Align the organization with the strategic choice of how much to lean forward
Successfully achieving Dynamic Advantage (i.e. competitively superior performance over time in contexts that are evolving) requires more than the realization that projecting forward past strategies is insufficient. The leadership needs the motivation to identify the new balance they wish to achieve between projecting from the past and embracing the future, i.e. the extent to which the firm should be forward leaning. They then need the commitment to nurture the development of the mechanisms that underpin the Dynamic Capacity of the firm and to leverage this capacity to guide investment in capabilities and repositioning the firm for winning in the unfolding future.
Beyond the motivation and commitment the leadership of the firm also need to overcome four challenges to successfully empower their corporation to achieve Dynamic Advantage.
OPPORTUNITY: Align Where-to-Play choices with the forward leaning orientation
Once the leadership has decided the extent to which they will orientate the firm towards competing for the future they should undertake a critical review of the portfolio of businesses and markets in which they are participating, with the lens of aligning the choices of 'where to play' with the strategic choice of the forward leaning orientation. This can lead to harvesting or exiting positions in markets or sectors that have been core to the corporation such as IBMs decision to abandon computer hardware or Ingersoll-Rand's decision to exit the mining drill business that was the origin of the firm.
The research shows that in contexts that are evolving more quickly, the importance of leaning-forward to win the future is greater and the risk of the obsolescence of current business models maybe rendered more quickly. It is critical that there is alignment between the desired forward leaning orientation, investment in building the Dynamic Capacity of the firm and the dynamic intensity of the markets that the firm prioritizes.
ABILITY: Enable the management cadre to manage the ambiguity of competing goals
To pursue Dynamic Advantage the leadership must balance between optimizing performance results and investing and preparing for winning tomorrow. The management teams of the most successful firms are able to maintain the tension of pursuing two objectives simultaneously, adopting an “Also-And” approach.
What distinguishes the higher performing firms is the extent to which even mid-senior managers are expected to simultaneously pursue the conflicting goals, whereas at other firms the tension may only be managed by the executive officers. Ambidextrously managing across these tensions is challenging for individuals and particularly hard for a team, which has to resist the tendency for different managers to become focused on pursuing activities aligned with the different objectives (e.g. the ‘core’ business unit vs. the ‘incubator’ business) rather than to maintain the tension as a creative force.
STRUCTURE & CULTURE: Ensure the organization structure and culture enable the 9-mechanisms of Dynamic Capacity
The firm can seek to invest in any combination of the nine mechanisms that underpin the three capabilities in order to increase its capacity to compete for the future. However successfully building and leveraging these mechanisms requires that the organization structure and the culture are supportive.
Facilitating collaboration across and throughout the firm is consistently identified as a primary requirement. Executives need to be sensing in their local context and proactively sharing insights from their markets that may have relevance elsewhere, they also need to be willing to accept and integrate idea fragments and insights contributed by others.
The second most frequently cited enabler is for the employee community to be comfortable with fluidity in organization structures, role assignments and career progression. As the corporation evolves, changing the scope of the activities and businesses in which it competes the structures, scope of roles and reporting lines will also be adapted. Such fluidity can be unsettling to employees. HR systems and need to proactively support the development of talent for future roles requiring skills and in structures as yet unknown, they must also provide the mechanisms to maintain the motivation and engagement of the staff at all levels.
STAKEHOLDER SUPPORT: Sustain stakeholder support
As the leadership orientates the firm to be forward leaning, configuring to win in the future, it needs to maintain the support of the key stakeholder groups. 80% of the value of the firm is driven by expectations of future value, but some stakeholder groups may have little exposure to longer term considerations; employees in a certain country may be most concerned with continuity and growth in their location, activist shareholders or senior executives nearing retirement may be most concerned about short-term trading prices of stocks, rather that future performance or the corporation as it pursues its stated purpose.
From the research, the leadership of the firms with higher levels of Dynamic Capacity commit themselves to communicating to stakeholders the rationale for the choice of the extent to which the firm should be future orientated. Whether or not the bold initiatives by leaders such as Ginni Rometty of IBM or Paul Polman of Unilever to transform their respective corporations are ultimately successful will be in large part be dependent upon maintaining the support from stakeholders throughout the transformation journey as they lean-forward into the future as yet unknown.
Successfully achieving Dynamic Advantage (i.e. competitively superior performance over time in contexts that are evolving) requires more than the realization that projecting forward past strategies is insufficient. The leadership needs the motivation to identify the new balance they wish to achieve between projecting from the past and embracing the future, i.e. the extent to which the firm should be forward leaning. They then need the commitment to nurture the development of the mechanisms that underpin the Dynamic Capacity of the firm and to leverage this capacity to guide investment in capabilities and repositioning the firm for winning in the unfolding future.
Beyond the motivation and commitment the leadership of the firm also need to overcome four challenges to successfully empower their corporation to achieve Dynamic Advantage.
