for the
organizations .--- Continued Relevance of their existing products/services , Technologies ,
processes, policies , strategies ….
Constant/ emerging changes in the business environment can create uncertainties for
organizations thus impacting organizational performance. ( Provide opportunities and
create threats)
• At the National level
• Economic
• Technological
• Competitive
Comprehensive Strategic Management Model
Which/How do Political /Geopolitical /Government/legal forces/natural environment factors create
uncertainties /Impact organizational performance?
Give examples
Government legislations / regulation (employee Safety, consumer protection, environment , fiscal policies on
taxation/duties , On equal employment ), Import -Export regulations, Severity of terrorist activities , Political
conditions, ----
Geopolitical factors /forces such as trade relationships between countries -US China relationships/ trade
war/tariffs ( Huawei) , Brexit , Russian American relationships, African American
relationships, Vagaries of oil producing nations
Which/How do Economic forces create uncertainty/ impact organizational
performance( provide opportunity or create threats) ?
Examples ?
US China relationships/ trade war/tariffs ( Huawei) , Brexit , Russian American relationships, African American
relationships, Vagaries of oil producing nations, Government legislations / regulation
(employee Safety, consumer protection, environment , fiscal policies on taxation , On equal employment ), Import
-Export regulations, Severity of terrorist activities , Political conditions, ----
• Level of disposal income, propensity of people to spend, GDP , Consumption trends, unemployment , worker
productivity levels, , Monetary policies , currency exchange rates , central bank lending rates, inflation, regional
Labour rates, stock market trends -----
Which/How do Social/cultural forces create uncertainty/impact organizational
performance ?
Examples ?
US China relationships/ trade war/tariffs ( Huawei) , Brexit , Russian American relationships, African American
relationships, Vagaries of oil producing nations, Government legislations / regulation
(employee Safety, consumer protection, environment , fiscal policies on taxation , On equal employment ), Import
-Export regulations, Severity of terrorist activities , Political conditions, ----
• Level of disposal income, propensity of people to spend, GDP , Consumption trends, unemployment , worker
productivity levels, , Monetary policies , currency exchange rates , central bank lending rates, inflation, regional
Labour rates, stock market trends -----
Customer attitudes /beliefs/tastes , size and structure of workforce , Recycling , Waste Management , Air Pollution
, Pollution, Attitude towards work/career , Attitude towards customer service, Social Responsibility ---
Changes in the external environment/factors/forces create uncertainties for the
organizations .--- Continued Relevance of their existing products/services ,
Technologies , processes, policies , strategies ….
HUL anticipated/monitored changing customer preferences ( 60 % customers
preferred natural products compared to a year ago) and responded with agility ( based
on appropriate frameworks/methodologies which were in place ) to create/develop
and launch new products under “ nature protect”, develop core competencies,
tweaked business model for new value proposition for natural products -------so can
manage/sustain growth.
How do Technological forces create uncertainties/impact organizational
performance ?
Examples ?
US China relationships/ trade war/tariffs ( Huawei) , Brexit , Russian American relationships, African American
relationships, Vagaries of oil producing nations, Government legislations / regulation
(employee Safety, consumer protection, environment , fiscal policies on taxation , On equal employment ), Import
-Export regulations, Severity of terrorist activities , Political conditions, ----
• Level of disposal income, propensity of people to spend, GDP , Consumption trends, unemployment , worker
productivity levels, , Monetary policies , currency exchange rates , central bank lending rates, inflation, regional
Labour rates, stock market trends -----
Customer attitudes /beliefs/tastes , size and structure of workforce , Recycling , Waste Management , Air Pollution
, Pollution, Attitude towards work/career , Attitude towards customer service, Social Responsibility ---
Technological Innovations , Use of Technology for automation, production, quality control, communication, sales ,
decision making , Disruptive innovation
Technological Forces ( T)
The Internet has changed the nature of opportunities and threats by altering the life cycles of products, increasing the speed of
distribution , creating new products and services, ( ecommerce, Netbanking --) erasing limitation of traditional geographic
markets etc. It has lowered entry barriers and redefined the relationship between industries , various suppliers , creditors,
customers and competitors.
Papa John’s international a few years ago received more than 50 % of pizza orders through its website up from 30 % in 2011 and
far more than industry average of 10%. Technology is a key to Papa John’s success as it strives to compete with Domino’s pizza
and Pizza hut. Pap John’s website is interactive where customers can see a picture of their pizza as they decide upon toppings.
Amazon, Flipkart , Jiomart, Pharmeasy , 1 mg , Uber , Swiggy, Zomato, Grofers , BigBasket , Medlife etc. – are utilizing the
Technological opportunity.
Technological Innovations ,( Uber, Ola ) Use of Technology for automation(UPI Payments, Netbanking etc.) , production, quality
control, communication, sales ( company websites , ecommerce) , decision making , Disruptive innovation.
Technological forces represent major opportunities and threats that must be considered in formulating strategies. ( Brand Japan ,
Sony , Motorola etc.) They can create new markets ( tier 2/tier3 ) , result in proliferation of new and improved
products( electronics) , change the relative competitive cost positions, render existing products and services obsolete( postal
for letter , typewriter etc. ) . Technological advances can create new competitive advantages that are more powerful than
existing advantages. ( Uber, M & M)
No company or industry today is insulated against emerging technological developments. In hi-tech industries , identification and
evaluation of key technological opportunities and threats can be an important part of external strategic management audit.
