The Quest for Resilience

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The world is becoming
turbulent faster than
organizations becoming
resilient.
corporate earnings are
more erratic
large bankruptcies
In a turbulent age, the only dependable
advantage is a superior capacity for
reinventing your business model before
circumstances force you to!
The Quest for Competitiveness
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Restructure Reengineer Reinvent
smaller better
different
Coca Cola: Share of the throat
McDonalds: burger weary customers
Challenges!
Essential forms of innovation
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Revolution
Renewal
Resilience
Creative destruction
Innovation w.r.t industry rules
e.g. Southwest, Dell, Ginger Hotels
Creative reconstruction
Innovation w.r.t traditional business models
e.g. Google
Capacity for continuous reconstruction
Innovation w.r.t. orgn values, processes, behaviour(7S)
Success >>> success
Success>>failure>>success
Things that cant go on for ever, usually dont
% of Capex on IT:US Firms
19
59
0
10
20
30
40
50
60
70
1990 2000
%
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Bubble
burst
1994- Great to Just OK -2003
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To Stay Ahead, Cos must have Bold
Aspirations
1. Forever morphing strategies in response to
emerging trends and opportunities
2. An orgn that is constantly remaking its
future, rather than defending its past.
3. A co. where revolutionary change comes in
lightning quick, evolutionary steps with no
calamitous surprises, indiscriminate layoffs &
colossal write-offs
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GM vs Toyota: Share Price
Toyota on course to overtake GM in 2007 as the biggest
auto manufacturer
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GM and Ford can't
design vehicles that
Americans want to
pay "Toyota
money" for.
GM and Ford are
clueless as to how
to work with their
suppliers.
GM and Ford still
treat customers as
strangers engaged
in one-time
transactions.
GM and Ford have
miasmic
management
cultures.
Zero Trauma?
A turnaround is a transformation tragically delayed
IBM Profits
6
-8
6
-10
-8
-6
-4
-2
0
2
4
6
8
1990 1993 1997 $

b
n
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Strategic Resilience:
its the ability to..
dynamically reinvent business models and
strategies as circumstances change
Continuously anticipate and adjust to changes
that threaten their core earning power, and
Change before the need becomes desperately
obvious
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To Become Resilient,
Master 4 Challenges
1. Conquer Denial

2. Value Variety

3. Liberate Resources

4. Embrace Paradox
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1.To Conquer Denial, Understand
Change. Heres how
Witness change close (labs, activists etc)
Find who in the orgn is plugged into the future
and understands its implications for your
business model
Strategy will eventually get ..
Replicated by rivals
Supplanted by better strategies
Exhausted as markets saturate
Eviscerated when power shifts to new players
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Strategies start decaying the day they
are born.



Scissors
Western Roll
Eastern Roll
Fosbury Flop: +3
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Anticipating Strategic Decay
Replication: Is our strategy losing its
distinctiveness?
Supplantation: Is our strategy in danger of
being superceeded?
Exhaution: Is our strategy reaching the point
of exhaution?
Evisceration: Is increasing customer power
eviscerating our margins?
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2. Valuing Variety
Life on earth survived:

Meteor showers

Seismic upheavals

Radical climate shifts
Genetic variety within and
across species is
natures insurance
policy against the
unexpected.
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Big Co s take big bets
Disney: Theme park outside Paris

Motorola: Satellite phone venture-Iridium

HP: Acquisition of Compaq

GM: Hydrogen powered cars
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Value Variety
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Variety is an
insurance
against the
unexpected
Not a single billion
$ bet, but a
swarm of $10-20
K bets
1000s of ideas
Dozens of promising ones
A few huge successes
Test Ideas Thru
Prototypes

Computer simulation

Customer interviews
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A stream of new products from
10,000 employees brainstormed product
breakthroughs
Generated 7000+ ideas
300 small scale experiments
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3. Liberate Resources
Get cash to people who can bring ideas to
fruition (Thinkers/ doers)
Create market inside the firm for seed funding
investors cud form syndicates to take bigger
risks
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4. Embracing Paradox:
Execution and Creativity
To be Efficient
Stick to your knitting
Exploit what you know
Meet current customer
needs
Plan
Demand accountability
Impose process & structure
To be creative
Think outside the box
Explore what you dont know
Anticipate future customer needs
Let things emerge
Allow freedom & flexibility
Avoid process. Encourage
unstructured interaction

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As an ideal, OPTIMIZATION is
sufficient only as long as theres no
fundamental change in what has to
be optimized.
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Mapping an
Organization
Responses to Ups & Downs of Business
Cycles
Quickly rebalance product mix
Retrenchment cant revitalize a moribund
business model
Great execution cant reverse the process of
strategy decay
Forces of optimization are seldom interrupted
in their slow march to irrelevance.
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Gaps
Performance
Gap
Opportunity
Gap
Resilience Gap
Cost
Quality
Speed
etc..
Mkt growth
Vs
Co. growth
Turbulence
Vs
Resilience
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In less turbulent times
AT&T
American Airlines
Insulated from competition
by regulatory protection &
oligopolistic practices
GM
Coca Cola
Relatively stable product
paradigm
McDonalds
Intel
First mover advantage
Petroleum
Aerospace
capital intensive
high entry barriers
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Dodging Environmental Bullets
Value
Loyal customers
Strong brand
Deep industry know- how
Preferential access to
distribution
Proprietary assets
Patent portfolio
Attacked by
Tech discontinuities
Regulatory upheavals
Geopolitical shocks
Ind. Deverticalization
Ind. Disintermediation
Shift in consumer tastes
Non traditional competitors
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Exploring New Opportunities
Resources &
Competencies
Businesses &
Opportunities
Existing



Existing


New


New

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