FREE online courses on Financial Management and Creating Value - Chapter 4 -
The Need to Change & Strategize
The World is a global, highly connected, de-regulated,
customer driven place where the rate of change is escalating. The global
marketplace demands quick responses to numerous issues confronting the
organization. In today's world, a static business model is sure death. Unless a
business can reinvent itself, new competition will move-in and absorb value
within the marketplace. Taking risk and breaking away from the conventional
rules of business can represent a real source of value. Some examples include:
Anita Roddick - The Body Shop
John Nordstrom - Nordstrom
Herb Kelleher - Southwest Airlines
Jeff Bezos - Amazon
Michael Dell - Dell Computer
All of these people had a vision that departed from the rest
of the industry. As Michael Porter of Harvard
University has pointed out - if a
company has the same strategy as the competition, then it really doesn't have a
strategy. Therefore, in order to create value, organizations must engage in
change through innovative strategizing.
Innovative strategizing means looking at things differently,
finding new ways of selling your product. For example, Levi Straus sold nothing
but regular blue jeans until one day they noticed that customers would buy their
blue jeans and bleach them into denim jeans. Levi Straus decided to start
selling denim blue jeans and suddenly, enormous value was created by reinventing
how the product was sold.
Innovative strategizing is often a combination of luck and
foresight. Foresight comes from experience. In his book Mega Change, William F.
Joyce describes four areas that all organizations must emphasize:
- Empowering People
- Engaging Systems
- Reforming Structures
- Remaking Strategies
Joyce argues that the old approach to creating value through
reorganizations and cost cutting must be disbanded and replaced with a focus on
people. Innovative strategies are created by people. The challenge is to get
everyone engaged in a conversation about the business - this is how strategies
are borne. One way to establish this process is to make everyone an owner in the
business. When a person owns the business, they think differently about the
business.
A final point about innovative strategizing is that it is
non-incremental unlike the other sources of value. All of the other elements of
value-creation, such as financial restructurings, great product quality,
efficiency in operations, etc. have limitations on how much value can be
generated over the long run. Innovative strategizing, however, is perpetual and
continuous. It is an integral part of value-creation everyday, every month,
every year. As a result, innovative strategizing is the most important element
of value-creation.
