The three core roles of strategy formulation - maximizing core business value, exploring new business opportunities, and balancing old and new business relationships – run through the company's development history, and also contain its precise control of the company's development at all stages, and its extraordinary strategic guidance ability to respond to different challenges.
A study of Intel's history tells us that strategy development plays a three-fold role: getting the most out of your core business, creating and capitalizing on opportunities in new businesses, and balancing existing and new businesses.
One
Rule 1: Get the most out of your core business
Rule 1, which is related to guided strategies, will be familiar to those companies that have survived. To better understand this rule, it's a good idea to look at the journey a company has taken from its beginnings to maturity. Startups often face severe pressure from the outside to eliminate tough competitors, discerning customers, snobbish suppliers, etc., and must overcome the problems that come with new startups, such as lack of business records, unknown company names, uncertain customers and suppliers, etc. Once the startup survives, it will find out what it did to survive and form a guided strategy development process. An inherent feature of this strategy development process is to avoid the company being subject to fluctuations. This line of thinking still works, because the company has survived the harsh environment by meeting the needs of its customers, and still wants to continue to evolve like this. The result is a strategic and operational structure that makes the company's business operations reliable, predictable, and measurable, which is what Strategy Guiding Rule 1 entails.
There is a strategy that scholars call narrow business, which can facilitate the progress of Strategic Rule 1. A narrow business path should give the CEO a deeper understanding of the company's strategy and be able to effectively convey its essence to all levels of the company and to external partners, such as market analysts. This approach allows the CEO to focus on strategy and allows him to use his or her abilities to create incentives that align the company's strategy with the actions of all levels of management.
In Intel's second period, Andrew Grove strengthened the impact of the guided strategy by focusing on the microprocessor business to establish an operating structure (including strategic planning, organizational design, resource allocation, performance evaluation, and reward mechanisms) to align strategy with action. This approach has given him a clear understanding of the receptivity of middle and senior executives to the new strategy, which allows him to make rolling adjustments to key positions.
Two
Rule 2: Take advantage of new opportunities outside of your core business
1. Broaden the benefits of your business strategy
Or the scholars mentioned above, who have recently modeled corporate evolution to include both guided and spontaneous strategic processes. In their mathematical model, the company hires CEOs who have a long-term vision and have a strong preference for certain businesses over others, but do not block the way and allow for the beneficial exploration of other business opportunities.
The model's research suggests that this model may be more profitable than doing business in a narrow area, and it also shows that the role of unbiased middle managers in exploring new opportunities is also very important, and that CEOs should never interfere with their autonomy when allocating resources to new business projects. As such, this model demonstrates the potential value of spontaneous strategy development on the path to a company's success.
Strategic Guiding Rule 2 deals with the grant-based (self-proprietary) strategy process, which focuses on turning new ideas beyond the current strategy into new business areas. Spontaneous projects explore business opportunities that exist at the boundary between a company's existing capabilities and product markets, which may be complementary to or potential replacements to the core business, which are not always anticipated early on. Given the importance of self-initiated projects, it is important for senior management to give high priority to such projects and to Strategic Rule 2. Many companies think they already know Rule 2, but their spontaneous strategy often gets bogged down because they don't recognize the difference between exploration (generating new ideas) and development (turning ideas into new business).
2. The role of the strategic content determines the process
This is critical for spontaneous projects to become new businesses. The establishment of the strategic content depends on the middle and senior executives who find value in the unpredictable innovations generated by spontaneous projects, and they want to convince and support the projects that will succeed. It is important for senior executives to be aware of the strategic importance of a particular initiative and the link to core business development capabilities. For those who are already under pressure from their core business, changing mindsets is difficult and takes time.
In order to understand the importance of the strategic content process, it is only necessary to look at where the spontaneous strategic project would go if the process was not initiated. The first possibility is a lack of interest from the company, a sense of boredom from the project proposer, and the project itself fails. The second possibility is that the proposer leaves the company in favor of venture capital support, which may be the best outcome for some particular type of project, but making such a decision still requires involvement in the strategic content determination process.
The third possibility is to evaluate the initiative in terms of what is good for the core business, in which case the initiative is also likely to be eliminated due to conflict with the core business project.
Finally, in-house entrepreneurs often turn directly to the top management for help. One may have heard of examples of success through this approach, but in reality it is quite unsafe because top management is often not equipped to properly assess the uncertainty of technology and markets and the dangers involved early on (they are too far away from these areas).
Since all of the above channels have potential drawbacks, there must be a full understanding of the importance of the strategic content process. Through this process, it is beneficial for both project proposers and senior management in terms of providing value information, evaluating the advantages of business opportunities, and how to conduct this process in the company.
3. Tolerance for lack of conclusions
If senior management is intolerant of uncertainty, it can have a detrimental effect on the process of content the new business strategy, and the business opportunities for the new business are often difficult to identify at the initial stage, and the strategy for the new business area is not as clear and clear as the core business. While Rule 2 differs from Rule 1 in that Rule 2 is less rigorous than Rule 1, the strategic content process provides a testing ground for examining the harshness of Rule 2, but managers at all levels should be aware that there is a degree of uncertainty in Rule 2 at the initial stage and should allow for adjustments as circumstances change.
On the one hand, the strategic assessment from the top management can be executed as an order to maintain the new business development rules, and on the other hand, there is a need to allow for uncertainty in the development process. However, senior management should appropriately control their direct impact and allow room for new business leaders to develop development strategies.