Changes in the external environment ( triggered by various categories of forces ) create
uncertainties for the organizations .--- Continued Relevance of their existing
products/services , Technologies , processes, policies , strategies …. Brand Japan ,
Blackberry , Nokia --
Management processes—the recipes and routines that determine how the work of management gets
carried out on a day-to-day basis. Typical processes include:
Strategic planning
Capital budgeting
Project management
Hiring and promotion
Training and development
Internal communications
Knowledge management
Periodic business reviews
Employee assessment and compensation
These processes establish standard protocols for common management tasks such as evaluating an
employee or reviewing a budget request
Constant/ emerging changes in the business environment( triggered by PESTEL, C and
other factors such as shift in growth centres /opportunities) can create uncertainties for
organizations thus impacting organizational performance. ( Provide opportunities and
create threats)
Key Learnings
In today’s uncertain and volatile environment , organizations need New Strategic Frameworks to ride the
wave from one transient advantage to another (navigating from advantage to advantage ) , rather than
sustainable, competitive advantage --- as competitive advantages are temporary.
Moving from advantage to advantage is seen as quite normal, not exceptional. Most important, companies
develop a rhythm for moving from arena to arena, with each one being managed as its particular life cycle
stage suggests.
• Continuous Reconfiguration – Balance between Stability and Agility ( Resources and Management
processes)
Changes in the external environment ( triggered by various categories of forces/ varying
economic growth across nations /shifting growth centres ) create uncertainties for the
organizations .--- Continued Relevance of their existing products/services , Technologies ,
processes, policies , strategies …. Brand Japan, Nokia
Management processes—the recipes and routines that determine how the work of management gets
carried out on a day-to-day basis. Typical processes include:
Strategic planning
Capital budgeting
Project management
Hiring and promotion
Training and development
Internal communications
Knowledge management
Periodic business reviews
Employee assessment and compensation
These processes establish standard protocols for common management tasks such as evaluating an
employee or reviewing a budget request
Constant/ emerging changes in the business environment( triggered by PESTEL, C and
other factors such as shift in growth centres /opportunities) can create uncertainties for
organizations thus impacting organizational performance. ( Provide opportunities and
create threats)
Over time there has been a major shift in terms of growth
centers/opportunities and wealth to Asian countries and within that China.
It is uncertain which will be the next growth centers. Which will decline ?
A nation can climb the ladders for a decade, two decades, three decades,
only to hit a snake and fall back to the bottom, where it must start over
again, and maybe again and again, while rivals pass it by.
That kind of failure happens a lot more often than making it to the top.
1. Core competences is the (specialized) available knowledge in the corporation that is difficult to
imitate by other organizations. It will be difficult if it is a complex harmonization of individual
technologies and production skills. A competitor may acquire some of the technologies but will find it
difficult to duplicate in totality. Example –For Honda, design and development of Automotive
Engines is its core competence.
2. It provides potential access to a variety of markets thus enhancing opportunities for success.
Competence in display systems for example enables a company to participate in diverse businesses/used
for diverse products such as calculators, TV sets, monitors for laptop computers, automotive dashboards --
which is why Casio’s entry into handheld TV markets was predictable.
3. A core competence should make a significant contribution to perceived customer benefits of end
products. Example Honda’s engine expertise contributes significantly to perceived customer benefits of the
car. ( in terms of reliability , functioning etc.)
What do you understand by Business Model ?
Business Model: A Definition
A business model, consists of four interlocking elements that, taken together, create and deliver value. The
most important to get right, by far, is the first.
•1 Customer value proposition. The model helps customers perform a specific “job” that alternative
offerings don’t address.
Opportunities for creating a CVP are at their most potent, we have found, when alternative products and
services have not been designed with the real job in mind and the company can design an offering that gets
that job—and only that job—done perfectly.
The better the company’s solution is than existing alternatives at getting the job done (and, of course, the
lower the price), the greater the CVP.
Example: MinuteClinics enable people to visit a doctor’s office without appointments by making nurse
practitioners available to treat minor health issues.
2. Profit formula. The profit formula is the blueprint that defines how the company creates value for itself
while providing value to the customer. It consists of the following:
• Revenue model: Price x Volume
• Cost structure: Direct costs, indirect costs, economies of scale. Cost structure will be predominantly driven
by the cost of the key resources required by the business model.
• Margin model: Given the expected volume and cost structure, the contribution needed from each
transaction to achieve desired profits.
• Resource velocity: How fast the company needs to turn over inventory, fixed assets, and other assets—and,
overall, how well the company needs to utilize resources—to support the expected volume and achieve
anticipated profits.
3. Key resources. The key resources are assets such as the people, technology, facilities, equipment, channels,
and brand required to deliver the value proposition to the targeted customer. The focus here is on
the key elements or having key resources that create value for the customer and the company and the way
those elements interact. (Every company also has generic resources that do not create competitive
differentiation.)
4. Key processes. Successful companies have operational and managerial processes that allow to deliver
value in a way they can successfully repeat and increase in scale. These may include such recurrent tasks as
design, product development , training, hiring, manufacturing, marketing , sourcing etc.. Key processes also
include a company’s rules, metrics, and norms.
