Business strategy that keeps on giving - the Disney Recipe: When Steve Jobs passed in 2011 there was a lot of discussions about the survival of the post-jobs Apple. A few made the parallel with Disney when Walt died in 1966. Yet Disney is a media powerhouse today. As turned out, and it may well be the case for Apple and Jobs, Walt Disney, left a very valuable recipe for his company. This was a strategic recipe and a corporate theory of sustained growth.

[Reproduced from Harvard Business Review]
The Disney Recipe
[by Todd Zenger  05.28.13]

In a recent interview, Jeffrey Katzenberg described his first day at Disney as the newly appointed head of The Walt Disney Studios. The equally new Disney CEO, Michael Eisner, gave him a simple, unambiguous mandate: fix animation at Disney.

Although a veteran in the film business, Katzenberg had no experience with animation and little appetite for it. Disney long-timers, however, informed him that Walt Disney had left extensive notes and audio recordings concerning his experiences making animation, which were stored in the Disney archives.

Looking through these records, he discovered that Walt had effectively "left the recipe for making a Disney animated movie." Katzenberg proceeded to apply this recipe with remarkable success, adding on the way some extra ingredients of his own.

Walt Disney, however, left another, arguably even more valuable, recipe for his company. This was a strategic recipe or what I call a corporate theory of sustained growth. This corporate theory is largely captured in the adjacent drawing also from the Disney archives, published in 1957. It depicts a central film asset that in very precise ways infuses value into and is in turn supported by an array of related entertainment assets.
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Tours of duty: the time has come for a new employer-employee compact. You can’t have an agile company if you give employees lifetime contracts—and the best people don’t want one employer for life anyway. But you can build a better compact than “every man for himself.” In fact, some companies are doing so.

[Reproduced from Harvard Business Review]
Tours of Duty: The New Employer-Employee Compact
[by Reid Hoffman, Ben Casnocha, and Chris Yeh, 06.2013]

For most of the 20th century, the compact between employers and employees in the developed world was all about stability. Jobs at big corporations were secure: As long as the company did OK financially and the employee did his or her job, that job wouldn’t go away. And in the white-collar world, careers progressed along an escalator of sorts, offering predictable advancement to employees who followed the rules. Corporations, for their part, enjoyed employee loyalty and low turnover.

Then came globalization and the Information Age. Stability gave way to rapid, unpredictable change. Adaptability and entrepreneurship became key to achieving and sustaining success. These changes demolished the traditional employer-employee compact and its accompanying career escalator in the U.S. private sector; they are in varying degrees of disarray elsewhere.

We are not the first to point this out or to propose solutions. But none of the new approaches offered so far have really taken hold. Instead of developing a better compact, many—probably most—companies have tried to become more adaptable by minimizing the existing one. Need to cut costs? Lay off employees. Need new skills? Hire different employees. Under this laissez-faire arrangement, employees are encouraged to think of themselves as “free agents,” looking to other companies for opportunities for growth and changing jobs whenever better ones beckon. The result is a winner-take-all economy that may strike top management as fair but generates widespread disillusionment among the rest of the workforce.

Even companies that have succeeded using minimalist compacts experience negative fallout, because the compacts encourage turnover and hamper employee productivity. More important, although the lack of job security indirectly creates incentives for employees to become more adaptable and entrepreneurial, the lack of mutual benefit encourages the most adaptable and entrepreneurial to take their talents elsewhere. The company reaps some cost savings but gains little in the way of innovation and adaptability.
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Seven Strategies for Simplifying Your Organization: the Catch-22 of organizational complexity is that most managers don't have the time to fix it.

 “One of the patterns that causes or exacerbates complexity is the tendency to not speak up about poor practices. This is particularly true when people hesitate to challenge more senior people who unintentionally cause complexity through poor meeting management, unclear assignments, unnecessary emails, over-analysis, or other bad managerial habits.”

So let’s talk more about the negative impact of complexity on both productivity and workplace morale -  in seven steps particularly for managers who are already over-worked, stressed, and can barely keep up with their current workload.

