The Organization of the Future: Strategic Imperatives and Core

Competencies for the 21st Century

Presentation of Nuggets from the article published by DAVID A. NADLER & MICHAEL L. TUSHMAN

with insights from a book published by MARTIN CHRISTOPHER on LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Why must Verdant Zeal think Future?

Our world is changing rapidly as a result:

Boundaries are no more

Value has a new definition

Technology is now a universal asset

Differentiation is essentially service

The 4 Rapidly changing

factors

FACTOR # 1

Boundaries are no more

• Territory is now a fallacy Effect of globalization on

industry and local content • Everybody plays everywhere Hyper-competition

• Search for scale and size is on an all time high If a network, it is better

FACTOR # 2

Value has a new

definition

• A new equation exist in determining value (Low cost + High quality) x

Speed

FACTOR # 3

Technology is now a universal

asset

• Internet & search engines have changes access to information and resources Less/no monopoly of idea

FACTOR # 4

Differentiation is essentially

service

Service! Service!! Service!!!

The effect of these changing dynamics is that we have a huge reduction in: 1. Space 2. Loyalty index 3. Margins

Ⱦ Salary cuts Ⱦ Job cuts Ⱦ Rightsizing/downsi

zing Ⱦ Companies folding

up Ⱦ Increased

unemployed labour

Ⱦ Low purchasing power

The 4 facts that will

guide us

FACT # 1

The environment drives the strategic architecture of the enterprise, either through

anticipation of, or reaction to, major changes in the marketplace

The organization's capacity to understand its environment and to make the right kinds of strategic changes at the appropriate

point in the cycle will determine its competitive strength

FACT # 2

Strategy drives organizational architecture

The more closely each component of the organization is aligned with the others—and with the strategy—the more effective the

overall performance. Consequently, effective organizations design patterns of formal and informal structures and processes best suited

to their strategic objectives

FACT # 3

The relationship between strategy and organization design is reciprocal

How an enterprise is organized will influence its focus and time horizons, either encouraging or restricting its people's ability to

develop creative strategies

FACT # 4

The basic dilemma of organizational design remains unchanged.

How do we design and manage both differentiation and integration? How do we group people, processes, and operating

units in ways appropriate to their unique competitive environments and strategic requirements, while maintaining their

link to the larger organization?

The 3Cs that shapes

strategy

Needs seeking benefits at acceptable prices

Assets & Utilization Assets & Utilization Cost

Differentials

Customers

Company Competition

Competitiveness and Differentiation is fostered on how well we can manage our ASSETS & UTILIZE them to gain COST DIFFERENTIALS over

competition

Note These…

1 The source of competitive advantage is found firstly in the ability of the organization to differentiate itself, in the eyes of the customer, from its competition and secondly by operating at a lower cost and hence at greater profit

2 Sustainable and defensible competitive advantage has become the concern of every manager who is alert to the realities of the marketplace

3 It is no longer acceptable to assume that good products will sell themselves, neither is it advisable to imagine that success today will carry forward into tomorrow

There’s a close link between relative market share and relative cost

Re

al c

ost

s p

er

un

it

Cumulative volume

The experience curve

Service Leader

Cost and Service Leader

Cost Leader

Commodity Market

High

Low

Low High

Val

ue

adva

nta

ge

Cost advantage

1. When the market is commoditized, then survival is non-existent 2. As the market become commoditized, COST takes over as a key determining factor. So, the

lowest cost will always WIN 3. Service that doesn’t obey the law of cost will only be good on paper and poorly banked 4. The perfect match of cost advantage and service leadership is where the FUTURE

ORGANIZATION must locate in the now and tomorrow

THE NEW STRATEGIC IMPERATIVES • It is believed that the changing environment

has just been described creates six strategic imperatives for the organization of the future.

• It will be required to: 1. Increase strategic clock speed 2. Focus portfolios with various business models 3. Abbreviate strategic life cycles 4. Create "go-to-market" flexibility 5. Enhance competitive innovation; and 6. Manage intra-enterprise cannibalism.

Increase strategic clock speed

WHY?

