The Imperatives of an Organization Built for Speed

by Vijay Govindarajan and Manish Tangri

In Greek mythology, Hydra, an ancient water-serpent had many heads. If one head was cut off, two rapidly grew in its place before another head could be cut off — an energy-sapping disappointment for any opponent trying to overcome it. Regenerative speed made the Hydra formidable. Even Hercules, the legendary Greco-Roman hero, needed his nephew's assistance to win. To sustain a competitive edge, your company's new business development engines must similarly fire on all cylinders at supersonic speed.

As a CEO or a leader of a business, how do you build this competency? Measure, motivate and model. 

Measure: Measure your company's "heart rate" and optimize for speed
Every team, business unit and/or company as a whole, has an underlying execution rhythm. At the most basic level this may be an individual's task completion rate (TCR). Setting a TCR of 2 weeks would mean any task you give to another or take from another needs to be done in 2 weeks. Imagine every employee, putting a red sticky on a company-wide virtual whiteboard, when an assigned task isn't completed in the allotted two weeks. With an explosion of stickies, you know that either the task allocator (a project manager) is not breaking down the task into a meaningful two-week chunk, or the doer (a low rung employee or a high rung decision maker etc) is not able to complete the task, or perhaps there are other dependencies, etc. While this is a crude example, it illustrates the importance of tracking, doer-allocator transparency and an implicit service level agreement across team members, which encourages "good enough" instead of perfect, thus optimizing for speed.

Just as agile product development methods, such as Scrum, use process and tracking tools to set and track execution rhythm, so must the organization's leader measure and monitor to ensure useful output. After all, you can't improve what you can't measure.

Motivate: Instill the sense of urgency
The best way is to expose employees to "the jungle." Too often, front-line sales people, but not necessarily the engineer or financial analyst deep in the organization, can "feel" the competition.

Simple steps such as sending them to a conference dominated by a competitor, or having them listen to a tough sales/customer service call can get their emotional investment. Some may be motivated by threats, others by solutions and the impact they can have on the world. In case of the latter, define competition as the worsening of a current problem statement. Regardless, one needs to "feel the jungle" to adopt a sense of urgency.

Model: Lead the way
You must role model to lead the way. First, don't be the bottleneck. Empower and delegate decisions so people aren't waiting for your decisions or resource allocation requests, any longer than the desired TCR. When the stakes are high and you need to decide, lead, even when in doubt. Innovation by nature is uncertain and your job is to realize what is knowable, what is not, and how to move forward to eliminate critical unknowns. So, stop looking for data that doesn't add to your decision and stop using the lack of data to procrastinate on hard decisions. Speed must be a factor in your consideration.

Finally, as this I Love Lucy video illustrates very aptly, you can't speed up the belt forever. When moving faster would result in over-utilization or amplifying skill gaps, find new ways. Can you buy instead of build? Form partnerships and alliances for mutual benefit? Fail-fast to enter a white space with a higher probability of success?

Ultimately, every organization — whether a nimble start-up or a large, established firm — needs to find ways to speed up or be left behind. These three simple rules can help you move faster.

Vijay Govindarajan and Manish Tangri

Vijay Govindarajan is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth. He is coauthor of Reverse Innovation (HBR Press, 2012). Manish Tangri is Associate Director of New Business Development at Intel Corporation.

What Is the Theory of Your Firm?

by Todd Zenger

Photography: Courtesy of Pace Gallery

Artwork:Tara Donovan,Untitled, 2008, polyester film

If asked to define strategy, most executives would probably come up with something like this: Strategy involves discovering and targeting attractive markets and then crafting positions that deliver sustained competitive advantage in them. Companies achieve these positions by configuring and arranging resources and activities to provide either unique value to customers or common value at a uniquely low cost. This view of strategy as position remains central in business school curricula around the globe: Valuable positions, protected from imitation and appropriation, provide sustained profit streams.

