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Highlights of The Association for Strategic Planning's 2004 conference, “Strategy in a turbulent world”
Stan Abraham
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 Conference report
Highlights of The Association for Strategic
Planning’s 2004 conference, ‘‘Strategy in a
turbulent world’’
Stan Abraham
The Association for Strategic Planning plans
to hold its fifth annual conference in Los
Angeles in November 2005
(www.strategyplus.org). Stan Abraham, a
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Strategy & Leadership Contributing Editor, is
professor of strategy and entrepreneurship
at California State Polytechnic University,
Pomona (scabraham@csupomona.edu).
Jim Wilson, Managing Director at Claremont
Strategy Center, and Soren Eilertsen, Managing
Director at Kollner Group, Inc. organized and
chaired the conference.
DOI 10.1108/10878570510608068
Dwight Allen, Deloitte Research –
‘‘Globalization at risk: why your
strategy should allow for a divided
and disorderly world’’
Most international or global strategists
focus on adapting in the short-term to
conditions in the global arena and give
less attention to how to strategize in an
environment characterized by
discontinuous changes. To help global
strategists prepare for discontinuity,
Dwight Allen forcefully made two
points:
1. Equally qualified experts and
prognosticators have diametrically
opposed expectations of two
different futures – increasing
globalization or deglobalization. So,
great uncertainty exists as to how
international or global trade might
develop.
2. Faced with such uncertainty,
strategists should undertake
scenario planning to develop
flexible strategies that can be
implemented in a variety of futures.
Globalization vs deglobalization
Over the last ten years, many writers
and observers of the international
scene have been saying that national
borders and boundaries are fading in
significance, that world commerce and
global trade are here to stay, and that
market forces are in many cases
usurping national-government power in
the spread of free flows of information,
goods, and people. Leaders around
VOL. 33 NO. 4 2005, pp. 53-57, Emerald Group Publishing Limited, ISSN 1087-8572
the world maintain that capitalism and
open markets are the best means for
achieving economic success and
raising a country’s standard of living;
the spread of democracy promotes
international harmony because
democracies do not go to war with
each other; and technological
advances, especially involving media
and communications, foster
cross-border linkages. The big
questions, even for proponents of
globalization, are whether such a
scenario will continue and for how long.
The contrary view – dubbed
‘‘deglobalization’’ – and put forward by
equally prominent authorities, fears that
an integrated global economy may
never be realized, that patterns of
cooperation are eroding, giving way to
new frictions, and that the world order
we have become used to is beginning
to crumble. In this view, the world is
divided into opposing camps with the
possibility of conflict between them,
even though within each camp there
could be free trade, free markets, and
compatible business practices.
Examples of such frictions include
differences between the US and EU
over antitrust law and use of customer
data, and differences between the US,
EU, and Asia over standards for
financial disclosure and corporate
governance.
In the energy sector, for example, the
‘‘globalization’’ view is that the
market allocates available fuel and
funds, whereas the ‘‘deglobalization’’
j STRATEGY & LEADERSHIP j PAGE 53
 view says that governments really
decide who gets what. Industrial
nations (Western Europe, North
America, Japan, Korea, Australia, and
New Zealand) are not the only ones
who need more energy for electricity
and cars; they must share energy
resources with developing nations
(Brazil, China, India, Indonesia, and the
Middle East). In all major economies,
including China, demand for oil will
increasingly outstrip supply to the year
2030, forcing them to depend heavily
on imported energy. Producing and
transporting this needed energy will be
costly, not only in economic measures,
but also in terms of the resources
needed to safeguard supplies from
violence perpetrated by terrorists or
rogue nations. Given this growing
tension between oil demand and an
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insecure supply, the incidence of
conflict over vital resources and
materials is expected to grow (Klare,
2001).
