VUCA Cheatsheet - --------------------------------------- PDF

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Megatrends & VUCA:Megatrends : Large, social, economic, political environmental or technological change -> slow to form. Once in place, megatrends influence wide range of activities, processes & perceptions, both in government & society, for decades. Underlying forces ...

Description

Megatrends & VUCA:

Megatrends, so what?

Complicated v. Complex system:

Megatrends: Large, social, economic, political environmental or technological change -> slow to form. Once in place, megatrends influence wide range of activities, processes & perceptions, both in government & society, for decades. Underlying forces that drive trends.

Knowledge about probable future – 10 – 15years. Forces that define present & future worlds.

Complicated systems: many parts but they operate in predictable ways – eg. an aircraft.

Relationship between MT’s & VUCA

Complex systems: interactions that are constantly changing – eg. air traffic control situation.   Properties of complex system: i) Multiplicity; ii) Interdependence; & iii) Diversity.

Trend: Emerging pattern of change -> likely to impact government & require response. Issue: Controversial, debatable or “hot” topic. Eg. 1) Changes in Political conditions MT: Election issues T: campaign finance reform, redistricting, term limits 2) Economic Dynamics MT: Energy supply T: price increases, availability MT: Intellectual property T: standardization of local, state, national & international regulations 3) Social & Cultural Shifts MT: Government involvement in social policy T: gay marriage, abortion, separation of church & state issues MT: Redefinition of morality T: Re-evaluating deftn of indecency, censorship issues MT: Aging population, Demographic shifts T: elder care, healthcare, workforce gaps when baby bloomers retire 4) Science & Technology Developments MT: Energy sources T: development of alternative energy sources MT: Privacy & security issues T: wireless tracking, identity theft, cyber terrorism

Even though MT say something about what we know about the future, it is not certain how society, companies or any of us will react to these forces. Every MT can be set aside or can suddenly & fundamentally change directions. By:

ii) “Black swan” – unexpected event

Responding to complexity: Provide environment that allows us to: - Some forecasting; - Mitigating risk; - Making tradeoffs; & - Ensuring diversity of thoughts.

History of Management:

Strategy under Uncertainty

Four Approaches to Management Thought: a. Classical b. Behavioral c. Systems  d. Contingency – “It depends”

Residual uncertainty: UC that remains after best possible analysis has been done.

i) Wildcards – events that are unlikely but would have enormous consequences – slow MT or create counterforces.

Overview VUCA: Volatility: nature & dynamics of change, & the nature & speed of change forces & change catalysts.

Four levels of uncertainty: C A R T Level 1 – Clear-enough future Level 2 – Alternative futures Level 3 – Range of futures Level 4 – True ambiguity Strategic Postures: defines the intent of a strategy relative to the current & future state of an industry. S A R

Uncertainty: lack of predictability, the prospects for surprise, & the sense of awareness & understanding of issues & events.

1. Shaping - play the leadership role in establishing how the industry operates.

Complexity: multiplex of forces, the confounding of issues & the chaos & confusion that surround an organization.

2. Adapting – win through speed, agility & flexibility in recognizing & capturing opportunities in existing market. (See, Adaptability: New competitive edge)

Ambiguity: haziness of reality, the potential for misreads, & the mixed meanings of conditions; confusion between causes & effects.

3. Reserving right to play – invest sufficient to stay in the game but avoid premature commitments.

Strategic Moves: actions to fulfil the strategic postures intent. N O O B 1. NO regrets moves – strategic decisions that have positive payoffs in any scenarios. 2. Options – Designed to secure big payoffs of the bestcase scenarios while minimizing losses in the worst-case scenarios. (See, Strategy as options on the future) 3. Big Bets – Large commitments that will result in large payoffs in some scenarios / large losses in others.

i) Ability to Read & Act on Signals

Managing organisational complexity 1. Recognize Complexity – Through surveys, focused group & structured interviews. 2. Learn driving forces – “Heat Map,” pinpoint where, why, how complexity affects employees. Each map showed a particular breakdown & level of coping skills employees possessed. 3. Retain whatever that adds value & remove whatever that does not – channel rest to “ambidextrous” employees -> able to tolerate stress.

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Big data analytics (See, Analytics 3.0)

Process of examining big data (huge volume of data) to uncover hidden patterns, unknown correlations & other useful information that can be used to make better decisions (what’s important & what’s not) Case studies: Tesco – of loyalty card holders to customize offerings in different stores & to provide early warning of purchasing shifts.

Organisational Complexity Adaptability: New competitive edge Types of Complexity Ø

Individual – poor processes, duplicate / unclear roles.