Unfortunately, investors don’t reward senior managers for simply occupying and defending positions. Equity markets are full of companies with powerful positions and sluggish stock prices. The retail giant Walmart is a case in point. Few people would dispute that it remains a remarkable firm. Its early focus on building a regionally dense network of stores in small towns delivered a strong positional advantage. Complementary choices regarding advertising, pricing, and information technology all continue to support its low-cost and flexibly merchandised stores.
 
Despite this strong position and a successful strategic rollout, Walmart’s equity price has seen little growth for most of the past 12 or 13 years. That’s because the ongoing rollout was anticipated long ago, and investors seek evidence of newly discovered value—value of compounding magnitude. Merely sustaining prior financial returns, even if they are outstanding, does not significantly increase share price; tomorrow’s positive surprises must be worth more than yesterday’s.

Not surprisingly, I consistently advise MBA students that if they’re confronted with a choice between leading a poorly run company and leading a well-run one, they should choose the former. Imagine assuming the reins of GE from Jack Welch in September 2001 with shareholders’ having enjoyed a 40-fold increase in value over the prior two decades. The expectations baked into the share price of a company like that are daunting, to say the least.
 
To make matters worse, attempts to grow often undermine a company’s current market position. As Michael Porter, the leading proponent of strategy as positioning, has argued, “Efforts to grow blur uniqueness, create compromises, reduce fit, and ultimately undermine competitive advantage. In fact, the growth imperative is hazardous to strategy.” Quite simply, the logic of this perspective not only provides little guidance about how to sustain value creation but also discourages growth that might in any way move a company away from its current strategic position. Though it recognizes the dilemma, it offers no real advice beyond “Dig in.”

Essentially, a leader’s most vexing strategic challenge is not how to obtain or sustain competitive advantage—which has been the field of strategy’s primary focus—but, rather, how to keep finding new, unexpected ways to create value. In the following pages I offer what I call the corporate theory, which reveals how a given company can continue to create value. It is more than a strategy, more than a map to a position—it is a guide to the selection of strategies. The better its theory, the more successful an organization will be at recognizing and composing strategic choices that fuel sustained growth in value.

The Greatest Theory Ever Told 
Value creation in all realms, from product development to strategy, involves recombining a large number of existing elements. But picking the right combinations out of a vast array is like being a blind explorer on a rugged mountain range. The strategist cannot see the topography of the surrounding landscape—the true value of various combinations. All he or she can do is try to imagine what it is like. 

Todd Zenger is the Robert and Barbara Frick Professor of Business Strategy at Washington University in St. Louis’s Olin Business School.

The Rise of Pre-Commerce

Written by: Lisa Gansky

The sharing economy and crowdfunding have fundamentally altered the way we develop products.

 

Business is social. At its core is a seemingly endless series of social interactions--not just internal relationships, but external ones as well, involving investors, suppliers, resellers, customers, government agencies, even competitors. Over time, these ongoing conversations and exchanges fundamentally shape the products, partnerships, and value footprint of every successful brand.

While the social nature of business is nothing new, the recent rise of globally networked social media and the growth of the sharing economy has changed the rules of the game. Old business models are coming apart at the seams. Outsourcing, crowd funding, viral marketing and access or subscription-based services are challenging historically favored strategies in many areas--including, perhaps most surprisingly, product development. The fantasy that the customer waits for products to be developed and distributed suddenly appears to be so last century.

Welcome to pre-commerce, a powerful product development engine fueled by social networks and propagated by designers publicly honing their voice and story. In some industries, community voices just became more powerful than executive off-sites and PowerPoint. 

Company As Driver: Top Down
 

At the height of the Industrial Age, product development followed a more or less linear road map from manufacturer to customer, with established corporations unilaterally defining new offerings, design specifications, production volume, timing, pricing, positioning, shape, color and distribution channels. In this model, data from surveys, focus groups and customer feedback provide a certain amount of advance intelligence, but there’s always a good deal of guesswork involved in forecasting market demand. Guess wrong and you end up with a warehouse full of unwanted widgets, a tarnished brand and a boardroom full of angry investors.