Example: For Tata Motors to fulfill the requirements of the Nano’s profit formula, it had to reconceive/reinvent
how a car is designed, manufactured, and distributed. It redefined its supplier strategy, choosing to outsource
a remarkable 85% of the Nano’s components and to use nearly 60% fewer vendors than normal to reduce
transaction costs.
Leadership Capabilities to lead in Dynamic Business Environment ( Volatile and Uncertain)
To be successful in today’s dynamic business environment, special leadership capabilities are required as
follows :
Strategy: Understand that strategy is not just a deliberate choice anymore but that it emerges and evolves
based on changing business realities. Strategic decisions should be based on real-time customer input.21 q
Adapting and refining business models: This is the ability to fine-tune company’s business model to stay
relevant and includes making changes in customer value proposition, the company’s profit formula, and
the value chain.
Disruptive innovation: Look for un-served/underserved market segments and identify quick innovation
opportunities that are in alignment with the company’s strategy.
Leading proactive change: This is the ability to lead change agendas through consistent, transparent
communication and a clear vision or roadmap.
A strong leadership mindset: Leaders in these fast-changing times need to more quickly embrace their new
leadership roles—truly thinking of themselves and behaving as leaders, which is a more time-consuming
and challenging transformation than learning discrete skills.
Carry out competitive analysis using Porter’s 5 Forces Model-- the way the 5 forces
operate in an Industry shapes competition, impacts profitability and provides
vital inputs for taking appropriate strategic actions.
Changes in the external environment/factors/forces create uncertainties for the
organizations ( provide opportunities and create threats )
So there is a need to constantly scan the external environment including the competitive
environment to identify these changes and review existing strategies for their relevance.
Comprehensive Strategic Management Model
Leadership Capabilities to lead in Dynamic Business Environment
To be successful in today’s dynamic business environment, special leadership capabilities are required as
follows :
Strategy: Understand that strategy is not just a deliberate choice anymore but that it emerges and evolves
based on changing business realities. Strategic decisions should be based on real-time customer input.
Adapting and refining business models: This is the ability to fine-tune company’s business model to stay
relevant and includes making incremental changes in customer value proposition, the company’s profit
formula, and the value chain.
Disruptive innovation: Look for un-served/underserved market segments and identify quick innovation
opportunities that are in alignment with the company’s strategy.
Leading proactive change: This is the ability to lead change agendas through consistent, transparent
communication and a clear vision or roadmap.
A strong leadership mindset: Leaders in these fast-changing times need to more quickly embrace their new
leadership roles—truly thinking of themselves and behaving as leaders, which is a more time-consuming
and challenging transformation than learning discrete skills.
Key Factors/ingredients for Success in Turbulent/Uncertain & Volatile Business Environment
• Leadership with appropriate capabilities
• Customer value proposition. The model helps customers perform a specific “job” that
alternative offerings don’t address.
• Profit formula. The model generates value for the company while delivering value to the
customer through factors such as revenue model, cost structure, margins, and inventory
turnover.
Example: The Tata Group’s inexpensive car, the Nano, is profitable because the company
has reduced many cost structure elements, accepted lower-than-standard gross margins,
and sold the Nano in large volumes to its target market: first-time car buyers in emerging
markets.
• Key resources and processes. Your company has the people, technology, products,
facilities, equipment, and brand required to deliver the value proposition to the targeted
customers. And it has processes (training, manufacturing, service---) to leverage those
resources.
Example:
For Tata Motors to fulfill the requirements of the Nano’s profit formula, it had to
reconceive how a car is designed, manufactured, and distributed. It redefined its supplier
strategy, choosing to outsource a remarkable 85% of the Nano’s components and to use
nearly 60% fewer vendors than normal to reduce transaction costs.
Future of Management
End of Management
Who Manages a Company ?
To a large extent, companies are being managed right now by a small coterie of long-
departed theorists and practitioners who invented the rules and conventions of
“modern” management back in the early years of the 20th century.
They are the poltergeists who inhabit the musty machinery of management. It is their
edicts, echoing across the decades, that shape the way a company( of the 21st century)
allocates resources, sets budgets, distributes power, rewards people, and makes
decisions.
Most companies have a roughly similar management hierarchy (a cascade of EVPs, SVPs,
and VPs). They have analogous control systems, HR practices, and planning rituals, and
rely on comparable reporting structures and review systems
Think about the great product breakthroughs over the last decade or two that have changed the way
we live: the personal computer, the mobile phone, digital music, e-mail, and online communities.
Now try to think of a breakthrough in the practice of management that has had a similar impact in the
realm of business—anything that has dramatically changed the way large companies are run. Not easy,
is it? And therein lies the problem.
While a suddenly resurrected 1960s-era CEO would undoubtedly be amazed by the flexibility of today’s
real-time supply chains, and the ability to provide 24/7 customer service, he or she would find a great
many of today’s management rituals little changed from those that governed corporate life a generation or
two ago
Frontline employees may be smarter and better trained, but they’re still expected to line up obediently
behind executive decisions. Lower-level managers are still appointed by more senior managers.
Strategy still gets set at the top. And the big calls are still made by people with big titles and even bigger
salaries.
There may be fewer middle managers on the payroll , but those that remain are doing what managers have
always done—setting budgets, assigning tasks, reviewing performance, and cajoling their subordinates to do
better.
