Strategy – Thinkers50

Playing the In-Sider’s Game in the Chinese Market

enquiries — Wed, 20 Sep 2023 10:14:48 +0000

By Allen J. Morrison & J. Stewart Black

After decades of effort, many foreign firms have concluded that becoming an insider in China is a fool’s-errand. As we report in our recent book, Enterprise China, foreign firms face two seemingly insurmountable barriers while operating inside China. First, foreign firms are not competing in China with hundreds of multi-billion-dollar Chinese enterprises but instead are competing against a multi-trillion-dollar monolith (which we label “Enterprise China”). This monolith directly owns and controls around a third of the country’s GDP via 150,000 State-Owned Enterprises (SOEs) and directs another third of GDP via large companies that it heavily influences (SIEs or State-Influenced Enterprises). Second, the odds are long because part of Enterprise China’s multi-part competitive strategy calls for ensuring that indigenous Chinese companies dominate domestically. It isn’t surprising that the odds are stacked against foreign firms.

Despite long odds, China remains the world’s second largest economy and in some industries has become the world’s largest market. China is not going away any time soon. So figuring out how to compete and win in China has become an increasingly challenging and yet an increasingly crucial hurdle to surmount.

Any serious firm that competes to win understands the importance of being an insider in their markets. And this is certainly the case for foreign firms operating in China. Central to achieving this is an “in China for China” strategy. Such a strategy requires significant investment, adjustments, and local autonomy. But it pays big dividends. Two examples illustrate this difficult but potentially fruitful path.

Industrial Insider: Honeywell

Honeywell China has seen its revenues soar from $360 million in 2004 to more than $6 billion in 2020, only Honeywell’s revenues in the United States are larger. By 2021 Honeywell China had facilities across more than 30 cities and employed more than 13,000 people. To achieve its insider position, Honeywell China made a number of significant investments over the last 20 years. One of the more notable investments was made by Honeywell China’s president, Shane Tedjarati, who personally invested significant time and effort learning Mandarin and developing strong relationships with China’s leadership. In fact, Tedjarati’s Chinese fluency progressed to the point where he was able to hold meetings with Chinese officials without interpreters. The strength of his relationships was evidenced in 2019 when Honeywell escaped being listed among the sanctioned U.S. defense companies giving it insider access to many key Chinese accounts.

Often foreign firms in China try to operate at the higher end of the value curve and avoid competing in the more intensive middle and lower parts of the curve. However, achieving insider status requires being able to compete where rivalry is the most intense. Facing this reality, Honeywell’s Garrett Motion unit created a no-frills version of its turbocharger and priced it on par with the knockoffs. Today, only three of the 100 imitators remain, and they became suppliers to Garrett.

None of this would be possible unless Honeywell China’s insider status was also supported by the significant amount of autonomy granted by headquarters. As an example, Honeywell headquarters allowed Honeywell China to help State Owned Enterprises (SOEs) as they participated in the Chinese government’s Belt & Road Initiative (BRI). Honeywell China has been able to provide a large number of SOEs with hardware, software and integrated solutions that helped them undertake massive infrastructure projects across over one hundred countries and organizations targeted by the BRI.

Yum China

Few would disagree that becoming an insider in China’s consumer space, with literally hundreds of millions of customers, represents a daunting challenge for a foreign firm. Impressively, in its 2022-2023 fiscal year, Yum China generated $10.34 billion in revenue, up a whopping 7.3% over the previous year. Yum China’s sales were nearly ten times more than its largest domestic rival Lao Xiang Ji (Home Original Chicken). In 2023, Yum China had nearly 13,000 restaurants in over 1,900 cities in China, including 9,000 KFC and 3,000 Pizza Hut restaurants. This was more than twice as many outlets as its next closest competitor, McDonald’s. As testimony to its insider status, in 2023 Yum China opened its 500th KFC store in Shanghai, nearly three times more than in New York City which had just 176 stores. As further evidence of its insider status, in 2020, Yum China was named the Official Food Services Sponsor of the 2022 Olympic and Paralympic Winter Games in Beijing, which allowed it to use the imagery of the Beijing 2022 Olympic Winter Games in its advertising and promotional activities.

How was Yum able to do this? Yum China’s journey to becoming an insider began in 1987 with an investment in just one KFC restaurant, which was adjacent to Tiananmen Square in Beijing. Over the next 15 years, KFC invested in and built out an additional 800 restaurants. During this time of heavy investment in China, KFC became part of Yum! Brands, which also included Taco Bell and Pizza Hut restaurants.

Although Yum continued to invest in restaurants in China, company’s growth came in part because of significant menu and format adjustments made to better fit the local market. In 2022 alone, Yum China launched 500 new or heavily modified products. It also positioned Taco Bell as an upscale establishment, selling crayfish tacos and Japanese beer, rather than downscale refried beans and cheese burritos familiar to U.S. consumers.