Competition among the major powers
tends to undercut international
cooperation; in particular, US policy is
dividing the world and promoting
conflict and opposition (‘‘US vs the
rest’’). One of the consequences may
be some sort of US-EU cold war and
tensions rising to dangerous levels
between the US and its old friends in
South Korea, Europe, Japan, Southeast
Asia, and Latin America (Prestowitz,
2003). The EU, in fact, is growing
stronger and more integrated, and is
becoming a new center of global
power, even forming its own military
arm. Forces pushing towards
deglobalization warrant attention from
strategists, particularly because it is a
less widely held view. Increasing
protectionism will strain cross-border
commerce and, within domestic
markets, look for monopoly franchises
and government ownership to grow.
Undertake scenario-based strategic
planning
Strategists should therefore explore
different future scenarios, three
examples of which are the growing
power of Asian countries, increasing
protectionism, and increasing turmoil
j j
PAGE 54 STRATEGY & LEADERSHIP VOL. 33 NO. 4 2005
between the US and the EU. For each
scenario, strategists should come up
with an optimal strategy. Common or
‘‘core elements’’ among the strategies
can be planned for, leaving only
‘‘contingent elements,’’ those that are
different for each strategy, to be
accounted for. Companies can then
make a limited investment in a strategy
– such as by acquiring facilities or land
with options to develop, or a joint
venture with options to increase or
decrease participation. If conditions
change that jeopardize the strategy, it
should be curtailed or abandoned; if
conditions continue to favor the
strategy, the initial investment can be
increased or options exercised.
David La Piana, founder and
president of La Piana Associates,
and coauthor of Play to Win: The
Nonprofit Guide to Competitive
Strategy, Jossey-Bass, 2004 –
‘‘Nonprofit organizations’’
Nonprofits are growing very rapidly in
number and significance in society.
Between 1940 and 1989, about 2,000
new nonprofits came into being a year;
since then, the rate has shot up to an
average of nearly 100,000 per year.
Two reasons for the high growth are the
growing need that nonprofits fill in
society and the low entry barriers that
exist – little regulation, low capital
requirements, and grassroots,
cause-based movements. About 80
percent of nonprofits have neither a
formal budget nor professional staff.
Nonprofits compete in four areas –
customers, people (staff, board, and
volunteers), sources of money to fund
programs, and for public attention
through the media. In each of these
areas, competition is increasingly
intense. First, resources are limited –
more nonprofits are competing for
fewer sources of funding. Second,
nonprofits cannot compete effectively
without a unique and worthwhile
mission (cause or purpose) and good
people (staff, board, and volunteers) to
achieve it.
Nonprofits’ challenges mirror those of
companies in the private sector – they
need inspired leadership, effective
people, the appropriate organizational
structure, cultural discipline, and
strategic planning – the strategic
process that takes you from where you
are to where you want to be. But for
most nonprofits, strategic planning as it
is done in the corporate sector takes
too much time and money. Instead,
nonprofits need more analytical tools
and better strategic thinking and
execution.
Peter Bershatsky, Chasm Group –
‘‘Managing innovation: strategy for
turbulent times’’
Beginning with an adaptation of the
industry-lifecycle model in Geoffrey
Moore’s book, Crossing the Chasm,
summarized in Table I, Peter
Bershatsky focused on what to do once
the ‘‘chasm’’ between early adopters
and the early majority had been
crossed. In other words, using less
technical terms, once the market
begins to mature, how do you innovate?
Innovation could take one of six forms –
line-extension and new-product
innovation, marketing innovation,
experiential innovation, process
innovation, integration innovation, and
business-model innovation. And the
proper goal of innovation is not just
simple return on investment; instead,
the objective should be to continue
achieving return on investment over
time to increase shareholder value.
What enables a return to be achieved
year after year? Increasing one’s
competitive advantage. Figure 1 shows
the two components of competitive
advantage – gap and cap. ‘‘Gap’’ (the
size of the returns or advantage) results
from new product introductions, lower
prices, strategic alliances to add value,
and superior customer service; it leads
to bargaining power over customers.
