As emerging economies seek to influence global standards, Europe's role as a shaper becomes a priority.
Standards are the rules, guidelines, and definitions that describe repeatable ways of doing things. Standards are a crucial element in the EU's industrial strategy as Europe seeks to remain a shaper of global standards rather than a follower.
The European Round Table of Industrialists worked with A.T. Kearney to study the issue of developing and implementing standards. We found six recommendations for establishing standards in European industry:
- Establish performance targets to foster innovation. Standards spread collective knowledge, bringing together industry players in a working environment of sharing and collaboration. The use of standardized parts and business processes can reduce early investment costs and risks, and provide a platform from which industries can innovate.
- Consult with experts. Involving technical and industrial experts, even when standards are initiated by governments, can help build standards on solid foundations.
- Coordinate industry players. European standardization bodies can play a larger role in facilitating standard-setting along the value chain and across industries.
- Balance speed and consensus. Standards must be put in place quickly in the face of accelerating technological change and market competition, and they must be built on a foundation of consensus to broadly address the requirements of all players.
- Encourage a global approach. European companies that adopt and participate in setting global standards increase their market access to other countries.
- Encourage SME participation. Despite their importance to the European economy, few small and medium-sized enterprises (SMEs) are actively involved in setting standards.
- The right way to think about network optimization
Networks are complicated, and managing them requires an expansive strategic imagination.
The conventional way of looking at a network is through the direct-value lens: How much does it cost to run the network? Networks are a great deal more complicated than that, and managing them—or, more fittingly, optimizing them—requires an expansive strategic imagination.
No matter what kind of network one manages—hospitality, retailing, banking, leisure, telecommunications whatever it might be—once the network is built, it immediately begins its evolution. Even within a single local market, the network is evolving all the time. As the network goes through its life cycle, perspectives on sustaining it must change as well. The means for doing this are distilled in A.T. Kearney’s Network Optimization Tools, or KNOTs, comprised of eight elements, each focused on a strategic element of the network.
The English word knots translates as les nœuds in French, or nodes. This is an apt image for thinking about the symbiosis of the local and the networked—the balance of savoir-faire métier and savoir-faire local, of the collective intelligence of the network and the specific intelligence of the individual.
Think of KNOTs not as a laundry list of best practices used to build an optimal network but as electrons—each one discrete and at the same time interacting around the nucleus. A national bank develops financial products centrally, but the local branch manager manages the relationship with customers. The national bank maintains good relations with the regulators while the branch manager cultivates the good will of the town mayor. A manufacturer’s leverage with suppliers may be directly proportionate to its number of plants, yet procurement is not only about concentrated volume. It is also about expertise the manufacturer owns in a multitude of categories and brings to bear in the local nodes of its network.
A sobering counterexample is the flameout of video retailer Blockbuster, which channeled its energies into adding thousands of stores and tens of thousands of employees in North America and Western Europe only to be caught off guard by competitors such as Netflix and the rapid adoption of streaming video. In hindsight, Blockbuster’s history suggests an unbalanced emphasis on its real estate network and not enough on the customer experience. The result was catastrophic.
We organize our network nomenclature into three types: production networks, service networks, and distribution networks. La Poste, for example, is a production network in that it operates like a factory producing a product: collecting and distributing mail. Taxi companies, railroads, and airlines are other good examples of production networks. The nodes in these networks are more than just infrastructure. One must own the nodes or there is no business to manage. Closely related to the production network is the service network, typified by telecommunications and hospitality. A hotel network, for instance, cannot deliver a night’s sleep over the Internet. The consumption of its product is done at the local level even though each node in the network is supported by the expertise of the whole. The service is the network.
A distribution network is retail in all senses of the word, especially in its tailoring of products to meet the needs of local customers. Distribution networks are high touch and in certain ways are the easiest networks to think about in terms of nodes. The most familiar example, literally the most concrete, is a brick-and-mortar retail chain. Find a Wal-Mart, and its distribution center will not be very far away.Close
In an environment that is likely twice as volatile today as it was 10 years ago, the Turbulence Index offers direction for managing in an era of volatility.
There has never been an age when people did not marvel at the pace of change in their lives. If the acceleration of change in our era is not unprecedented, there has certainly been nothing like it for at least a generation. A.T. Kearney’s Global Business Policy Council has developed a measure of volatility that quantifies just how volatile our age has become.
Our Turbulence Index portrays an interwoven world economy in which the volatility of external conditions doubled from 1999 to 2011. For strategic planners, operating environments became twice as difficult to predict, even in the near term. We call this “the 200 percent effect.”