Perhaps we have reached the end of management. Perhaps we have more or less mastered the science
of organizing human beings, allocating resources, defining objectives, laying out plans, and minimizing
deviations from best practice. Maybe most of the really tough management problems have already been
solved.
But as a species evolves, the percentage of terrain that lies above it steadily dwindles. Over time, there
are fewer and fewer routes that lead upward, and ever more that lead downward. As a result, the pace
of evolution slows. In an expansive fitness landscape, that is, one with many possible pathways, it is
unlikely that a particular species will ever scale the evolutionary equivalent of K2 or Kangchenjunga.
Instead, its meandering journey will probably end on the summit of a local peak—a crag that is, by
comparison, a mere shadow of the mountains that loom over the horizon.
This is not to belittle the achievements of modern management. Indeed, one could argue that the
machinery of modern management—which encompasses variance analysis, capital budgeting, project
management, pay-for-performance, strategic planning, and the like— amounts to one of humanity’s
greatest inventions—right up there with fire, written language, and democracy.
Most of the essential tools and techniques of modern management were invented by individuals born in
the 19th century, ( when the business environment/challenges were very different) not long after the end
of the American Civil War. Those intrepid pioneers developed standardized job descriptions and work
methods. They invented protocols for production planning and scheduling.
They mastered the intricacies of cost accounting and profit analysis. They instituted exception-based
reporting and developed detailed financial controls. They devised incentive-based compensation schemes
and set up personnel department.
Like the gasoline engine, our industrial-age management model is languishing ( ineffective) out at the far
end of the S-curve, and may be reaching the limits of its improvability
Because management—the capacity to marshal resources, lay out plans, program work, and spur effort—is
central to the accomplishment of human purpose. When it’s less effective than it could be, or needs to be, we
all pay a price.
What constrains the performance of the organizations( 21st century) is not its operating model, nor its
business model, but its management model.
Management innovation has a unique capacity to create a long-term advantage for the company.
Even the world’s “most admired” companies aren’t as adaptable as they need to be, as innovative as they
could be, or as much fun to work in as they should be. ( as their management processes /practices are derived
from the 20th century inventions and need improvement)
When it comes to the future of management ( innovating management processes) , organizations should
rather lead than follow.
Great organizations should be capable of spontaneous strategic renewal,( move from one advantage to
another) the drama of change is unaccompanied by the wrenching trauma of a turnaround. I dream of
businesses where an electric current of innovation pulses through every activity, where the renegades always
trump the reactionaries. ( Innovation should be part of everyone’ job everyday)
I dream of companies that actually deserve the passion and creativity of the folks who work there, and
naturally elicit the very best that people have to give. ( motivated /engaged /innovative workforce) Of course,
these are more than dreams; they are imperatives. ( for managing growth)
They are do-or-die challenges for any company that hopes to thrive in the tumultuous times ahead—and
they can be surmounted only with inspired management innovation.
Power of Management Innovation – Example
Vital role played by Management process innovation in long term success of Google
As the pace of change accelerates, more and more companies are finding themselves on the wrong side of the
change curve. ( unable to cope with uncertainty/manage change effectively)
Recent research by L. G. Thomas and Richard D’Aveni suggests that industry leadership is
changing hands more frequently, and competitive advantage is eroding more rapidly, than ever before.
Today, it’s not just the occasional company that gets caught out by the future( future success related challenges/
disruption) , but entire industries—be it Traditional airlines, old-line department stores, network television
broadcasters, the big drug companies, America’s carmakers, or the newspaper and music industries.
Deregulation( Oil and Gas , Retail, Telecom, Mining, Broadcasting --) , along with the de-scaling effects of new
technology( Start-ups --don’t need physical stores across the country, have a website to reach customers) , are
dramatically reducing the barriers to entry across a wide range of industries, from publishing to
telecommunications to banking to airlines. As a result,
long-standing oligopolies are fracturing and competitive “anarchy”( free competition) is on the rise. Increasingly,
companies are finding themselves enmeshed in “value webs” and “ecosystems” over which they have only
partial control.
The digitization of anything not nailed down threatens companies that make their living out of creating and
selling intellectual property. Drug companies, film studios, publishers, and fashion designers are al struggling to
adapt to a world where information and ideas “want to be free.”
The Internet is rapidly shifting bargaining power from producers to consumers. In the past, customer “loyalty”
was often an artifact of high search costs and limited information, and companies frequently profited from
customer ignorance. Today, customers are in control as never before—and in a world of near-perfect
information, there is less and less room for mediocre products and services.
Strategy life cycles are shrinking. Thanks to plentiful capital, the power of outsourcing, and the global reach of
the Web, it’s possible to ramp up a new business faster than ever before. But the more rapidly a business
grows, the sooner it fulfills the promise of its original business model, peaks, and enters its dotage. Today, the
parabola of success is often a short, sharp spike.
Plummeting communication costs and globalization are opening up industries to a horde of new, ultra-low-
cost competitors. ( Data, laptops , electronics goods etc. )
Need to Innovate Management
These new realities call for new organizational and managerial capabilities.
To thrive in an increasingly disruptive world, companies must become as strategically adaptable as they are
operationally efficient. They need to dramatically accelerating the pace of strategic renewal in
organizations large and small.