[Reproduced from Harvard Business Review]
Seven Strategies for Simplifying Your Organization
[by Ron Ashkenas  05.28.13 co-authored with Lisa Bodel]

Over the past several years we have heard hundreds of managers talk about the negative impact of complexity on both productivity and workplace morale. This message has been reinforced by the findings of major CEO surveys conducted by IBM and KPMG, both of which identified complexity as a key business challenge.

Agreeing on complexity as a problem is one thing, but doing something about it is quite another — particularly for managers who are already over-worked, stressed, and can barely keep up with their current workload. In fact, the Catch-22 of complexity is that most managers don't feel that they have the time to focus on it: Having the problem precludes the ability to solve it.

With this dilemma in mind, we think it's important for managers to have a strategic framework that they can use to address complexity in their own areas, at their own pace, in their own ways. So to that end, we would like to offer a "simple" seven-step simplification strategy. While we present these sequentially, they can be implemented in any order, depending on where you might be able to make the greatest difference most quickly. Over time however, it's important to do all seven so that simplicity becomes a core capability of your organization and not just a one-time project.
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The new dynamics of competition:  fascinating read for memorial day that explores an emerging science for modeling strategic moves – and challenges Michael Porter’s five forces model.

[Reproduced from Harvard Business Review]
The New Dynamics of Competition
[by Michael D. Ryall / 05.27.13]

In his book Innovation and Entrepreneurship, Peter Drucker made this observation about industries that rely on knowledge-based innovation: “For a long time, there is awareness of an innovation about to happen...Then suddenly there is a near-explosion, followed by a few short years of tremendous excitement, tremendous start-up activity, tremendous publicity....Later comes a ‘shakeout,’ which few survive.”

The problem, Drucker argues, is that knowledge-driven innovations are “almost never based on one factor but on the convergence of several different kinds of knowledge.” The initial breakthrough generates a spate of activity, but meaningful progress occurs only after all the pieces are in place.

I cannot attest to the scientific merit of Drucker’s claim, but I consider it to be a remarkably accurate description of the field of strategy. In its early days strategy was a loose affair. Content originated either from commonsense approaches such as SWOT analysis or from frameworks like the Boston Consulting Group’s growth-share matrix. In 1979, however, Michael Porter’s five forces model changed the field forever. It masterfully synthesized the practical implications of economic research on industrial organizations from the 1960s and 1970s. Knowledge-based innovation put strategy on the map as a field of study, virtually overnight. Competitive Strategy, Porter’s practitioner-oriented book, became an enormous success.

Porter’s ideas generated immediate excitement. They prompted interest from researchers in other fields and the establishment of the Strategic Management Society and the peer-reviewed Strategic Management Journal. A flurry of papers made informally reasoned claims about the causes of persistent performance differences across firms. Theories such as the resource-based view, dynamic capabilities, and transaction-cost economics appeared, and an avalanche of empirical work quickly followed. Another seminal concept, though not as popular with practitioners as Porter’s proved to be, came in 1996, when Harvard Business School’s Adam Brandenburger and Harborne Stuart Jr. proposed “value-based business strategy.” That work has bred an extensive body of literature on strategy by mathematical economists.

From that backdrop, a general model of competitive strategy, which I call the value capture model (VCM), has emerged. It uniquely applies the mathematical concept of cooperative game theory to research on business strategy. (“Cooperative” is a misnomer, as the math focuses on competitive dynamics.) As such, the VCM has an explanatory, predictive potential that no other theory of competitive strategy, including Porter’s, can claim. The model is a work in progress, but scholars are starting to use it to explain the dynamics of competition and to identify practical implications for strategic decision making. At the VCM’s core is this axiom: “The value that any party can capture from engaging in transactions with a given set of parties is bounded by the value each of them can add to parties outside the set.”

In this article I will explain the axiom and its implications for how we need to think about strategy.

Redefining Competition: From Five Forces to One

In most industries, a firm, its suppliers, and its customers all have choices about how and with whom they create value. To produce more value, they may change how they engage in transactions with existing suppliers and customers or may switch to other suppliers and customers. Those agents, in turn, have similar alternatives in how they transact with the original firm and with their own suppliers and customers.