Wednesday, June 3, 2009

Creating a viable tomorrow.

To make intelligent bets on the future, you have to understand what’s likely to develop in the next five to ten years and this is especially difficult given the present pace of change. The impact of something that grows exponentially is difficult to predict because the short-term consequences are generally less than planned while the long-term consequences are generally much more than expected. As a result, most people overestimate what’s going to happen in the next two to three years and underestimate what’s going to happen in the next decade. As technology becomes more and more of a commodity, an organization’s unique competitive competence has to come from its other capabilities instead.

In high technology companies, the products are complicated, the pressures to innovate are enormous and the people who buy and use products like computer equipment often know as much about how the product works as the people who developed it. As technologies become more complicated and users more sophisticated, customers are no longer the passive recipients of a company’s products but the engines of innovation instead.

In order to leverage developments like these to build sustainable competitive advantage, more and more companies are blowing up old industry models and offering their customers a new and better deal. In the United States, Wal-Mart has done this in retailing and Nucor in steel. Southwest Airlines has reconfigured air travel. The list goes on to include Charles Schwab, Embassy Suites, Federal Express, Gateway 2000 and hundreds more. These upstarts have created new ways of doing business rather than just sticking with the old ways of doing things.

Successful organizations like these make plans to operate simultaneously in three different kinds of futures:

- predictable futures, where information about what’s required is readily available to everyone in the marketplace. Here, it’s virtually impossible to steal a march on the competition for very long, so flawless execution is the key to success.

- uncertain futures, where what’s required can’t be anticipated in advance and adaptability is the key differentiating capability. Here, the name of the game is improvisation, not standardization. One of my clients, describing her company’s strategy says, “We run like mad, and then we change direction.”

- intuitive futures, where what’s required is defined by those who create new business opportunities. Organizations gain sustainable competitive advantage by finding new patterns that connect existing elements in their environment in novel and original ways, or by inventing elements that can be used to create new patterns not previously in effect. Here, innovation and speed win the day.

Successful companies in the future will be simple, small, speedy and strategic, while aspiring to be global, lean, fast and smart. The challenge for most organizations will be to add speed and capability without adding complexity. When creating the organizations of the future, the real voyage of discovery will consist not in seeking out new structures but in seeing the world with new eyes. Great strategies come from understanding what’s happening in the world in new ways.

to be continued......

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