‘‘Cap’’ (the competitive-advantage
period over which the return or
advantage endures) results from
market-share dominance, a
successfully defended patent position,
and an established brand; it leads to
category power.
Market disruptions represent
fundamental rearrangements of
category power, for example:
 Table I Industry lifecycle model
Lifecycle stage Adapted to technology adoption
Emerging Innovators and early adopters
Growth Early majority
Mature Late majority
Declining Laggards
Note: Adapted from Moore (1999)
Figure 1 The two components of competitive advantage
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B New user disruptions: filmmakers
Kodak and Fuji are experiencing
disruptions in digital photography
and established record labels are
being challenged by on-line digital
music services.
Low-cost disruptions: long
B macro-environment (especially
established airlines and travel
agencies are experiencing
disruptions from Southwest Airlines,
JetBlue, and ATA in the US and
RyanAir in Europe.
B Value-chain disruptions: mega retail
stores such as Wal-Mart and Home
Depot are disrupting traditional
value chains and affecting scores of
individual product suppliers.
When a business in the declining phase
of a particular technology (‘‘old
paradigm’’), faces a decision of when
to abandon it in favor of the new one
(‘‘new paradigm’’) Bershatsky says it
has reached the ‘‘challenge of the fault
line.’’ The danger is twofold:
abandoning too late means
relinquishing the new market to
competitors, or abandoning too soon
risks premature adoption of technology,
before the market has sufficiently
developed.
Type of customer
‘‘Techies’’ and ‘‘Visionaries’’
‘‘Pragmatists’’
‘‘Conservatives’’
‘‘Skeptics’’
In the end, a business must determine
for itself how vulnerable it is to
fundamental marketplace changes,
and the degree to which it can exploit
such changes. It must also understand
the power of the category (segment) it
is in, and whether it is waxing or
waning. A company is no more
powerful than the category it operates
in, but it should try to dominate its
category. The appropriate question is,
‘‘does the company have the right
strategy to give it a sustainable
competitive advantage?’’
Morning Executive Panel, ‘‘Imagine
the future,’’ moderated by Doug
Randall, Co-Leader of the
Consulting Practice, Global
Business Network[1]
The problem for executives today is
that, in an environment that is changing
rapidly, they are being asked to make
more decisions quicker. How to do it?
Most executives are good at either
thinking about the future or making
short-term operational decisions. Few
can do – or are comfortable doing –
both. In preparing for the future,
Randall made the following five points:
Customer frame
Let’s try it! Let’s get ahead of the herd!
Stick with the herd!
Hold on!
No way!
1. How we see determines what we
see – try to be open-minded,
because articulating the future is
difficult.
2. Make sense of the information that is
not synthesized – use it to tell stories
about the future; perhaps some of
the information is truly important.
3. Imagine the unthinkable – find weak
signals, go far beyond the familiar.
4. Handle strategic issues strategically
– reveal uncertainty, do not try to
reduce it.
5. Make your assumptions explicit – do
not mistake the unexplored territory
for your map. Your mental model
may differ from everyone else’s.
Panelists in this session were asked to
focus on their respective industry and
turbulent environments), where typically
firms have little or no influence to control
them. Brief summaries of two of the
presentations follow.
Scott Dolan
United Airlines faces the following
challenges:
B uncompetitive cost structure – has
reduced annual costs by $5 billion,
needs to reduce them a further $2
billion;
B excess capacity in the domestic
market – reduces profitability;
B vulnerable to terrorist and other
disruptions – greatly harmed by
attacks of 9/11;
B uncertain fuel prices – has a
significant impact on profitability;
and
B uncertain regulatory environment.
j j
VOL. 33 NO. 4 2005 STRATEGY & LEADERSHIP PAGE 55
 United is moving to address these
challenges in the following ways:
B leveraged the protection of the
bankruptcy process – achieved
significant savings and flexibility
through work rule, scope, and wage
and productivity changes;
B leveraging TED (a low-cost
subsidiary airline), United Express,
Cargo, MRO (maintenance, repair,
and overhaul), and STAR alliance;
B moving assets to foreign countries –
less competitive markets;
B implementing plans for increased
security;
B lowering fuel costs – hedging future
prices and implementing fuel-saving
techniques; and
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B lobbying Washington, DC
educating legislators about the
airline industry.