To safeguard their margins, they must become gushers of rule breaking innovation. And if they’re going to
out-invent and outthink a growing mob of upstarts, they must learn how to inspire their employees to give
the very best of themselves every day.
These are the challenges that must be addressed by 21st-century Management Innovators.
If you’ve spent any time inside large organizations, you know that expecting them to be strategically
nimble, restlessly innovative, or highly engaging places to work—or anything else than merely efficient—
is like expecting a dog to do the tango. Dogs are quadrupeds. Dancing isn’t in their DNA.
So it is with corporations. Their managerial DNA makes some things easy and others virtually impossible.
Reengineering, cost-cutting, continuous improvement, outsourcing, and offshoring: these things are
entirely consistent with the genetic proclivities of large companies. They’re all about better, faster,
quicker, and cheaper.
Unfortunately, though, resolving some of modern management’s more odious trade-offs, and coping with
tomorrow’s disorienting discontinuities, is going to require something more akin to gene replacement
therapy.
Need to Innovate Management
We must learn how to coordinate the efforts of thousands of individuals without creating a burdensome
hierarchy of overseers; to keep a tight rein on costs without strangling human imagination; and to build
organizations where discipline and freedom aren’t mutually exclusive. In this new century, we must strive
to transcend the seemingly unavoidable trade-offs that have been the unhappy legacy of modern
management.
Vital role played by Management process innovation in long term success of Google
Strategic Planning - Position and hierarchy insignificant , More bottom-up than top-
down, CEO only plays host to provoke than proclaim
For our purposes, management innovation is anything that substantially alters the way in which the work
of management is carried out, or significantly modifies customary organizational forms, and, by so doing,
advances organizational goals.
Put simply, management innovation changes the way managers do what they do, and does so in a way that
enhances organizational performance.
What do Managers do to( Management Practices ) accomplish the goals of the organization ?
Practice of Management entails:
Anything that dramatically changes how this work gets done can be labeled as Management
Innovation
Any Examples of Management Innovation ?
Example of Management Innovation
Management innovation also encompasses value-creating changes to organizational structures and roles.
Companies consist of business units, departments, work groups, communities of practice, and alliances with
suppliers, partners, and lead customers.
For example, InnoCentive, a spin-off from Eli Lilly and Company, has created a global market for scientific
expertise that allows “seeker” companies to bid out tough technical challenges to a network of more than
70,000 scientists around the world ( Crowd sourced innovation) . While the goal of InnoCentive is scientific
innovation, the processes and structures that support its global network of seekers and solvers is a first-
rate example of management innovation, in that it involves new ways of aligning effort, coordinating
activities, and applying knowledge—all components of managerial work.
Focus on Management Processes
While operational innovation focuses on a company’s business processes (procurement,
manufacturing, marketing, order fulfillment, customer service, etc.),
Management innovation targets company’s management processes—the recipes and routines that
determine how the work of management gets carried out on a day-to-day basis. Typical processes
include:
Strategic planning
Capital budgeting
Project management
Hiring and promotion
Training and development
Internal communications
Knowledge management
Periodic business reviews
Employee assessment and compensation
These processes establish standard protocols for common management tasks such as evaluating an
employee or reviewing a budget request
Focus on Management Processes
They propagate best practice by translating successful techniques into tools and methods that can be
broadly applied.
They also shape management values by reinforcing certain behaviors and not others.
Put simply, management processes are the “gears” that turn management principles into everyday
practice.
In even a medium-sized organization, it’s impossible to change the what and how of managing without
changing the processes that govern that work.
Practice of Management entails:
Anything that dramatically changes how this work gets done can be labeled as Management
Innovation
Power of Management Innovation
One inescapable conclusion: major advances in management practice often lead to significant shifts in
competitive position, and often confer long-lasting advantages on pioneering firms.
Consider, for example, a few of the consistently successful companies: General Electric, DuPont, Procter &
Gamble, Toyota, and Visa.
What is it that propelled these companies to positions of global leadership? Of course, the usual suspects
—great products, disciplined execution, and farsighted leaders—played a role. But if one digs deeper,
one discovers that it was management innovation, first and foremost, that set them on the course to
greatness:
Fortune World’s Most Admired Enterprises ( Among Top 50)
Over the past few years, General Electric has been hard at work reinventing its core management processes—
financial reviews, management development, strategic planning, and executive assessment—around the challenge of
raising the company’s organic growth rate. CEO Jeff Immelt is determined to make GE the world’s largest growth
company.
In recent years, Procter & Gamble has turned its R&D process inside out in an attempt to
open up its development pipeline to ideas and technologies sourced from outside the firm.
P&G’s chairman, A. G. Lafley, has said that he expects 50 percent of the company’s future
products to be based on concepts and technologies acquired from third parties.
Capturing the wisdom of every employee. –Toyota is the world’s most profitable carmaker— by a long
margin. Much of its success rests on an unmatched ability to enroll employees in the relentless pursuit of
efficiency and quality. For more than 40 years, Toyota’s capacity for continuous improvement has been
powered by a belief in the ability of “ordinary” employees to solve complex problems. Indeed, people
inside Toyota sometimes refer to the Toyota Production System as the “Thinking People System.” In 2005,
the company received more than 540,000 improvement ideas from its Japanese employees.