4. Strengthen the company's entrepreneurial spirit
Spontaneous strategic projects play a seed role in the internal Schumpeterian process of creative destruction. In a dynamic environment, external changes often outweigh internal changes and can sometimes have a big impact on a company's future. In order to control the fate of the company, it is better to bring these changes inward, rather than being dragged down by these changes. This means that companies must not only grasp their own internal venture capital projects, but also learn to introduce corresponding external venture capital projects, which will expand the challenges posed by Rule 2.
External venture capital must complement internal venture capital by identifying, funding, and integrating opportunities for collaboration from outside. The company's venture capital is an important tool in the initial stage: it identifies and finances relevant external projects. In the second period of development, these links should be integrated to form a broader strategic driving force for the company. This, in turn, involves a strategic content process in order to optimize the relationship between internal and external projects and existing collaborations that increase contribution.
5. Keep in touch
Governed by logical cause and effect, leaders will see the spontaneous strategic process as a channel for career success. They may have underperformed in the past facilitation process, or they may feel that other discerning people have extracted the best opportunities. Most likely, they look at this topic from the perspective of a sense of mission, and think that it is a great task from heaven, and of course, this will be a distance from the views of the rest of the company. The development of a strategy is also about the makers and their emotions. As long as it's long enough, there will always be protagonists in the conflict who represent the guided and spontaneous strategic process. Even if the problem is resolved constructively, the emotional unhappiness will still linger in the mind, and it will inevitably leave a shadow on the relationship between senior executives.
The tension between motivation and emotion exacerbates the inherent stubbornness in the minds of people in the spontaneous strategy process, the tendency to think that they are just alien to the rest of the company, and the psychological perception of "us about them", which is always scathing.
Senior and C-suite management should provide an umbrella for voluntary projects, but they should not be isolated from the rest of the company. If consistency is the driving force of Rule 1, then the driving force of Rule 2 is the relationship between them. However, this relationship is not so easy to establish, as one organizational theorist said:
"You either have autonomy or you have authority, but you can't have both. Monopoly depends on relationships, and relationships are the enemy of autonomy. ”
Not all managers in the process of spontaneous strategy are able or willing to continue the relationships that have been established, and this situation is a serious challenge for human resource management and the development of supervisors.
6. Stop hopeless attempts
Rule 2 of the Strategic Guidance also requires senior executives to stop self-directed projects that have been judged to have no prospect of success after careful scrutiny, that have either not achieved significant results or that are not applicable to the company. The desire to terminate the trial can be seen as an integral part of the overall trial process, otherwise the accumulation of unproductive trials will eventually deplete the company's resources and be detrimental to the development of new trials.
Careful and careful identification of the content of the strategy will avoid misleading those working on spontaneous projects, who may perceive any decision that is not in their hands hasty. When a voluntary project is terminated, top management needs to consider how to reassign the people who are being treated as good employees. Transferring people from the core business who are reluctant to take in the core business to the new business is often one of the main obstacles to terminating a new project.
Three
Going hand in hand is key
Balancing Strategic Guidance, Rule 1 and Rule 2 is not an easy task for senior and C-suite leaders, and they must help the company implement both disciplines. This is extremely difficult for companies, which tend to focus on one and ignore the other at different stages of their development process. To go hand in hand, senior management needs to learn how to balance two opposing forces and be aware of the ever-present impact of a guided strategy. Managing the relationship between these aspects will allow the management to smoothly support the spontaneous strategic process, otherwise it can only be relied on and will not be proactive. Finally, the success of the two sets of rules is a never-ending test for the top management, testing their ability to develop strategy as a kind of management.
1. Several factors that affect going hand in hand
Two forces are not conducive to the simultaneous application of two rules, which are the prospects of the core business and independent financial resources. Sometimes, the financial resources that the company has accumulated in good years can be a kind of support for spontaneous projects. If the outlook for the core business is always positive, it will be difficult for senior management to take care of the development of new business, because everyone is busy with existing business at this time.
In such a situation, the best of management is verbal support for the spontaneous project, and the things related to it can easily be delayed, and the few spontaneous projects may be bouncing. Conversely, if the core business does not develop as well as expected, the interest of senior management in actively developing new business will naturally increase. If the progress of the core business looks like it can be adjusted and improved, then the new business will be orphaned or cut back because of the renewed bullishness on the core business.
Sometimes companies do not have the financial resources available, for example, due to the development cycle of the industry, which has led to a severe decline in the company's core business recently. If the cycle is on the rise, the core business is expected to develop, and the driving force for the development of new business will become weaker. If the opposite is true, senior management may seize the first new business opportunity with a back-to-back mentality, which means a high failure rate.
2. Internal competition and cooperation
Guided and spontaneous strategic projects inevitably become opposites when they compete for a company's limited resources. Balancing the implementation of the two sets of rules will lead to friendly internal competition and synchronize the development of the two. Ultimately, the winners of the company's internal competition should be those who succeed in the external environment.
For new businesses, it takes time to make a difference in their product market and to a scale that is significant for the company's performance. At the same time, the synergies between the core business and the new business must be brought in to complement the development process of both. Internal competition should be based on the interests of the company as a whole, and must not become a tool to suppress and wantonly destroy the other party. This topic in turn touches on several attributes of the internal obsolescence environment that were discussed earlier.
By Robert A. Bergman, Strategic Management Expert
Source: Strategy is Destiny