This picture of extraordinary volatility quantifies what we all know intuitively about the growing influence of externalities on senior executives and the companies they manage. A decade ago, variables such as currency fluctuations and input costs had half the impact on corporate earnings that they do today.
The Index illustrates the macroeconomic uncertainty, financial instability, and unprecedented thirst for resources in an age of unpredictable energy and commodity prices. But bear in mind that the Index does not measure prices. It measures the degree of price movements—their volatility. It offers a foundation for analytics that, if approached systematically, can guide choices about resourcing, investment ideas, and talent management.Close
Amid ongoing instability in the global business landscape, the case for a continual strategic planning capability is unassailable.
As most people are painfully aware, few leaders—business or others—were able to foresee the chain of events in 2008 that plunged the world into recession. Of those who did foresee the meltdown, still fewer were able to prosecute a strategy to mitigate relevant risks. It is not surprising, therefore, that in a survey of global business leaders conducted last year by our Global Business Policy Council, more than half of all leaders were focused on improving their strategic-planning processes and tools.
While we can hope that the recession is increasingly behind us, few argue that the strategic outlook is any more sound or certain and the idea of negotiating unarmed the oncoming period of disruptive and potentially discontinuous political, social, economic, and commercial change without a strong and continual process for anticipating and preparing for change is simply untenable. But how to move to the next stage? While a great deal depends on the style of the leaders and the extent of commitment to empowering the planning process, a number of steps are useful in building a vigorous planning capacity that transcends corporate cultures and the nature of business. This paper discusses seven steps that stand out.Close
From the devastation of March 11, 2011, may come a new birth for Fukushima and Japan.
On the Richter scale, the quake is 9.0, the most powerful ever to strike Japan. Even as the aftershocks rumble, none of us imagines the approaching tsunami traveling behind the quake, across the Pacific, toward Japan's eastern coast. When the waves break, the news is immediately horrifying, and only grows more so. More than 20,000 people are dead or missing.
The catastrophe is not over. Three reactors at the Fukushima Daiichi nuclear plant flood and suffer core meltdowns. Radiation levels rise. An estimated 150,000 people move out or are evacuated while municipal officials impose a 20-kilometer exclusion zone around the power station. Around the world Fukushima becomes a household name for the worst possible reasons.Close
Growth is not limited to the almost mythical global giants with their vast resources. Regular companies are putting up incredible growth scores without a lot of fuss.
When "thought leaders" are asked about growth, they instinctively cite the same four or five companies. They love Apple, Amazon, Starbucks, and General Electric: mega-global behemoths with near-infinite power to attract talent, capital, and political goodwill. Listening to the conventional wisdom, you might think the only way to grow is to have billion-dollar investment programs pursuing multiple strategies under a celebrity CEO. Yet growth is not limited to the superstars. In fact, many of the largest companies in Australia and around the world are a fraction of the size of companies commonly profiled as case studies in growth. These are what we like to call "real companies"—versus the almost mythical status of the giants with their vast resources—and they are engaging in real growth based on real strategies.Close
How do the leaders stay consistently ahead of their markets while formerly thriving businesses fail?
What causes one leading company to stay consistently ahead of the market while another formerly thriving company flounders? The question is intriguing—and pressing, too, during these times of volatility. To explore the reasons and possible solutions, we conducted a study of industry champions. The result was a matrix that measures market success—a combination of growth in sales relative to market growth, and market share relative to the next largest competitor. Where BCG's matrix was created to help companies plan their portfolios, this matrix is used to chart a company's evolution and derive insights about its strategies. We call it the four seasons matrix:
- Spring. Companies that have outgrown their market but are not (yet) market leaders
- Summer. World leaders that have outgrown their markets
- Autumn. World leaders with below-average growth, gradually losing their positions
- Winter. Market followers that are growing more slowly than their market
We chose the axes of growth and market share because both metrics have a strong, proven relationship to long-term profitability and shareholder value. Combining those measures provides a solid basis for picking long-term winners.Close
It is not at all difficult to turn customer dissatisfaction or even mere indifference into pure delight.
Creating a unique customer experience is one of the best ways to achieve sustainable growth, particularly in industries that are stagnating. If a telco, a utility, or an insurance company can create a highly differentiated customer experience that turns dissatisfaction or indifference into delight, it will recruit an army of vocal advocates online and offline, gain market share, and generate revenue growth.