Managing science. –In the early 1900s, General Electric perfected Thomas Edison’s most notable invention,
the industrial research laboratory. GE’s success in bringing management discipline to the chaotic process
of scientific discovery allowed Edison to claim that his labs were capable of producing a minor invention
every 10 days and a major breakthrough every six months. This was no idle boast. Over the first half of the
20th century, GE won more patents than any other company in America.
Power of Management Innovation- Examples
Managing intangible assets. –Procter & Gamble’s preeminence in the packaged goods industry has its
roots in the early 1930s, when the company began to formalize its approach to brand management. At the
time, the idea of creating value out of intangible assets was a novel idea. In the decades since, P&G has
steadily built upon its early lead in building and managing great brands. In 2007, P&G’s business portfolio
included 16 brands that were delivering more than $1 billion in annual sales.
Above highlight the decisive role that management innovation often plays in helping companies build
durable advantages. Indeed, no other factor seems to have been similarly instrumental in underwriting
long-term competitive success
From Innovation to Advantage
Management innovation tends to yield a competitive advantage when one or more of three conditions are
met:
1. The innovation is based on a novel management principle that challenges some long-standing
orthodoxy;
3. The innovation is part of an ongoing program of rapid-fire invention where progress compounds over
time.
Power of Management Innovation- Examples (Advantage through Novel Management Principle )
Capturing the wisdom of every employee. –Toyota is the world’s most profitable carmaker— by a long
margin. Much of its success rests on an unmatched ability to enroll employees in the relentless pursuit of
efficiency and quality. For more than 40 years, Toyota’s capacity for continuous improvement has been
powered by a belief in the ability of “ordinary” employees to solve complex problems. Indeed, people
inside Toyota sometimes refer to the Toyota Production System as the “Thinking People System.” In 2005,
the company received more than 540,000 improvement ideas from its Japanese employees.
Fortune World’s Most Admired Enterprises ( Among Top 50)
Amazingly, it took nearly 20 years for America’s carmakers to decipher Toyota’s advantage.
Unlike its Western rivals, Toyota believed that first-line employees could be more than cogs in a soulless
manufacturing machine. If given the right tools and training, they could be problem solvers, innovators,
and change agents.
Toyota saw within its workforce the necessary genius for never-ending, fast-paced operational improvement.
In contrast, U.S. car companies tended to discount the contributions that could be made by first-line
employees, and relied instead on staff experts for improvements in quality and efficiency.
Over the past 40 years, Toyota has gotten more out of its people, day by day and year by year, than its
competitors have gotten out of theirs— an advantage that has been reflected in Toyota’s ever-rising
market share and market value.
While U.S. carmakers are now working hard to more fully utilize the brainpower of their employees, they
have paid dearly for a management system that was rooted in intellectual feudalism.
As this example illustrates, management dogmas are often so deeply ingrained as to be nearly invisible,
and so devoutly held as to be virtually unassailable.
When it comes to management innovation, the more unconventional the underlying principle, the
longer it will take for competitors to respond/imitate. In some cases, the head-scratching can go on for
decades
Example of Advantage through Systemic Changes
It is also tough for rivals to replicate advantages that are systemic, that encompass a web of individual
innovations spanning multiple management processes.
In 1999, Dave Whitwam, then chairman of Whirlpool, challenged his colleagues to make innovation a deeply
embedded core competence. From the outset, Whitwam made it clear that he didn’t want a one-off program, a
corporate incubator, or a new ventures division.
He wanted something deeper and more systemic. As a first step, he appointed Nancy Snyder, a well respected
corporate vice president, as Whirlpool’s Innovation czar. Snyder’s job: to rally her colleagues around what would
become a five-year quest to reinvent the company’s management processes. Aided by Strategos, a Chicago-
based consulting company, Snyder and her compatriots worked to turn each of Whirlpool’s core management
processes into a catalyst for innovation.
Example of Advantage through Systemic Changes ( Cont.)
Setting aside a budget every year for projects that were truly innovative substantial share of capital
spending
Training more than 600 innovation mentors charged with supporting innovation throughout the
company
• Setting aside time in quarterly business review meetings for an in-depth discussion of each unit’s innovation
performance
• Creating an Innovation Board to review and fast-track the company’s most promising ideas
• Building an innovation portal to give employees access to a compendium of innovation tools, data on the
company’s global innovation pipeline, and the chance to input their ideas
These changes were not the product of some highly detailed master plan. Instead, they emerged over the
course of Whirlpool’s innovation “journey,” often in response to roadblocks that would have been difficult to
anticipate at the outset.
Example of Advantage through Systemic Changes ( Cont.)
The payoff? In 2005 Whirlpool derived $760 million of its $14.3 billion in revenues from products that
met the company’s tough new innovation standards, up from $10 million in 2001.
In addition, it had 568 innovation projects under way, 195 of which were being readied for launch. Jeff
Fettig, Whirlpool’s current chairman, reckoned that those new initiatives would ultimately add as much
as $3 billion annually to the company’s top line.
While Whirlpool’s innovation efforts have been widely reported, a competitor would find it hard to
duplicate what is now a deeply engrained innovation system—for the same reasons it would be
difficult to pick apart Toyota’s multifaceted management advantage.