• Speed is quickly becoming a critical success factor. In a strategic context, speed involves an organizational capacity to understand, anticipate, and respond appropriately to those external changes that fundamentally alter the rules of engagement and the sources of value in a given industry or business segment.

• Timing is everything. During periods of radical, discontinuous change, the first movers enjoy significant advantages. Those who perceive the early signs of discontinuity in the environment and then rapidly fashion an appropriate new strategy are infinitely more successful than those who miss the warning signs or delay their response. Those who move slowly find must react to competitors; those who wait too long find themselves struggling for survival

SI # 1

Focus portfolios with various business models

WHY? • We're witnessing the emergence of the new "strategic enterprise." The changing

marketplace no longer rewards unfocused growth and gross market share. • Instead, companies are reshaping their portfolios in the pursuit of strategic focus,

concentrating on those businesses where they can create sustainable value by applying their core competencies to provide competitive advantage. They are spinning off or selling businesses that either dilute focus, in terms of resources and managerial energy, or whose potential value cannot be leveraged within the larger enterprise. In effect, companies are breaking up and reassembling the traditional value chain

• In effect, we're going to see more and more variations in business design within a single enterprise. In this context, let’s use the term "business design" as defined by Slywotzky and Morrison as encompassing four dimensions:

1. Which customers to pursue 2. How to capture value(i.e., profit) 3. How to maintain a unique value proposition, and 4. What scope of activities to pursue

SI # 2

Abbreviate strategic life cycles

WHY? • Each industry progresses through a fairly predictable life cycle.

Therefore understanding those cycles is essential for leaders. Different stages in the cycle of industry evolution—the well-known "S-curve"—demand different strategies at various points along the curve

• Rather than thinking in terms of decades, the pace of change in the environment will require the organization of the future to significantly change its underlying strategy on a regular basis

SI # 3

Create "go-to-market" flexibility

WHY? • The fragmentation of markets is one of the significant changes in the

environment and has enormous strategic implications for organizations.

• In order to reach each market segment in the most effective way, companies have begun focusing more intensely than ever before on the rising demand for "go-to-market“ variability. Various market segments offer widely divergent demands for the same core product or service in terms of pricing options, sales and service support, speed of delivery, customization, and so forth.

• Today, no organization can succeed with a "one size fits all approach to the marketplace”.

SI # 4

Enhance competitive innovation

WHY? • The successful organization of the future will also develop

exceptional skills to innovate in two other areas: strategy development and organization design.

• If the most critical characteristic of the new business environment is the accelerating pace of change, then the ability to quickly and creatively develop and implement new strategies and the organization designs required to make them work will become a major source of competitive differentiation

SI # 5

Manage intra-enterprise cannibalism or “Purposeful cannibalism”

WHY? • In the successful organization of the future, the idea of

cannibalism will become routine, an accepted part of each company's strategy.

• In the future, it won't suffice to make one big bet each decade. The pace of innovation and the abbreviated strategic cycles will force companies to place multiple bets on an on-going basis, acknowledging that a new product may be well on its way to obsolescence by the time it reaches the market.

SI # 6

The 12 Critical lessons for

Verdant Zeal

1 No “one-size fit all” approach. An end to cut and paste style of work

2 Speed to market or no market at all. Do it NOW mindset

3 Service is hallmark of all achievement. No pain, no gain

4 Cannibalism is acceptable. IF NOT A NEW IDEA, IT DRIES US UP

5 Get there first or don’t get there at all. NO SECOND CHANCE

6 Profit re-defined. LOWER COST to US, LOWER COST to Client, so slash ALL FAT.

7 Expect nothing static. CHANGE CAN BE DAILY

8 Response to change will be an all-comers affair. NO to CHANGE. YOU are CHANGED.

9 Divergence is STRENGTH. Collaboration is HARNESSING

10 Matrix over hierarchy. THE GATEHOUSE TO KEEP RANKS

11 Survival is MULTI-DIMENSIONAL, MULTI-DISCIPLINARY & MULTI-FACET

12 The Good. The Bad. The Ugly. ALL FOR THE NEW FUTURE

9:9:11 Thanks