Strategy

Platform leadership is the ability of a company to drive innovation around a particular platform technology at the broad industry level.

Farsighted investors can check wayward founder-CEOs by creating strong and independent boards.

What shapes strategy today and how has it changed? While many executives were focused on the implications of the Internet, a more powerful force was at work, contends Stanford University professor Kathleen M. Eisenhardt: globalization. Globalization has quietly transformed the economic playing field. The traditional strategic paradigms (positioning, core competence and the like) are not dead, but they are less germane than they were. Schumpeter’s “creative destruction” and similar economic views are coming into their own. The new economics is more entrepreneurial. It centers on disequilibrium, fleeting opportunities to capture competitive advantage, and the creation and destruction of wealth. Successful strategy in today’s world is simple; it uses a few clear guidelines and allows for flexibility. It is supported by organizational design; it is not handed down from on high. And timing is everything. Eisenhardt cites Colgate’s use of simplicity in a key strategic process, global product management. Colgate has found success through allowing product managers considerable freedom within a couple of simple guidelines (Maintain the Brand; Keep Relative Product Positioning Stable). That thinking also has been a boon to Ispat International, which uses uncomplicated rules for choosing and integrating acquisitions and has thus become one of the world’s fastest-growing steel companies. In contrast, Intel and SAP stumbled with their joint venture for e-commerce services, Pandesic. Although the companies had ample resources and a clear vision of their desired strategic position, their plan’s complexity kept them from adjusting as the market unfolded. Eisenhardt explains how managers can refocus their strategy on key processes and simple rules, mapping their individual businesses to market opportunities and employing an evolutionary form of timing to move from one competitive advantage to the next.

Diversifying can be the best way for companies to match their capabilities to the marketplace.

In following the traditional model of strategy development, a company seeks to craft the best possible plan so that it can be handed off for a predetermined course of execution involving a predictable set of events and a specific final goal. This scripted approach resembles traditional theater: The actors speak the same lines and the action comes to the same satisfying conclusion, night after night. The model works well when business is going through a relatively stable period. The current situation, however, is not stable: Companies are still trying to navigate the technological tsunami created by the Internet. Under the circumstances, it makes much more sense for companies to follow an improvisational model & #8212; that is, to throw out the script, bring in the audience and trust the actors to innovate on the spot. The metaphor of improvisational theater helps executives think about the way in which an entire organization can become an arena for staging experiments that can transform a company’s overarching strategy. Harvard Business School professor Rosabeth Moss Kanter lays out the six elements of strategic improvisation and illustrates how companies have made use of each one to get the most out of new technologies. Senior managers who understand these elements can create an atmosphere in which improvisational theater thrives; change then becomes an organic process rather than a painful reaction to circumstances beyond the company’s control. Although this approach does not advocate a big plunge into something totally new, it is anything but conservative. Companies that engage in continual improvisation through innovative projects of all sizes and shapes are much better equipped to explore highly threatening disruptive technologies and embrace quite radical changes.

Although identifying and hiring the most appropriate CEO is critical to an organization’s success, the succession practices of many large corporations often result in poor outcomes, as recent brief CEO tenures at Coca-Cola, Gillette and Xerox testify. To better understand the dynamics affecting such a complex selection process, from 1995 to 2000 Harvard Business School professor Rakesh Khurana interviewed scores of directors, executive-search consultants and job candidates about the methods that large corporations use when hiring a CEO. In the process, he discovered several common pitfalls that derail efforts to find the right CEO. He observes that a variety of practices are nearly institutionalized in many companies, and he explains ways to avoid them. Khurana also contends that boards can actively manage the following aspects of a CEO search and greatly improve the likelihood that the survivor who emerges is best suited for the challenges of the job. Search-committee composition. Khurana recommends that the search committee consist of a diverse group, not only in terms of age and functional background but also concerning knowledge of the company and its culture. The “CEO as panacea” syndrome. Boards must be sure to consider the contributions of other executives in company success; failure to do so will raise expectations about the performance of the incoming CEO to an unsustainable level. Adoption of outcome-oriented practices. According to Khurana, the practices most relevant to a successful outcome are discussing the company’s strategic direction explicitly and early in the process; recognizing and defining search participants’ roles and responsibilities (in particular, limiting the roles of the outgoing CEO and the executive-search firm); and evaluating candidates in light of the position’s requirements, rather than in relation to one another.