The 21st century has a new playing field. Companies today are faced with new technologies, more information, and increasingly complex choices about how and where to do business.
The interactive web has created a connected world, where consumers and corporations can share ideas, criticize and experiment in real-time. The volume of data in systems is overwhelming but also presents an opportunity to make smarter business decisions. Rising populations, scarcer resources and increased demand for goods puts pressure on companies to figure out how to balance a desire for growth with long term sustainability. Corporations are more global today, with presence in multiple countries, through ownership stakes, international supply chains and off-shored workforces. This globalization brings advantages, as well as exposure to geopolitical risks.
So, how can corporations play in this new landscape? What does this mean for corporate strategic planning? What practical steps should strategists take to navigate these new terrains? What will the corporate strategy function of this next century look like?
4 forces are creating a new landscape. They provide an opportunity for strategists to redefine themselves.
1. The Rise of Big Data.
Big Data is more than a buzz word. Analyzing large data sets has become a must-do for companies. The implementation of data analytics has taken root in various business processes, including more targeted marketing campaigns, predicting business performance, lowering risk and decreasing costs. The growing need to analyze an ever increasing amount of data has led to the hiring Chief Data Officers, especially at large multinational firms. According to a McKinsey Quarterly paper written in 2011, by 2018, the United States will face a shortage of 1.7 million data analysts. This begs the question of how strategists are affected as new roles and skill sets come into demand.
At large companies, Chief Data Officers will become mainstay. These individuals will have the responsibility to merge large datasets and run algorithms using cutting edge technology. Companies will depend on their ability to make sense out of big data. The key is to make sure that that the analysis being done is in line with the company’s strategic goals. Yin Nawaday, who leads Sales Operations & Analytics at Las Vegas Sands Corporation, explained that “keeping a vigilant eye on process and strategic alignment” is very important. Furthermore, she emphasizes that “if you can’t articulate what success looks like and measure it, don’t do it.” Goals need to be articulated. Metrics need to be defined. And the output needs to be user-friendly and acted upon. A collaborative relationship between strategy and data analytics needs to exist at all levels. At a minimum, strategists and data officers should be communicating regularly to make sure that analytics are aligned with strategic goals. In a truly symbiotic relationship, the analytics feedback loop might reveal information that alters the strategic plan altogether. Strategists need to be open to an analysis which might be incongruent with their original premise.
At mid-market firms, where data officers might not be designated, strategists may be the ones in charge of data analytics. This responsibility behooves them to learn how to blend different data sources, how to derive useful analytics, and how to communicate insights to decision-makers. Strategists in this situation need to have a basic understanding of technologies and best practices in data analytics. While predictive analytics and Monte Carlo scenarios might be the norm for one industry, historical analysis and segmentation might be enough in another.
2. Ease of Crowd Sourcing Through Social Media
During the dawn of Web 2.0, few companies could have predicted how social media would affect their business. Today it is commonplace for companies to have LinkedIn profile pages, Twitter handles and community blogs. The adoption of social has allowed companies to not only send messages out, using a variety of channels, but to also collect information about what is happening in their market.
Strategists, at least those who want to incorporate the voice of the customer into their planning, typically rely on news, customer interviews, focus groups and other research products. These have been good methods to track emerging trends and signals. Knowing what customers like and need is a fundamental input in strategic planning. This information, while not difficult to find, has been at times expensive to obtain, as research costs can run into the millions. More elusive, the “why” behind certain customer likes and needs, is difficult to pinpoint. This vital information can be tough to deduce from surveys and other standard research tools. Still some companies have held on to these tools for fear that online interactions will be rife with customer created content which will not resonate with the company’ stance or worse yet, might spark a torrent of customer comments which spiral out of control. While such disasters can and have happened, one shouldn’t throw out the baby with the bathwater.
More advanced social media tools are allowing companies to crowd source ideas, almost in real-time. Online, private communities, give companies a sandbox gather new ideas from customers, test new products and build creative brand connections. Large companies, such as American Airlines and P&G, just to name two, have embraced these tools. Chaordix is one such tool, a crowd sourcing platform that allows companies to tap into customers, employees and other stakeholder groups. Chaordix works with its clients to setup the right type of community and program, providing advice and best practice. CEO Shelley Kupiers says, ““With the access provided to key consumers by a persistently global, social & mobile world, it’s natural that organizations are looking to better engage, better understand and better serve the people who directly impact their bottom lines. It’s nearly impossible to separate that kind of information from any phase of the corporate planning function. Of course, every organization is different. Some have hardwired a participative, customer-centric view into their decision-making processes, and others are taking more tentative early steps.”
Crowd sourcing has a very strong interplay with brand. Participants generally have a strong affiliation with the brand and they want to share, give feedback, and feel part of the process. These are the same people who will tell their friends about a product and share their opinion, good or bad. Kuipers cites, “HTC is one of the more progressive global brands. It’s created an ‘always on’ community of its most rabid fans, called elevate. The elevate community members willingly operate as advocates for HTC outside the community because the company is honoring their effective co-ownership of the HTC brand by tapping them for ideas, insights and content.”
The ability to test, tweak and pilot new concepts quickly, inside an incubated setting, gives companies a safe sounding board and launch pad. The crowd sourcing platform can act not only as an innovation test field, but also a brand building tool which deepens loyalty and creates more meaning for customers who want to contribute to your company’s growth. Such programs can help strategists to expand innovation efforts beyond the incremental. Crowd sourced innovation can lead to new business models and products, which may not have been in the R&D pipeline. It creates a frontier to know the unknown and gain an edge over competitors.
