Quick takes

Citation

(2002), "Quick takes", Strategy & Leadership, Vol. 30 No. 3. https://doi.org/10.1108/sl.2002.26130cae.004

Quick takes

Editor's note

"Quick takes" presents the key points and action steps contained in each of the feature articles. Catherine Gorrell prepares these summaries.

Page 4 Extending the boundary of corporate innovation

Amy Muller and Liisa Välikangas

Is your company being challenged by new waves of entrants? In response, are you struggling to be more competitive through greater innovativeness? Trying to get out of the box? Sometimes the box is your company. Extending your search for innovation beyond the corporate – or even – industry boundary increases the potential to explore new business opportunities.

There are many drivers of "extended innovation" (six are cited) but the most significant is a decline in transaction costs. When transaction costs are negligible, companies can benefit from disaggregating their business processes into stand-alone businesses. This in turn leads to both new growth opportunities and new competition from unexpected places. In response, consider alliances that introduce your company to more distant technological or geographical contexts; they are more likely to provide access to new and unique knowledge, and concomitant business opportunities:

1. 1.

   Extended innovation in mature industries: use alliances to recombine assets and competencies. In established industries, the industry structure has long remained unchanged. For the several reasons cited in the article, the innovation opportunities that do exist are most likely to exist in the "white spaces" between companies. Home Depot teaming with Toys "R" Us is an example of exploiting extended innovation. Opportunity mapping helps to identify extended innovation opportunities. An example is presented.

2. 2.

   Extended innovation in emerging spaces: use explorative collaboration:

• •

  Opportunities in emerging spaces typically lie beyond both a company's existing markets and its existing customers. In such situations, use a series of partnerships to access the required competencies while learning about the potential of the opportunity. Keep learning ahead of investment to avoid heavy losses from unproven ventures. These strategic alliances take many forms, including innovation-oriented collaborative R&D and operation-oriented marketing and distribution agreements. There are major differences between the two.

• •

  A core question arises: is it better to just acquire, say, intellectual property instead of doing the alliances? The answer is "no" for four reasons cited.

For greater competitive innovativeness, use alliances. The advantage of cross-company collaboration comes from its potential to challenge the orthodoxies of each firm and thereby uncover otherwise latent opportunities.

Page 10 Tips on tactics – a legal perspective on innovating beyond the corporate boundary

Michael P. Mount

The legal framework for extending innovation beyond the corporate boundary is the Strategic Alliance (or partnership) Agreement. Before entering into any type of alliance involving a joint development arrangement, every company whose core assets are comprised of intellectual property should initiate a two-step process to learn what their assets are and how to protect them:

1. 1.

   First, conduct an internal Intellectual Property Audit. Make certain what you own (or control through licenses); it may be more or less than you think.

2. 2.

   The second phase of the Intellectual Property Audit is to make sure your Intellectual Property Assets are secured. Begin drafting the Alliance Agreement by articulating the goals of the alliance as specifically as possible. Define the product to be developed or area to be explored in detail. The Alliance Agreement should define what technology is proprietary to each party. Determine in advance who collects the money, how is the money split, and who does the accounting. Each party should be individually responsible for the cost of defending any claims of infringement. Options can be tied to the development and testing milestones that allow you to get out of the deal entirely or reduce it from an exclusive to a non-exclusive arrangement.

Page 13 A CEO'S guide to the new challenges of M&A leadership

Orit Gadiesh, Robin Buchanan, Mark Daniell and Charles Ormiston

Companies increasingly use mergers and acquisitions to change the scope and/or competitive environment of their business. As the implementation of such ambitious transactions has grown more complex, new challenges have evolved, especially for those leading the deals.

There are five roles for the top leaders that are essential to all M&A transactions. The art is to know which roles need to be played and when. This is determined by the strategic rationale behind the deal, and the inherent risks and opportunities that it presents. Mergers to change the scope of competition demand the most skillful leadership.

The five roles are:

1. 1.

   Visionary to articulate "why are we doing this" and "what we plan to achieve," both internally and externally.

2. 2.

   Cheerleader for the troops to generate enthusiasm and confront fear and uncertainty in its various forms.

3. 3.

   Closer of the deal (which is not a given considering that one in five falls through after it is announced).

4. 4.

   Captain the change by managing the integration of the two entities.

5. 5.

   Crusader for the new entity to dispel inertia and encourage people into actions consistent with the strategic vision.

Customizing the leadership approach is presented in several examples:

• •

  Efficiency-driven deals. Act swiftly to dispel fears. A key source of risk in this type of deal is fear within the organization that threatens productivity. The leader must communicate absolute clarity and stick to the strategy with certainty of purpose.

• •

  Revenue-enhancing mergers. Show people how to create value. The leader needs to spend much more time in face-to-face contact with people than in a simple scale transaction. The leader needs to cheer on each move and crusade for more.

• •

  Transformational mergers. Use the vision to inspire innovation. When changing the fundamental way a company does business, it is hard to establish a precise integration plan. But the leader must set a course and give new rules by which to navigate, keeping a clear eye on the final destination. One example cited is the AOL-Time Warner endeavor to transform the media industry.

There are as many approaches to leading a merger as executives who attempt the task. But one cannot assume that any one approach will do. Would-be deal leaders should consider carefully the major risks inherent in the transaction and craft leadership styles to manage those risks most effectively, invoking different roles at different times to make the most of the opportunities their deal presents.

Page 19 How top management steers fast cycle teams to success

V.K. Narayanan, Frank L. Douglas, Brock Guernsey and John Charnes

Confronted by the pressing need to accelerate product development and project execution, top managers often launch fast cycle teams to develop a culture of speed. Much has been written on the behavior of fast cycle teams, but there is little on the proper role of senior management.