The intent is to transform United into a
flexible and cost-focused organization
that can respond quickly to all unknown
challenges.
Jay Boberg
The music business has been marked
by consolidation in both labels and
distribution. Four companies – Warner
Music Group, Sony/BMG, Universal,
and EMI – now control the
recorded-music industry and one
player, Clear Channel, now dominates
music broadcasting. Turbulence in the
music industry is characterized by:
B digitization of content;
B inability to protect copyright;
B peer-to-peer file sharing;
B internet as a means of discovery,
e.g. Yahoo music and videos will find
other selections for you;
B satellite radio stations
(narrow-casting);
B internet radio individualized through
profiling; and
B physical distribution no longer
critical for access to content by
consumers.
j j
PAGE 56 STRATEGY & LEADERSHIP VOL. 33 NO. 4 2005
In general, producers have not yet
figured out how to compete in the new
technological/Internet age.
Government appears unable to
‘‘control the genie.’’ Consolidation and
cost cutting continue and industry
players are less willing to take risks.
Consumers are changing in terms of
their expectations, desires, and
perceptions of value. Early
experimenters lead the market, which
still needs to be educated. Most paths
currently lead to a subscription model,
thanks to the internet allowing
consumers to dictate how the industry
changes.
Afternoon Executive Panel,
‘‘Strategy execution in turbulent
times,’’ moderated by Iain
Somerville, Founder and Managing
– Partner, Somerville and Associates
The purpose of this session was to give
examples of strategic-planning
practices that produce results in
today’s often difficult business climate.
Summaries of four of the five
presentations follow.
Amy Brandt, CEO and President, WMC
Mortgage Corp. (a GE Consumer
Finance Company)
In 2000, WMC Mortgage Corp.’s
business model changed to be a 100
percent B2B internet lender with all its
underwriting automated
(WMCDirect.com). In 2004, it passed
$18 billion in assets and was acquired
by GE. In the midst of rising interest
rates, increasing competition, and
increasing consumer choices, WMC is
expanding its product offerings and
strategic marketing efforts, expanding
its site, increasing its sales force, and
providing alternative channel initiatives.
Tony Rodriguez, Senior VP, Warner
Home Video
The entertainment business is an
industry undergoing constant change.
Two changes have had profound
effects: the VHS to DVD shift affected
quality and economics, and the
purchase vs rental trend. We found that
households with one DVD player would
purchase on average one DVD movie a
year; homes with two would purchase
17 per year, and those with three or
more purchase 22 per year. Certainly,
movie purchases follow purchases of
DVD players, which have now become
quite affordable. A third change is
looming on the horizon – the shift to
HDTV. If that transition is managed well,
it can add a lot of value to companies in
home entertainment.
Competition also requires a broader
focus than just being aware of your
rivals; for example, anything anyone
does in their leisure time competes with
the time people spend watching more
DVD movies. Our long-term planning
horizon is no more than five years
because the landscape changes so
rapidly. Strategic planning is more
important than ever, especially the
external focus part for a
consumer-driven business like ours –
monitoring and understanding the
changing environment. As a reality
check, one must know the critical
issues the firm faces, develop ways of
addressing them, then develop action
plans to meet the goals that have been
set – complete with budgets, roles,
responsibilities, etc. As you implement
the plans, feedback on how you are
doing is important for staying on track;
discovering what works and what does
not is key to doing it better the next
time. And above all, keep efforts
balanced between achieving
short-term and long-term results.
Craig Levra, Chairman and CEO, Sport
Chalet, Inc.