Advantage where Innovation is part of an Ongoing Program
There is perhaps no company in the world that is better at developing great leaders than General
Electric. While many elements of GE’s executive development system have been imitated—such as its
training facility in Crotonvile, New York, its 360-degree evaluation process, the way it encourages
managers to collaborate, and its tough and unsentimental culling off underperformers—few companies
would claim to have matched GE’s capacity for growing superlative leaders.
GE’s prowess is less the product of a single breakthrough than of a long-running and unflagging
commitment to improving the quality of its management stock—a commitment that has spawned
repeated management breakthroughs.
In 2006, for example, GE announced yet another leadership initiative, this time focused on developing
executives who could help the company raise its organic growth rate. Any company hoping to match
GE’s leadership advantage soon learns that it’s not easy to keep a fast-moving quarry in your sight.
Innovation comes in many flavors: operational innovation, product innovation, strategy innovation,
and, of course, management innovation. Each genre makes its own contribution to success, but if we
were to array these various forms of innovation in a hierarchy, where higher tiers denote higher
levels of value creation and competitive defensibility, management innovation would come out on
top . Understanding why this is so is an important step in building your company’s commitment to
management innovation, so let’s work our way up from the bottom
The point is, not all types of innovation are created equal. When focused on big, chunky problems,
management innovation possesses a unique capacity to create difficult-to-duplicate advantages.
Why? Because some heresies are more heretical than others. You, for example, would probably find
it easier to adjust your fashion preferences than to transpose your religious beliefs. Similarly, most
executives find it easier to acknowledge the merits of a disruptive business model than to abandon
the core tenets of their bedrock management beliefs.
While operational innovation focuses on a company’s business processes (procurement,
manufacturing, marketing, order fulfillment, customer service, etc.),
Management innovation targets a company’s management processes—the recipes and routines that
determine how the work of management gets carried out on a day-to-day basis. Typical processes
include:
Strategic Planning
Capital Budgeting
Project Management
Resource Planning and Allocation
Internal Communications
Knowledge Management
Periodic Business Reviews
Hiring , promotion and retention
Performance Management
Training and Development
Employee Assessment and Compensation
These processes establish standard protocols for common management tasks such as evaluating an
employee or reviewing a budget request.
Practice of Management entails:
• Setting and programming objective
• Motivating and aligning effort
• Coordinating and controlling activities -
• Developing and assigning talent
• Accumulating and applying knowledge
• Amassing and allocating resources
• Building and nurturing relationships
• Balancing and meeting stakeholder demands
The three of the most formidable challenges that confront companies in the 21st century.
1. Dramatically accelerating the pace of strategic renewal in organizations large and small
2. Making innovation everyone’s job, every day
3. Creating a highly engaging work environment that inspires employees to give the very best of
themselves
Over the past few years, General Electric has been hard at work reinventing its core management processes—
financial reviews, management development, strategic planning, and executive assessment—around the challenge of
raising the company’s organic growth rate. CEO Jeff Immelt is determined to make GE the world’s largest growth
company.
In recent years, Procter & Gamble has turned its R&D process inside out in an attempt to
open up its development pipeline to ideas and technologies sourced from outside the firm.
P&G’s chairman, A. G. Lafley, has said that he expects 50 percent of the company’s future
products to be based on concepts and technologies acquired from third parties.
Capturing the wisdom of every employee. –Toyota is the world’s most profitable carmaker— by a long
margin. Much of its success rests on an unmatched ability to enroll employees in the relentless pursuit of
efficiency and quality. For more than 40 years, Toyota’s capacity for continuous improvement has been
powered by a belief in the ability of “ordinary” employees to solve complex problems. Indeed, people
inside Toyota sometimes refer to the Toyota Production System as the “Thinking People System.” In 2005,
the company received more than 540,000 improvement ideas from its Japanese employees.
Managing science. –In the early 1900s, General Electric perfected Thomas Edison’s most notable invention,
the industrial research laboratory. GE’s success in bringing management discipline to the chaotic process
of scientific discovery allowed Edison to claim that his labs were capable of producing a minor invention
every 10 days and a major breakthrough every six months. This was no idle boast. Over the first half of the
20th century, GE won more patents than any other company in America.
Power of Management Innovation- Examples
Managing intangible assets. –Procter & Gamble’s preeminence in the packaged goods industry has its
roots in the early 1930s, when the company began to formalize its approach to brand management. At the
time, the idea of creating value out of intangible assets was a novel idea. In the decades since, P&G has
steadily built upon its early lead in building and managing great brands. In 2007, P&G’s business portfolio
included 16 brands that were delivering more than $1 billion in annual sales.
Above highlight the decisive role that management innovation often plays in helping companies build
durable advantages. Indeed, no other factor seems to have been similarly instrumental in underwriting
long-term competitive success
From Innovation to Advantage
Management innovation tends to yield a competitive advantage when one or more of three conditions are
met:
1. The innovation is based on a novel management principle that challenges some long-standing
orthodoxy;
3. The innovation is part of an ongoing program of rapid-fire invention where progress compounds over
time.
Power of Management Innovation- Examples (Advantage through Novel Management Principle )
Capturing the wisdom of every employee. –Toyota is the world’s most profitable carmaker— by a long
margin. Much of its success rests on an unmatched ability to enroll employees in the relentless pursuit of
efficiency and quality. For more than 40 years, Toyota’s capacity for continuous improvement has been
powered by a belief in the ability of “ordinary” employees to solve complex problems. Indeed, people
inside Toyota sometimes refer to the Toyota Production System as the “Thinking People System.” In 2005,
the company received more than 540,000 improvement ideas from its Japanese employees.