Ø

Organisational Unnecessary

–Inherent,

Imposed,

Problem: Traditional approaches to strategy are becoming obsolete in today’s increasingly VUCA world & are no longer providing competitive advantage.

Google – to customize presentation of relevant advertisements so you will click on them & help Google earn more money. ii) Ability to Experiment

Designed,

Imposed: laws, industry regulations, interventions by non governmental organisations. Not manageable by companies.

As such companies cannot rely on first-order capabilities, eg position & scale (ie size of the company). They must look at second-order organizational capabilities that foster rapid adaptation – they must learn to be good at doing new things. n

Four organisational capabilities (Deft ): Inherent: Intrinsic to business & can only be jettisoned by exiting a portion of the business. Designed: results from choices about where business operates, what it sells, to whom & how. Companies can remove BUT means have to simplify business model. Unnecessary: arise from growing misalignment between needs of organisation & processes supporting it. Benefits of managing complexity i) Remove unnecessary costs & organisation friction ii) New sources of profit iii) Competitive advantage boosting company resilience (ability react quickly)

i) Ability to read & act on signals Acquiring right information, recognize relevant patterns & act on it immediately. ii) Ability to experiment – tolerance to failure Experiment rapidly, frequently & economically with products, services, business models, processes, strategies. iii) Ability to manage complex Multicompany systems Skills to manage multiple stakeholders (cust, suppliers) iv) Ability to mobilize Unlock employee potential

Case studies: Proctor & Gamble’s (P&G) Connect & Develop (C+D) model - uses virtual reality to conduct experiments to determine what consumers prefer. iii) Ability to manage complex Multicompany systems VUCA world, companies are increasingly being interconnected into co-dependent companies as webs or ecosystem. Hence, must think beyond boundaries & work with other stakeholders. Instead of single companies, now have to think of dynamic business systems whereby strategies directed at network or system levels. Able to operate with network without benefitting competitors. Case studies: eBay’s reputational currency of transparency & rating system. Toyota’s system mechanisms.

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iv) Ability to mobilize

Time Pacing

Organisation must be able to adapt locally & globally to be successful.

Deftn: Strategy for competing in fast changing, unpredictable markets by scheduling change at predictable time intervals.

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As such, it must create environments that encourage: Ø Diversity Ø Flexibility Ø Autonomy Ø Risk taking Ø Knowledge flow Ø Sharing Replace silos with modular units, can be recombined according to different situations.

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Culture of constructive conflict & dissent.

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To have an adaptive organisation, must exchange certainty (rigid hierarchy) with simple, generative rules.

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Then set boundaries in which employees can make decisions.

Helps managers anticipate change or set pace for change; can counteract the natural tendency of managers to wait too long, move too slowly or lose momentum. Event Pacing: familiar & natural order of things, about creating a new product when a promising technology comes out / favourable opportunity presents itself. Time Pacing: about creating new products or services, launching new businesses, or entering new markets according to the calendar. (NOT SPEED!) Case studies of time pacing: 3M wants to have 30% of revenues come from new products every year. As employees know this, they will work to develop new products, or develop new technologies in order to have new products.

Case studies of time pacing: Gillette does not release a new product prototype into production unless a mock-up of the next product is available. Gillette is “not just reacting to competitors but orchestrating & commanding a business.” Benefits: when competitors copy its products, Gillette would have another new product ready. Banc One had a process for managing the post-merger transition by: - welcome staff of newly acquired bank into the family. - align marketing efforts; - assessed ATM volume; - assigned a “mentor” bank to provide a model of how the bank will turn out. The Best Transitions Offers opportunities for managers to learn, reflect, change direction & accomplish other goals.

Starbucks opening of 300 stores every year.

Best transition processes follow a plan.

Case studies: Netflix has two types of rules: 1) Those designed to prevent irrevocable disaster, & 2) Those designed to prevent moral, ethical & legal issues.

British Airways refresh its service classes every five years.

i) Managing Rhythms:

Challenge for Big Business

Effect of Time Pacing - Creates a relentless sense of urgency around meeting deadlines & concentrates individual & team energy towards common goals.

i) Look at the mavericks (new players in related industries)

Create momentum for change in time pacing; helps people plan & synchronize their activities. Help companies align with important rhythms in market. Case Studies:

- Employees become more focused, efficient & confident ii) Identify & address the uncertainties (addressing MT?) iii) Put an initiative on every risk (address every significant risk)

- For time pacing, managers need to: i) Manage transitions; & ii) Rhythm

ThirstCo: launching new drinks for summer (changes in season) Appliance Manufacturer: aligning its new product launch with retailer’s schedule shelf-planning cycle.

i) Managing Transitions: iv) Examine multiple alternatives (plan & backup plan) v) Increase the clock speed (plan at shorter intervals)

- Transitions are periods where they are most likely to stumble & managers should place extra attention on them.

