STRATEGY, STRUCTURE, CULTURE AND AN ICEBERG

Ever wondered what the commonality is between a corporate strategy, structure, culture, and an iceberg? All these have some amount of mystique around them.

Originally born in the warfare, the fundamental purpose of a strategy is to win over your enemy with your limited resources. Whether it was the master military Chinese strategist Sun Tzu (5th Century BC), or the Italian philosopher Niccolò Machiavelli, (1500s), or the Prussian general, who fought against Napoleon, Carl von Clausewitz (1832), believed that “a strategy is very important, and its aim is to achieve the end result - WINNING”.

The purpose of a strategy even in the business world is to win over the competition in the volatile and competitive marketplace. The initial Western thinking about strategy was dominated by the Russian American mathematician and business manager, Igor Ansoff. The ‘Ansoff Matrix’ (1957) boils down to improving corporate’s competitiveness to increase the market share. Several of his ideas were later picked up by other gurus and made more famous, like ‘Stick to your knitting’ by Tom Peters, Competitive Advantage by Michael Porter(1985), Core competence by Gary Hamel and C.K. Prahalad(1990) etc.

Michael Porter, the famous Harvard Professor opined that many of the  Japanese companies did not have a strategy and their way of improving operational effectiveness (OE) by squeezing down the costs, merely levelled out competitors, rather than giving them a differentiation that led to competitive advantage. On the other hand, Kenichi Ohmae, the highly regarded Japanese consulting strategist, strongly felt that many western companies suffer from too much and too complicated strategic planning. The tremendous amount of importance given to a few people at the top with the assumption that they are more intelligent than others to create strategies was termed by him as ‘McNamara Syndrome”.

The Blue Ocean Strategy, which revolutionized ‘strategy’ in the recent times talked about simultaneous pursuit of differentiation and low cost to open up a new market space and creation of new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant.

Given the great importance it gained in the business world, and perhaps due to the complexities involved in its creation, some organizations started using the term ‘strategy’ as a catchall phrase for several tactics and initiatives. In many cases, success is often mistaken for strategy even in the absence of a strategy.

Hambrick and Fredrickson, with their experience of studying several corporate strategy documents, which mention things like - “Our strategy is to be the low-cost provider”…”We’re pursuing a global strategy”…The Company’s Strategy is to integrate a set of regional acquisitions”…Our Strategy is to provide unrivaled customer service”…”Our strategic intent is to always be the first mover”…Our strategy is to move from defense to industrial applications”, say in their article(Are You Sure You have A Strategy?), ‘What do these grand declarations have in common? Only that none of them is a strategy’.

The organizations wanted discipline in the execution of their ‘strategies’, and to achieve this, worked out different organization structures - geographical, functional, SBU, Matrix etc., with the primary purpose of describing the positions/jobs needed for such execution, and to define the authority and responsibility of each such position to take decisions. The organization strategies thus, influenced the structures thereby, creating rigid hierarchical ‘bumblebees’, putting people into various boxes, and defining their roles and responsibilities.

These hierarchical structures gave rise to a rigid, top down Command and Control Culture. Barring very few US, Germany and Japanese Companies, the rest of the corporate world follows these hierarchical structures, in one way or other. This has resulted in people not able to give their best and has also created issues around work-life balance, high attrition, low customer satisfaction etc. To quote Sumantra Ghoshal and Christopher A. Bartlett from ‘Individualized Corporation’ - ‘most of the large companies have created within their organizations the oppressive, energy-sapping environment of New York, Mexico City, downtown Calcutta in midsummer. This environment saps all the initiative, creativity, and commitment from their people. That is why they cannot renew themselves’.

Thus, the biggest casualty in this Strategy – Structure – Culture Triangle is the human potential. The ability of people to think creatively and innovatively solve organizational problems has been severely impaired.

As we know, COVID-19 caused enormous hardships to many individuals as well as organizations. The recent news about Cirque du Soleil, the largest contemporary circus producer in the world and the subject of a successful case study of Blue Ocean Strategy, filing for bankruptcy protection is a testimony to the fact that the virus is uprooting many a company from its roots, irrespective of having a great strategy, and great success in the past.

