No business is too big to fail
We are in an era of unprecedented business volatility. Businesses lifecycles are collapsing due to three key factors:
- globalisation (eroding margins)
- digitisation (disruption of established business models), and
- the primacy of the customer (shifting of power from corporations to customers).
In the words of Brian Solis:
“No business is too big to fail or too small to succeed.”
Analysis of the longevity of the Fortune 1000 over the past 40 years reveals a startling picture.
The failure rate of businesses is accelerating, and in this decade it is expected to exceed 70%.
Of strategy and agility
In this atmosphere of constant change, sustainable competitive advantage has become elusive, and business leaders are questioning the role of long-term business strategy.
Business leaders seeking resilience in a landscape that is moving at warp speed are thinking that business agility is the business strategy. AT Kearney’s research revealed that over half of business leaders believe agility to be as important as strategy, and a third believe that agility is what strategy is about. There is of course a difference between strategy and agility; and to succeed, leaders need both.
Strategy is about making informed choices and agility is the ability to respond quickly. Strategy sets the direction and agility adjusts strategy as needed. With the increase in the speed of business, agility is becoming more and more critical for business success, but agility in of itself cannot be the ‘sole direction’ of a business. Strategy is still highly relevant, but what has changed is the relevance of the traditional approach to strategy.
The new approach – it is all about the customer
Traditionally, strategic planning adopted an inside-out view approach – pushing products into the market based on a narrow viewpoint of their customers by looking at them through the lens of the product they are selling. Strategy was about driving growth by managing competitive forces. That approach is losing its effectiveness and impact on business. Also ineffective is the traditional strategic planning process that is conducted annually, driven top down, with large scale planning over multi-year horizons. It is simply no longer viable and is quickly outdated after it is defined.
The traditional view of strategy – coping with competition – needs to be revised. In this constantly changing world full of market adversity, the one constant is offering value to a customer, and that is what business strategy needs to focus on – adding value to customers.
To do that, companies need to adopt an ‘outside-in’ view. An outside-in approach starts with the marketplace, and then looks to deliver on market opportunities. The outside-in orientation maximises customer value, and enables organisations to be agile with their offering and go to market. To define an agile strategy, it is key to adopt a four-pronged approach:
- Build a framework (not a plan, which isn’t as flexible)
- Draw inspiration from the future (to anticipate emerging opportunities)
- Be organizationally inclusive (to consider multiple perspectives)
- Adopt a portfolio approach (to protect initiatives disrupting status quo)
A parting thought
The motto of the company that has had the largest IPO ever – Alibaba with $ 25 B – is:
Customers first, employees second, shareholders third.
- Header Picture: Michael Faber, Counter Spin III, Deviant Art
- Stats on Business Failures: Brian Solis Article – No Business is Too Big to Fail or Too Small to Succeed – Sobering stats on business failures
- The Future of Strategy by Johan Aurik, Martin Fabel, Gillis Jonk, published by A T Kearney