In years past, Sports Chalet’s planning
revolved around the annual budgeting
process and was therefore tactical and
not strategic. A company that had gone
public in 1962, it had a five-year
technology plan, but little else. In fact, it
wanted to double sales over a five-year
period, and use a more formalized
process, but did not know how to go
about it. In April 2003, it selected a book
on strategic planning (Bradford and
Duncan, 2000) and a moderator, and
began changing its planning process.
The company developed three
responses to its strategic challenges:
 1. Be in one-store markets (i.e. the only
sporting-good store in that area).
2. Remodel existing stores and
relocate some of them.
3. Accelerate the store-expansion
program.
Already, the second quarter’s results
(the first since implementing the new
plan) are superior to the same quarter a
year ago, so we seem to be on the right
track.
Cliff Tompkins, President, Prepaid
Concepts, Inc
In 2001, Cliff Tompkins was running a
paging company, and prospects
looked good because his three other
competitors had just declared
bankruptcy, clearing the way for him to
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make some profits. But wait! Could it be
that his company was next in line for
bankruptcy? Was something wrong
with this industry? So he sat down with
his managers for two days of strategic
thinking – exploring how the company
could make the best use of its current
resources and skill sets (an
FCC-licensed wireless carrier,
relationships with dealers) and trying to
figure out how it got into its present fix.
Tompkins recalls: ‘‘Paging was a
commodity, prices were plummeting,
and fewer pagers were being sold
because people really preferred to talk.
Even the prices of cell phones were
falling. Focusing on what was
happening in the industry was a major
event for us. We thought, if the market is
switching from pagers to cellular, let’s
go sell some cellular. At that time,
anyone who wanted a cell phone and
had credit could get one. But our
customers – our dealers – weren’t
located in affluent areas, so all their
customers, who were getting
increasingly younger, didn’t have ready
credit. Many of these new customers
were demanding prepaid phones. In
fact, over the next five years, fully 50-60
percent of new subscribers wanted
prepaid service. So what we did was to
capitalize on this essentially ‘‘cash’’
business – from the end-user to the
merchant selling the cards to the
company that supplied the prepaid
cards. We had two skill sets –
electronic systems and knowing how to
collect money. Taking these in account
we looked at the world about three
degrees ‘‘off center’’ (one way of
describing the birth of a new business
model). The actual cards had no value,
but in the magnetic stripe was a PIN
number that had value. So when the
customer bought more prepaid phone
time, say for $50, the transaction was
electronic – the user’s account was
credited with $50 and a transfer was
made between the merchant and PCI,
which is how PCI’s business model
worked. Being a cash business,
accounts receivable and bad-debt
expenses disappeared. The business
grew rapidly for the rest of 2001,
continued growing as it was spun off in
2002, and then was later acquired.’’
Note
1. Panelists included Scott Dolan, Senior
VP, United Airlines and President,
United Cargo, Jay Boberg, former
President, MCA Records and
Cofounder, IRS Records, Alice J. Taylor,
Director, Strategy & Partnering,
Homeland Security and Services Group,
The Boeing Company, Patty DeDominic,
CEO, The PDQ Careers Group and Vice
Chair of Strategic Planning, Board of
Directors, the Jane Goodall Institute,
and Rohit K. Shukla, Founder and CEO,
LARTA (Los Angeles Regional
Technology Alliance).
References
Bradford, R.W. and Duncan, J.P. (2000),
Simplified Strategic Planning: A No-
Nonsense Guide for Busy People Who Want
Results Fast, Chandler House Press, New
York, NY.
Klare, M.T. (2001), Resource Wars: The New
Landscape of Global Conflict, Henry Holt,
New York, NY.
Moore, G. (1999), Crossing the Chasm:
Marketing and Selling High-Tech Products to
Mainstream Customers, HarperBusiness,
New York, NY.
Prestowitz, C. (2003), Rogue Nation:
American Unilateralism and the Failure of
Good Intentions, Basic Books, New York, NY.
j j
VOL. 33 NO. 4 2005 STRATEGY & LEADERSHIP PAGE 57