On the other hand, COVID-19 has brought in certain positive changes as well. It has speeded up the time and reduced the distance between geographies. It has proved that market boundaries are not a given and can be reconstructed by the actions and beliefs of industry players. Within a few weeks, work from home, virtual meetings, virtual conferences, virtual learning, video conferencing platforms, workplace automation has fast forwarded and has moved several years into the future.

While the organizations can keep looking for new business models and ‘strategies’ to rebuild their businesses, one big opportunity that can be leveraged is influencing the strategy through the structure. The best out of people can come only when they work in an empowering and stress-free environment. The structures which provide such environment are flexible and agile in nature. Some of the most complex business problems of current times, perhaps be solved by fully unleashing the human potential through a structure which brings out such innovation and creativity.

In a nutshell, it is only the unhindered human potential that can fight the disadvantages caused to the businesses by COVID-19 all over the world!

                              #Structure #Iceberg #Human Potential

This is where our learning from an Iceberg comes into picture. An iceberg, while it looks mammoth and sturdy – moves around, calves, breaks, and forms its ice many times during its lifetime. While the scientists say that the life of an iceberg is about 3000 years, during its lifetime, it changes its shape, size, colour and even flips over occasionally. It is said that when an iceberg flips over, it releases many minerals and nutrients hidden deep down below. (It is an amazing experience to watch an iceberg flip over. You may like to watch it on YouTube).

Imagine, instead of rigid, hierarchical, geographically static back office structures, if organizations have multiple, temporary, virtual, flexible and agile teams drawn from experts from around the world to contribute special knowledge and skills on the most complex business issues, would it not be possible for human potential to solve some of the most difficult issues being faced by their companies? Would they not be supporting the front office employees to do a better job?

For instance, it is said that at BP, externally focused teams (X-teams), with a critical task to improve project management, work in distributed teams with members throughout the world, come up with new ways to contract with suppliers, new ways to evaluate projects, new ways to structure joint ventures, standardise projects and gain value from technology. These teams work with top management to implement these ideas, virtually.

A similar process at Merrill Lynch, when X-teams came up with new proposals that brought debt and equity groups together as never before, while at Hewlett-Packard, these teams created new ways to improve services provided within and outside the company. At Vale, a Brazilian Mining Company, the teams have come up with new ways to go global, while at Newscorp, it has helped information technology (IT) managers find new ways to integrate IT into business strategy.

The above concept of X-teams was well researched by Professors Deborah Ancona (MIT) and Henrik Bresman (INSEAD). The X-teams work together for some time, and upon completion of a task (like an iceberg) break up, and the members join different teams to pursue another project. The biggest advantage of an X-team is that they are externally focused. In other words, they bring knowledge and expertise from the location wherever they are based in the world. The team combination, members, leadership, and structure shift as new challenges appear.

It is understood that at the Vehicle Design Summit (VDS), to build an innovative car, the externally focused team in India was busy getting data on market needs and manufacturing capacity, the team in Belgium was connected to a top university and was designing the car frame, and the team in Italy came together to create a prototype.

Consider another example. In 1982, an unprecedented crisis hit Johnson & Johnson when seven people were killed through the poisoned Tylenol capsules in Chicago. The J&J chairman, James Burke, reacted to the first negative media coverage by forming a seven-member team, which studied the developing situation and advised him on the action plans. What could have been a disaster for the company is now regarded as an example for success when confronted with a threat to an organization’s existence.    

One final caution! An organization can influence the strategy through its structure and try to bring the best out of people only when the leadership is flexible in their approach.

Leaders continuing to believe that their own wisdom and experience can define strategies and can hence pull their companies out of COVID crisis is similar to looking into the mirror and believing that the image is that of the most beautiful person in the world!

The gap between success and failure is perhaps the gap between the collective human potential and the leadership mindset!  

                               #HUMAN POTENTIAL #LEADERSHIP