Top-down product development worked well enough for the big guns of 20th-century commerce--wealthy corporations that excel at refining consumer products through multiple iterations and cultivating brands across multiple generations. But this approach tends to favor large organizations that can afford to invest heavily in R&D, and also absorb the cost of swinging and missing a few times before knocking one into the bleachers. For smaller players, it’s one strike and you’re out.

 

Community Takes The Wheel: An Outside-In Approach
 
The social media platforms that link millions of people in radically horizontal relationships have enabled a new twist in the product development cycle.

The process goes something like this: A company or individual comes up with a product concept and puts together a low-cost web-based presentation to pitch the idea directly to potential micro-investors and/or customers. In many cases, the essence of the pitch is fully contained in a short video featuring a prototype demo and a personal appeal from the product designer or company founder. Almost always, a palpably human story is what sells these products and programs. The pitch is published online, typically on a crowd funding site such as Kickstarter, Indiegogo, Catarse, Ulule or Quirky, and promoted via social networks like Facebook, Twitter and Pinterest.

These products and services typically exist only as ideas or prototypes. The proposition is that the product will only make it into your hands if the developer reaches a defined threshold of support from a community of fans (and future customers). In other cases, developers can test the market by selling early-stage products at very low volume through incubation-oriented ecommerce marketplaces like Etsy or Threadless. Either way, the developer has the luxury of refining a product based on real customer feedback before deciding whether or not to ramp up production.

Accelerating Innovation And Ditching Waste
 
When people first began to contemplate the impact of social media on business, much of the attention was pulled in the natural direction of customer support and public relations. Now that we all have the ability to connect, collaborate and act together in numbers, social media has emerged as a powerful thread that connects business innovators to customers. Since 2009, nearly $2.8 billion has been raised on crowd- and community funding services, a substantial portion of which funded new products or businesses. This means that products are being bought (or not) before they are made and distributed.

This model is scrappy and sensible. It reduces waste, encourages innovation, gives smaller players a shot at the marketplace, and ensures a built-in community of customers who will support entrepreneurs from the start. If proposed projects or products do not secure a minimal level of support, that insight alone is highly valuable--both financially and for brand equity.

I call this model pre-commerce (riffing on the term "pretail" coined by trendwatching). It may soon become an essential pre-launch step for any product road map.

Risks And Rewards: The Path Ahead
 

 

There are new challenges that go along with the presale of a product from a nascent or nonexistent company. One of the principal problems has been a lack of due diligence regarding the feasibility of the product proposed and presold. With no third party evaluating the project developer’s competence, presumer backers incur the risk of late or no delivery.

For players big and small, here’s something else to consider: Pre-commerce gives competitors early access to strategic information that would otherwise be considered company confidential. However in the increasingly open, connected and transparent world of social media, access to new ideas, product prototypes and community interest is readily available. Additionally, many product ideas come from outside our organizations. The visibility within and between companies makes the pulse of innovation accelerate and easily cross borders.

We are early. To date, this method has been used almost exclusively by upstarts. Going forward it’s not hard to imagine that well established brands like GE, Proctor and Gamble, Unilever and Bupa will source and test new product ideas beyond their organizational walls. As product cycle times decrease and the cost of waste (unused inventories, patents and talent) increases, the scope and frequency of experiments will grow. All the incentives and much of the infrastructure are already in place.

Now is the time. What separates your brand and company from a world of innovative independent designers is only a semi-permeable membrane. Invite, explore, learn and refine your company’s reach and capacity to provoke innovation through pre-commerce.

Lisa Gansky

Lisa Gansky is an instigator, entrepreneur, angel, and author of the bestselling book The Mesh: Why the Future o