Tomorrow’s industrial and commercial landscape is being reshaped in radical ways. The opportunity for senior business leaders is to rethink the chemistry of organisational competitiveness, going beyond standard models of organisational effectiveness, says Professor Gordon Hewitt, CBE, FRSE and co-founder of The New Game Academy (NGA).
From pharmaceuticals to farming, energy to electronics, digital media to drinks, new game-changing dynamics are altering traditional views of what competition and value creation are all about. The internet evolution, converging markets, changing customer standards and new regulatory demands, are just a few of the sources of competitive disruption requiring executives to rethink some basic questions about the performance of their businesses. Do you recognise these dilemmas? How do we discover new forms of organic growth in mature industries? Where is competitive advantage in a world where everything is transparent and can be copied? How do we create and deliver new forms of value for our customers and shareholders? When does market share not measure market influence? How do we enable our business to execute faster – but without taking undue risk? Do we have a genuine ‘strategy’ to navigate through the new landscape, or simply an extended operating plan?
The issues above highlight the need to rethink the meaning of organisational competitiveness, especially in dynamic and complex markets. If one criterion of organisational design is to achieve good alignment with business strategy, but the strategy process itself is preoccupied with playing the existing game better rather than creating market leadership in new games with different rules, then even classic organisational principles may actually be a force for competitive inertia. Getting better at the wrong game is not a desirable outcome. So what’s the solution? Business leaders often quote the following as key organisational attributes to ensure the organisation can meet the task of delivering on strategy: Clearly defined activities and accountabilities; Specification of appropriate authority for key tasks; Well-defined systems for accountability and answerability for performance; Performance metrics that align with key tasks and objectives; Appropriate resources and skills to enable objectives to be achieved and Clear lines of communication and delegation to enable effective and quick decision-making. These are important tests of administrative clarity. Ensuring well-defined roles and responsibilities in an increasingly complex world is becoming more rather than less important.
If, however, organisational competitiveness has to ensure the capacity to create access to ‘new game’ opportunities then the test of value creation must be addressed too. Is there a possibility that organisations could score highly on administrative clarity standards, but poorly on the value creation criterion? At the enterprise level, could each organisational component deliver high performance on the ‘existing game’ agenda while the whole company under-leverages value and loses corporate competitiveness? Let us look at the existing game vs. new game ‘value creation’ dilemma.An iconic example of this dilemma is the evolution of the Sony Corporation over the last decade. Its autonomous product-based divisions spanned a wide range of consumer electronics (CE). In a world in which standalone products catered for very different customer needs, Sony scored highly on administrative clarity. The shift, however, from “CE” to Digital Entertainment (DE) was a ‘new game’ challenge. Disconnected business unit responses were insufficient to tackle the opportunity which spanned multiple parts of their portfolio in a world of connected product features and knowledge arenas.
Apple’s introduction of the iPod was an early test of ‘new game’ competition. But why didn’t Sony get there first? Like so many corporations, Sony had all the parts of the jigsaw puzzle scattered across different parts of the organisation. The value creation test required a level and intensity of horizontal collaboration far beyond the normal practice of ad hoc voluntary cooperation. Indeed, the challenge is how to get leaders to achieve business unit results as well as cross-business innovation especially when most performance metrics relate to individual components of the organisation, and not connections between them. This challenge lies at the heart of internal governance in the modern corporation, and presents a critical opportunity for leading HR professionals to create ‘next practice’ rather than ‘best practice’. How we create disciplines and systems, not just hopes and aspirations, for managing new organisational connections while still achieving business unit results will be one of the new testing grounds of organisational competitiveness.