Computer Manufacturer: aligning its new product launch with computer magazine’s reviews (PC World)

VUCA Week 4: Meeting the challenge of Disruptive Change

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ORGANISATIONAL&CAPABILITIES&

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CREATING)NEW)CAPABILITIES)

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The Disruption Opportunity

Phases of disruption

Case Studies:

Deftn: Attack on big market players (incumbents) that must be met through defensive measures

i) Innovation creates non-competitive market ii) New market expands & slows growth of incumbents iii) Greater innovation steals business from incumbents

HP vs Teradyne memory drive market: 1990s; recognized the potential implications of disruptive technology.

Net effect = total market growth (new discoveries) Overcoming Disruption: Keys to navigate disruption growth path i) Watch the market (Disruption happens over time) ii) See beyond current customers iii) Get capabilities & resources to serve new customers

a) Identify new market; b) New business model; c) Stick with new customers; & d) Realise new growth.

Difficulty in recognizing disruption opportunities:

a) Identify new market

a) New markets lie outside firms existing resource base, b) Wrong prediction & conclusion on new product (IBM) c) Deals with non-current customers (Kodak) d) Disruption overlooked as it’s not competitive in nature.

- Disruptive innovation must be undervalued by current consumers

Case Studies: IBM: Early days of minicomputer, IBM hired a leading consulting firm to gauge size of the emerging market. The firm’s report concluded no opportunity existed for IBM – a predictable outcome given that the firm had surveyed IBM’s leading customers, who were happy with the functionality provided by IBM’s mainframe. Five years later, minicomputers were a billion-dollar business. Eastman Kodak Co. spent billions responding to digital photography. Fearing that digital newcomers would attack directly, Kodak’s first commercial effort in this market was to install more than 2,000 digital printing kiosks in it’s established retail distribution channel of pharmacies & groceries chain. Kodak was thus competing head-on with its own chemical film business. But the initial customer adoption of digital photography came through – new customers seeking new applications. Digital photography eventually attacks the chemical film market, but it’s growing initially in an area entirely outside the established business.

- Compete against non-consumptions (allow people to do things they couldn’t do in the past for lack of money or skills) - Help people accomplish things that they are already trying to do but can’t with the available product or services. - Eg. Balloon angioplasty vs Bypass surgery. b) New Business Model - Model for new customers different from current ones - Hard for incumbents to find new customers & see new business model but not impossible - Eg. Washington Post / New York Times started to change business models, learned to sell to new advertisers that value consumer-direct attribute of online media. c) Stick with new customers - Every market & industry has different needs - Focus on new disruptive market to improve product designs & business model

HP decided to create a 1.3-inch drive, “Kittyhawk”. HP looked into established notebook & PDA markets, whose customers wanted high-end functionality from smaller drive. HP found that Nintendo was looking for a $50 disk drive to slot into its game consoles to allow its platform to support complex games. HP initially was committed to creating a product for emerging customer, but expectations of established markets got in the way. Tried to serve established markets for notebook & PDA’s with new drive. Once product specification was built for those markets, HP could no longer serve Nintendo at $50. “Kittyhawk” ended up stuck in the middle; not good enough for established market but too expensive for the emerging disruptive market. Venture cost HP million in losses & was eventually shut down. Teradyne managers recognised that CMOS & Windows NT could be used to lower the cost of semiconductor testing significantly though initial product would likely be less reliable than the technologies then on the market. Teradyne was committed to CMOS business. CEO kept expectations & resources low until the team locked in on the new customer & could start to build a business model & product architecture around needs of microcontrollers. Teradyne engineers learned to use simpler & less costly tools such as commercial spreadsheet & analysis software which met the needs for microcontroller customers at a price they could afford. Teradyne built an entirely new division around new microcontroller customers – a market now exceeding $200 million in sales.

d) Realising new growth - Incumbents do not see opportunity; if they had only been able to recognize the implications of finding a new market with new customers. - Focus on combined net effort of growth for disruption & not potential losses in one market. - Find non-current consumers. Needs of new consumers should dictate new business model. - Innovate to meet non-current / current consumers needs. - Disruptive new business to start small, grow slowly.

How Firm’s Capabilities Affect Boundary Decisions Organisational Boundaries: Legal & business term. Used to distinguish a business from another yet related to one another. Imaginary dividers meant to distinguish a unit / company from external but nearby influences. Factors that impact Boundaries: a) Macro Level: ü PEST (Political, Economic, Technological) ü Consumer needs

Social

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Boundary Spanning Leadership Ability to create direction, alignment & commitment across gro...