OPPORTUNITY: Align Where-to-Play choices with the forward leaning orientation
Once the leadership has decided the extent to which they will orientate the firm towards competing for the future they should undertake a critical review of the portfolio of businesses and markets in which they are participating, with the lens of aligning the choices of 'where to play' with the strategic choice of the forward leaning orientation. This can lead to harvesting or exiting positions in markets or sectors that have been core to the corporation such as IBMs decision to abandon computer hardware or Ingersoll-Rand's decision to exit the mining drill business that was the origin of the firm.
- Choices for the relative prioritization of markets and the deployment of key resources should be aligned with the strategic choice of the degree of forward leaning orientation. For example, frontier, fast evolving markets that provide early insight for the unfolding future may not have previously been core areas of focus in the firm that had previously been more orientated to maintaining strategies proven in more mature or stable markets, e.g. the relocation of the role of global head of strategy of Honeywell to China.
- Within each market the firm also chooses the extent to which it leads or follows the evolution of the sector, for example does the firm lead disruption, act as a Fast-Follower or seek to maintain existing structures and practices?
The research shows that in contexts that are evolving more quickly, the importance of leaning-forward to win the future is greater and the risk of the obsolescence of current business models maybe rendered more quickly. It is critical that there is alignment between the desired forward leaning orientation, investment in building the Dynamic Capacity of the firm and the dynamic intensity of the markets that the firm prioritizes.
- A global manufacturer of semi-conductors decided to withdraw from supplying the market for telecommunications equipment despite it being a very large and fast growing market. Instead electing to focus on sectors such as Automotive that have longer cycles and less intense velocity of evolution; aligned with the extent of the forward leaning orientation that the leadership was comfortable to adopt.
ABILITY: Enable the management cadre to manage the ambiguity of competing goals
To pursue Dynamic Advantage the leadership must balance between optimizing performance results and investing and preparing for winning tomorrow. The management teams of the most successful firms are able to maintain the tension of pursuing two objectives simultaneously, adopting an “Also-And” approach.
What distinguishes the higher performing firms is the extent to which even mid-senior managers are expected to simultaneously pursue the conflicting goals, whereas at other firms the tension may only be managed by the executive officers. Ambidextrously managing across these tensions is challenging for individuals and particularly hard for a team, which has to resist the tendency for different managers to become focused on pursuing activities aligned with the different objectives (e.g. the ‘core’ business unit vs. the ‘incubator’ business) rather than to maintain the tension as a creative force.
STRUCTURE & CULTURE: Ensure the organization structure and culture enable the 9-mechanisms of Dynamic Capacity
The firm can seek to invest in any combination of the nine mechanisms that underpin the three capabilities in order to increase its capacity to compete for the future. However successfully building and leveraging these mechanisms requires that the organization structure and the culture are supportive.
Facilitating collaboration across and throughout the firm is consistently identified as a primary requirement. Executives need to be sensing in their local context and proactively sharing insights from their markets that may have relevance elsewhere, they also need to be willing to accept and integrate idea fragments and insights contributed by others.
- An executive at a globally leading FMCG company stressed how the company embarked on a multi-year journey to adjust the culture to embrace collaboration, and reflected that not all the managers that have succeeded in the old environment will be able to migrate and succeed in the new.
The second most frequently cited enabler is for the employee community to be comfortable with fluidity in organization structures, role assignments and career progression. As the corporation evolves, changing the scope of the activities and businesses in which it competes the structures, scope of roles and reporting lines will also be adapted. Such fluidity can be unsettling to employees. HR systems and need to proactively support the development of talent for future roles requiring skills and in structures as yet unknown, they must also provide the mechanisms to maintain the motivation and engagement of the staff at all levels.
- Having initiated a leadership development programme for senior managers, a global firm leader in building systems and equipment, then underwent a significant reorganization that divided key business units. Rather than determine training needs and budgets of the separate business units, the corporation decided to maintain the integrated programme, recognizing that by so doing they would help foster the cross-silo personal networks of the participants which could itself prove valuable as the corporation continues to transform in the future.
STAKEHOLDER SUPPORT: Sustain stakeholder support
As the leadership orientates the firm to be forward leaning, configuring to win in the future, it needs to maintain the support of the key stakeholder groups. 80% of the value of the firm is driven by expectations of future value, but some stakeholder groups may have little exposure to longer term considerations; employees in a certain country may be most concerned with continuity and growth in their location, activist shareholders or senior executives nearing retirement may be most concerned about short-term trading prices of stocks, rather that future performance or the corporation as it pursues its stated purpose.
From the research, the leadership of the firms with higher levels of Dynamic Capacity commit themselves to communicating to stakeholders the rationale for the choice of the extent to which the firm should be future orientated. Whether or not the bold initiatives by leaders such as Ginni Rometty of IBM or Paul Polman of Unilever to transform their respective corporations are ultimately successful will be in large part be dependent upon maintaining the support from stakeholders throughout the transformation journey as they lean-forward into the future as yet unknown.