Failure of many fast cycle teams can be traced to the inadequate appreciation by senior management of their crucial role in the process. Many senior managers mistakenly believe that their role is to bring the team together and empower the project leaders. This views the fast cycle team as an entrepreneurial initiative that functions best when left alone. Wrong! In this mode, success depends upon heroic project leaders and team members achieving victory against formidable odds, with senior managers cheering from the sidelines. This is a "Dilbert" version of organizational reality, not a prescription for success in the real world.

For successful implementation, top management needs to perform two major functions:

1. 1.

   They should create a strategic imperative for the company:

• •

  Acting in unison, senior management should communicate their underlying philosophy of resource concentration and empowerment in both beliefs and behavior. But be aware: consensus around beliefs can not be taken for granted. Gaining acceptance of fast cycle teams can take a two-month period of carefully orchestrated deliberations.

• •

  Readying the organization also means changing existing systems and procedures – that were suitable for a prior strategy – and are now irrelevant and/or dysfunctional for the goals of fast cycle teams.

• •

  When choosing a project for fast cycling, a key senior management role, the focus should be on three questions: Does it have a compelling competitive reason? Will it be technically feasible in a short time frame? Is it organizationally easy to implement? (For example, a project being co-developed in a strategic alliance is a poor candidate.)

1. 1.

   They should manage the organizational context by:

• •

  providing the organizational conditions for success (such as a power shift from functions to projects, active sponsorship, and coordination of spheres of responsibility under a matrix system);

• •

  choosing project leaders who are likely to succeed;

• •

  balancing empowerment and monitoring of the project leaders;

• •

  providing protections to the teams; and

• •

  managing the expectation of the rest of the organization.

Page 28 Ten strategies for survival in the attention economy

Saul J. Berman and Bennett E. McClellan

Astute strategists are aware that "attention" is evolving as a dynamic economic driver of all branded markets. Vying for the attention of the time-challenged, choice-saturated consumer characterizes the thrust for the competition for the next five years. Three factors in particular will frame this reality:

1. 1.

   The continuing explosion of new technologies will amplify the many new ways to connect electronically with customers. The result: demand for a customer's attention is escalating.

2. 2.

   The trend toward individualization and customization is powerful, moving consumers to a more influential role in relation to production of content. In the attention economy, consumers exert a greater power to shape content and experiences. In response, companies will need to use a variety of multi-channel consumer touch points, and – at the same time – market to ever-smaller, more finely targeted segments.

3. 3.

   Consumers will gravitate to trusted brands to manage and filter the bombardment of choices. Successful brand-owning business models will form collaborative alliance networks that will re-deploy capital, cut costs and share risk along the network.

Ten strategy recommendations for effective competition in the attention economy:

1. 1.

   Create networked consumers who are creative collaborators to share content that is individually relevant.

2. 2.

   Find new revenue streams – now! Gather attention by being in all the places your customers are likely to be.

3. 3.

   Set your customers and your brands free. Provide a memorable, pleasant customer experience and create customer-buying experiences with interactive content.

4. 4.

   Do not pay for advertising impressions; pay for attention.

5. 5.

   Make your pricing dynamic.

6. 6.

   Go global from the start; compress your windows.

7. 7.

   Create standards that work. MP3 is a prototypal example.

8. 8.

   Share the investment risk. Determine which parts to own and which to connect with on an alliance or outsource basis.

9. 9.

   Be a close follower: learn from others' mistakes.

10. 10.

    Do not become too invested in any one idea; hedge by investing strategically in a bundle of carefully selected ideas. Continue to experiment; most of your new ideas may not work out but the ideas that do galvanize attention powerfully are the ones that will underscore your future success.

Page 34 Case study Has talent, needs customers: an engineering lab profits from its first strategy experiments

Loyd Searle

This case study highlights how strategy and proactive leadership can work together in small, flexible, and fast-moving organizations. Although the focus is on a small business, it could also be relevant to a division of a much larger enterprise. The case's universal lesson: how to discover, communication, and implementation of strategic direction in a world where there is no time or resources to acquire all the facts or to develop and execute formal plans. In short, here is strategic management as a messy process in a tactical (hands-on) world.

Millis Research (a 14-year-old coatings lab and job shop) was a small company that did something for everyone. With great talent, they knew what they did well, but did not know what they wanted to do as a business. But one thing was clear: they needed to stop the dependence on opportunistic sales which lead to decisions being made impulsively, and at times contradicting previous policy. In that environment, most employees thought transforming Millis Research was hopeless. Six obstacles to strategic change were prevalent at Millis Research and are pervasive in many other small businesses and corporate divisions:

1. 1.

   customer needs are not well understood;

2. 2.

   management is accomplished by interference;

3. 3.

   processes are unique and errors are discovered in later stages instead of earlier ones;

4. 4.

   communications are unclear;

5. 5.

   too many projects and products are supported by too few resources;

6. 6.

   talented employees frequently suffer burnout.

Yet Millis was able to achieve radical growth by changing the direction of its core business, defining its distinctive competencies, specifying the deliverables and then creating awareness. The secret ingredient to changing business direction: using the less-is-more style of strategy making. This "style" has one key advantage: intimate contact with market opportunities.

The components reviewed in the case study are:

• •

  A needs assessment: the president wanted to understand better the company's core competencies and why they were important to the customers, but the priority was to increase sales immediately.

• •

  Preliminary fact finding: informal surveys of employees, customers and order history.

• •

  Adapting new business assumptions (i.e. a change to standardized products and the company name.

• •

  Discovering distinctive competencies and translating them into deliverables.

• •

  Searching for a new identity.

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  Building urgency with public relations.

• •

  Creating awareness in the marketplace.

• •

  Successful changeover: sales and employee confidence soar.