Fortune World’s Most Admired Enterprises ( Among Top 50)
Amazingly, it took nearly 20 years for America’s carmakers to decipher Toyota’s advantage.
Unlike its Western rivals, Toyota believed that first-line employees could be more than cogs in a soulless
manufacturing machine. If given the right tools and training, they could be problem solvers, innovators,
and change agents.
Toyota saw within its workforce the necessary genius for never-ending, fast-paced operational improvement.
In contrast, U.S. car companies tended to discount the contributions that could be made by first-line
employees, and relied instead on staff experts for improvements in quality and efficiency.
Over the past 40 years, Toyota has gotten more out of its people, day by day and year by year, than its
competitors have gotten out of theirs— an advantage that has been reflected in Toyota’s ever-rising
market share and market value.
While U.S. carmakers are now working hard to more fully utilize the brainpower of their employees, they
have paid dearly for a management system that was rooted in intellectual feudalism.
As this example illustrates, management dogmas are often so deeply ingrained as to be nearly invisible,
and so devoutly held as to be virtually unassailable.
When it comes to management innovation, the more unconventional the underlying principle, the
longer it will take for competitors to respond/imitate. In some cases, the head-scratching can go on for
decades
Example of Advantage through Systemic Changes
It is also tough for rivals to replicate advantages that are systemic, that encompass a web of individual
innovations spanning multiple management processes.
In 1999, Dave Whitwam, then chairman of Whirlpool, challenged his colleagues to make innovation a deeply
embedded core competence. From the outset, Whitwam made it clear that he didn’t want a one-off program, a
corporate incubator, or a new ventures division.
He wanted something deeper and more systemic. As a first step, he appointed Nancy Snyder, a well respected
corporate vice president, as Whirlpool’s Innovation czar. Snyder’s job: to rally her colleagues around what would
become a five-year quest to reinvent the company’s management processes. Aided by Strategos, a Chicago-
based consulting company, Snyder and her compatriots worked to turn each of Whirlpool’s core management
processes into a catalyst for innovation.
Example of Advantage through Systemic Changes ( Cont.)
Setting aside a budget every year for projects that were truly innovative substantial share of capital
spending
Training more than 600 innovation mentors charged with supporting innovation throughout the
company
• Setting aside time in quarterly business review meetings for an in-depth discussion of each unit’s
innovation performance
• Creating an Innovation Board to review and fast-track the company’s most promising ideas
• Building an innovation portal to give employees access to a compendium of innovation tools, data on the
company’s global innovation pipeline, and the chance to input their ideas
These changes were not the product of some highly detailed master plan. Instead, they emerged over the
course of Whirlpool’s innovation “journey,” often in response to roadblocks that would have been difficult to
anticipate at the outset.
Example of Advantage through Systemic Changes ( Cont.)
The payoff? In 2005 Whirlpool derived $760 million of its $14.3 billion in revenues from products that
met the company’s tough new innovation standards, up from $10 million in 2001.
In addition, it had 568 innovation projects under way, 195 of which were being readied for launch. Jeff
Fettig, Whirlpool’s current chairman, reckoned that those new initiatives would ultimately add as much
as $3 billion annually to the company’s top line.
While Whirlpool’s innovation efforts have been widely reported, a competitor would find it hard to
duplicate what is now a deeply engrained innovation system—for the same reasons it would be
difficult to pick apart Toyota’s multifaceted management advantage.
Advantage where Innovation is part of an Ongoing Program
There is perhaps no company in the world that is better at developing great leaders than General
Electric. While many elements of GE’s executive development system have been imitated—such as its
training facility in Crotonvile, New York, its 360-degree evaluation process, the way it encourages
managers to collaborate, and its tough and unsentimental culling off underperformers—few companies
would claim to have matched GE’s capacity for growing superlative leaders.
GE’s prowess is less the product of a single breakthrough than of a long-running and unflagging
commitment to improving the quality of its management stock—a commitment that has spawned
repeated management breakthroughs.
In 2006, for example, GE announced yet another leadership initiative, this time focused on developing
executives who could help the company raise its organic growth rate. Any company hoping to match
GE’s leadership advantage soon learns that it’s not easy to keep a fast-moving quarry in your sight.
Innovation comes in many flavors: operational innovation, product innovation, strategy innovation,
and, of course, management innovation. Each genre makes its own contribution to success, but if we
were to array these various forms of innovation in a hierarchy, where higher tiers denote higher
levels of value creation and competitive defensibility, management innovation would come out on
top . Understanding why this is so is an important step in building your company’s commitment to
management innovation, so let’s work our way up from the bottom
The point is, not all types of innovation are created equal. When focused on big, chunky problems,
management innovation possesses a unique capacity to create difficult-to-duplicate advantages.
Why? Because some heresies are more heretical than others. You, for example, would probably find
it easier to adjust your fashion preferences than to transpose your religious beliefs. Similarly, most
executives find it easier to acknowledge the merits of a disruptive business model than to abandon
the core tenets of their bedrock management beliefs.