3. Sustainability Taking Center Stage.
Consider the fact that in 1900, the world’s population, according to UN and US census data, was approximately 1.6 billion people. By the year 2000, that number had grown to 6 billion. Today, the world’s population stands at 7.1 billion. More than half of this population resides in developing countries in Asia where growing middles classes want to consume more and where large swaths of population still struggle to get the basics. As the world’s population continues to grow, the pressure to produce more, means natural resource depletion and increased pollution.
Businesses have a role to play in meeting the needs of the population, conserving natural resources and keeping the planet clean. Why? The talk of natural resource depletion and societal problems such as poverty and access to education in a business context may seem like someone else’s problem or a “tick the box” CSR campaign. In past decades, businesses may have treated these issues as tertiary or optional activities, but times are changing. Edelman’s 2014 Trust Barometer survey shows that 84% of people believe that companies can do good for society while also pursuing their business interests. Publicis Groupe surveyed 8,000 millennials in 17 countries and found that 83% of them expect businesses to do more to help with societal issues.
Multinational companies have the global presence, the assets, and the influence to solve societal issues and at the same time pursue profits. Strategists sit in the middle, between current state and future state. They must ask questions, become change agents and catalyze initiatives which create solutions. Strategists need to help their business leaders realize that finding new ways to operate before faced with a crisis can give them a competitive edge and build their brand. However, this is a difficult task as Eric Stryson, Managing Director at the Global Institute for Tomorrow (GIFT), based in Hong Kong, has noted, “Contrary to what some might suggest big companies are not entrepreneurial. Internal politics are endemic and vested interests often resist or block new ideas. Most executives are concerned first and foremost with survival and then reaping their own personal rewards in bonuses and promotions.”
Scenario planning becomes a valuable tool in the strategist’s toolkit. Proactively mapping out scenarios with what ifs such as what if key raw materials do not exist in the next 10 years, what if raw material commodity prices triple, what if consumers demand 50% discounts, what if consumer segments want different design or other similar scenarios can help businesses begin to think about potential issues in a concrete way. Strategists can start to engage with other business leaders to discuss the probability of such scenarios, start designing solutions and communicating with senior management about how to stay a step ahead. Stryson explains how companies must shift their thinking. “Companies fundamentally resist sustainability because inherent within the concept of sustainability is “Less.” Companies have been designed to do more, not less. The biggest change in strategic planning may be an acceptance of limits and thus planning for business success within limits.”
Consider the water stewardship initiatives that Coca Cola undertakes, or the proactive work of local sustainable fisheries. There are now over 1,100 B-Corps internationally, companies that have passed B Labs’ assessment which measures their social and environmental impact. Those companies that tackle these issues before they become emergencies have an advantage over their peers. Ultimately, these advantages come back full circle in the form of stronger brand image, ability to enter developing markets more easily, innovative supply chains, and over the very long term, stronger share prices. It is the long game that can turn less into more and strategists and business leaders must be willing to play.
4. Hyper Globalization and Geo-Political Uncertainty.
Global interconnectedness is the new norm. Over 2,500 flights cross between North America and Europe every 24 hours. Thomson Reuters reported cross border M&A for the 1st nine months of 2014 to be $1.1 trillion, double the 2013 levels. Whether through physical presence, customer and supplier relationships, virtual communications or ownership stakes, companies are operating in a truly global landscape.
At the same time, geo-political tensions are brewing across many regions. The Middle East is dealing with rising terrorist and militia groups. Russia continues to test its limits with the Ukraine. Protestors in Hong Kong are demanding democratic elections as mainland Chinese officials maintain their stance. South Korea and North Korea continue to exchange threats spurred by missile testing exercises. These places are not uncharted territories, but regions where companies have extensive assets and interests.
A heightened level of interconnectedness and more frequent political tensions will bring about more business disruptions than in past decades. Companies with a headquarters-driven single country strategic view are operating with a very large blind spot. Without conducting country level analyses, global strategic plans can offer only a surface level view, which quickly becomes irrelevant outside of the home country. While most would agree that a global analysis is required, many Fortune 500 companies still operate with a headquarters only based strategy team. The result is a very blurry understanding of dynamics in other markets, which often precisely those markets where more growth is expected.
To tackle the challenge, strategists who are responsible for global business plans must think about geo-political analysis in 2 dimensions. First, they must look at the major markets and countries where they are selling their goods and obtain pertinent information about regulations, price levels, service standards, talent levels and buyer preferences. Talking to salespeople based in those countries, conducting regular visits to offices and client sites, following news events, conversing with research analysts who are on the ground, are all good methods to keep a finger on the pulse. Having a strategy team member permanently based in the country is an ideal solution. Second, strategists must think about the dependencies between countries in their supply chain. Which countries serve as the backbone of the entire business? Are there shared service centers in certain countries? In which countries is the product manufactured? Are raw materials coming from a single source country? Mapping out the supply chain and then overlaying political hotspots cam reveal weak links or exposures. Strategists can then begin to devise alternate supplier options or new locations for service centers. While business continuity plans may account for short-term disruptions, strategic planning can take a more proactive approach in decreasing overall exposure. Strategists should refresh these analyses on a real-time basis as events unfold.
The result will be multi-faceted teams that can keep 4 cylinders firing all the time 1) provide regular insights on competitors, 2) cover geo-political risks, 3) derive useful information from big data and also 4) maintain an innovation engine, fueled by crowd sourced ideas.
Annual planning, board meetings, growth initiatives and sustainability can be tackled as special projects with by a team of strategists who are trained to be fungible resources, stepping in to help with long term, big picture issues or providing structure and frameworks for annual planning needs.
Companies and strategists, who rise to the challenge, and begin adding these capabilities, will be the pioneers of strategic planning for the next century.