Sound simple? It isn't, especially in sectors where the core product or service is difficult to differentiate. But it is doable, as Disney, IKEA, and ArcelorMittal have demonstrated. These firms are among the 15 Summer Champions identified by A.T. Kearney from an initial list of 500 as companies that outgrew their markets consistently over a five-year period despite being the largest players in their sectors.Close
Like being stuck in quicksand, struggling against the social media mindset simply hastens your demise.
Social media has become an integral part of our daily lives. We use Facebook, LinkedIn, Twitter, YouTube, Blogspot, and other social networking services to converse with friends and colleagues and to share family photos, videos, and important moments in our lives. It is a conversation over the (digital) backyard fence where your side of the fence is in Melbourne and your neighbor's is in Paris.
Yet people who skillfully blog and tweet with friends and family have not brought these same skills to the workplace. Although social media has distinct, valuable implications for corporations, most executives still see it as ... well, a mystery. The openness of Web interactions still baffles many companies as they try to squeeze the concept of social media—the square peg—into the traditional silos—the round holes—of marketing, sales, and operations.
We think it is time to change this. Rather than treat social media as a distinct element of a larger marketing strategy, companies should make it the core component of every customer-engagement strategy.
We all know that a strong organizational culture provides a business advantage. Yet, while many try to create a high-performing culture, few succeed.
Getting corporate culture right is important, which is why organizations invest heavily in shaping their cultures and influencing the behaviors of their workforces. Determining how much value is derived from the investment is another matter. Does the money spent on developing and communicating mission statements and corporate values really change employee behavior, or are there hidden, more powerful forces at work that make this investment ineffective? And if the investment in shaping culture does bring about change, is it promoting behaviors that support performance, or inadvertently encouraging poor behaviors?
The key to developing corporate culture, particularly one that becomes a source of competitive advantage, requires gaining insight into how culture is formed; this includes the important role that employees' attitudes and perceptions play in the process. Organizations that take time to understand the process and develop a highly engaged workforce can expect to see significant performance improvements. For those that create a culture aligned with their business strategy, the rewards are greater still: a workforce acting in unison as a dedicated powerhouse, moving the organization toward meeting its strategic goals.
Dozens of schools and frameworks claim to be the best for strategy development. The A.T. Kearney Strategy Chessboard selects the right ones for the right situations.
For the past four decades, we have seen a staggering number of strategic schools of thought and frameworks. The A.T. Kearney Strategy Chessboard helps sift through them to pick the right one for the right situation.
The 1980s were dominated by Michael Porter's thinking, the 1990s had multiple contributors (Prahalad and Hamel stand out in Competing for the Future,) and the early 2000s saw noteworthy contributions from Kim and Mauborgne in Blue Ocean Strategy and Deans, Kroger and Zeisel in Winning the Merger Endgame. At the same time, the Santa Fe Institute has contributed valuable insights on the economy as a "complex adaptive system" and its associated strategy implications.
Dozens of schools and frameworks claim to be the most widely applicable and useful for strategy development. The question is, are these strategy schools universally applicable or can they complement one another?
Based on our extensive work in strategy development we have concluded the latter. With this in mind, the A.T. Kearney Strategy Chessboard was designed to help corporate leaders select the right starting point for strategy development and formulation.
This paper does the following:
- Challenges two common but often flawed assumptions: that industries are predictable and that a company's primary focus is adapting its positioning
- Lays out the Strategy Chessboard and its use of industry predictability, while discussing companies' willingness to adapt to or shape an industry
- Outlines how to use the Strategy Chessboard in strategy development
The most successful leaders are those that keep a cool head and combine short-term thinking with a long-term view.
In 1996, two-time champion Michael Schumacher, one of the best Formula 1 drivers in the world, signed with Ferrari, a team considered a joke by most in the racing industry. Ferrari, having not won a championship in 17 years, was in chaos. But signing Schumacher was part of long-term strategy by Ferrari CEO Luca Cordero di Montezemolo to restructure every aspect of the company—car design to engineering and reliability to sponsorship and staff.
In the short term, it didn't work out very well. After Schumacher's engine blew up at the 1996 French Grand Prix, wasting his $1 million-per-race salary, team principal Jean Todt offered his resignation. But Montezemolo was not swayed by such short-term setbacks, even as they continued over the next four years. Within nine years, Schumacher had won more races and championships than any driver in history, making Ferrari the world's undisputed Formula 1 leader.
How many business strategists follow Ferrari's lead, developing and sticking to long-term strategies? Lately, not very many. Obsessed with the ever-increasing pace of change and its impact on soaring rates of "hypercompetition," many executives we've talked to believe it pointless to invest in strategic thinking beyond one to three years; indeed, a five-year strategy is considered long term.
We have a problem with that.
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