By 2015, Yum China was larger than the rest of Yum Brands globally. To allow its operations in China to fully prosper, in 2016 Yum spun off its China operations, making Yum China an independent company based in Shanghai but listed on the New York Stock Exchange. After the spinoff, Yum China had complete freedom to focus on its “in China for China” strategy. As part of this strategy, in 2018 it launched COFFii & JOY coffee shops as a direct competitor to Starbucks in China, and a year later, it signed an agreement with two large SOEs, China Petrochemical Corporation (Sinopec) and China National Petroleum Corporation (CNPC), to start a franchise business for its brands embedded in the two companies’ combined 80,000 gas stations.

With its expanded autonomy, Yum China also built a digital ecosystem in order to further establish itself as an insider. It created a digital membership program and pay app that spanned all of the company’s brands and restaurants in China and included hundreds of millions of members.

Conclusion

Despite mounting negative news coverage, growing trade frictions, and the looming presence of Enterprise China, China remains a lucrative market for many foreign companies. The experiences of Honeywell and Yum illustrate that it is possible to succeed in China by becoming an insider. Insiders are not interlopers or transients. Rather, they are fully committing to China as evidenced by decades of investment in time and management attention, significant adjustments to products and services, and restructuring and re-staffing to accommodate high levels of local autonomy.

Allen J. Morrison, Ph.D is Professor of Global Management at the Thunderbird School of Global Management.
J. Stewart Black, Ph.D is Adjunct Professor of Strategy and Leadership at INSEAD and Global Chief Leadership and Strategy Officer at law firm Squire Patton Boggs.

Global Enterprise 2030

enquiries — Sat, 09 Sep 2023 08:00:00 +0000

By Anil K. Gupta & Haiyan Wang

This article originally appeared in Duke CE’s Dialogue Magazine.

Think back to what the world was like 25 years ago. In 1998, China was just starting to build its infrastructure. President Jiang Zemin and Premier Zhu Rongji were busy dismantling state-owned enterprises and embracing the logic of the market. Boris Yeltsin was President of Russia, keen to integrate his country with the rest of the world. The World Trade Organization had just been established, with practically all of the world’s leaders embracing free trade with gusto. The dumb mobile phone ruled the day, that too in the hands of less than a quarter of all Americans. And artificial intelligence was just a technical curiosity.

How dramatically today’s world differs from that of 1998. Consider now that, in the next ten years, the world will change more than it has in the last twenty-five. What are the megatrends reshaping the structure and dynamics of the global economy? How will they redefine the organizational features of global enterprises that hope to stay or emerge as the winners in the new era?

Global Game Changers

Among the multitude of forces pulling and pushing the global economy in various directions, we focus on the big five.

Asia Moves to the World’s Center. In 2000, North America, Europe, and Asia accounted for 90% of the world’s economy, split roughly evenly across the three continents. Today, Asia’s share of the world’s GDP is 38% versus 26% for North America and 22% for Europe. In ten years, Asia’s GDP will likely equal that of the US and Europe combined.

Asia’s economic rise is being fueled by the fact that three of the world’s fastest growing large economic regions are all based in that continent – China, India, and Southeast Asia. Given the slowdown in China, India is now the world’s fastest growing large economy. Currently the fifth largest, it will be the world’s third largest by 2028, according to IMF projections. While the U.S. will remain the world’s dominant economic and technological power for quite some time, the three biggest economies after the U.S. will all be Asian – China, India, and Japan.

A More Contested World. In 2000, China’s GDP was 12% that of the U.S. Today, it is 72% as large. The gap is closing, albeit much more slowly than in the past. President Xi Jinping has declared that his ambition is to help China supplant America and become the world’s most powerful nation. Given also geopolitical conflicts over Taiwan, South China Sea, and East China Sea, the two countries are now locked in a new Cold War. Backed with clear bipartisan support, the U.S. is engaged in an active economic and technological decoupling from China and is urging its allies to do the same.

Rising tensions between the U.S. and China are not the only geopolitical challenges facing the world. China and India are trapped in a bitter territorial contest over their poorly demarcated 2000-mile border. India and Pakistan have fought multiple wars and remain deadlocked over overlapping claims to Kashmir. North Korea remains a nuclear menace. And, with Russia’s aggression into Ukraine, we are now witness to the first major land war in Europe since WWII.

Crisis of Global Warming. More frequent occurrences of severe weather patterns everywhere are the concrete outcomes of the fact that the earth’s surface temperature has risen by 1.2o C over the last 150 years and could crack an even more dangerous 1.5o C level by 2040. Methane and carbon dioxide emissions are the two biggest culprits. Atmospheric CO2 concentrations have increased from the-then 300 to the-current 420 parts per million over the last century.

Global warming is the toxic side effect of an otherwise glorious development – faster economic growth in emerging economies, which account for 80% of the world’s population and over 40% of the world’s GDP. Until a decade ago, government officials in emerging economies used to argue that dealing with climate crisis was something that only the developed economies needed to worry about. After all, bulk of the CO2 in the atmosphere came from carbon emissions by the developed economies over the last two centuries. The perspective now is different. Citizens in emerging economies suffer as much if not more from severe weather patterns. Unless emerging economies do their part as well, there can be no viable solution to the global problem.

Thankfully, entrepreneurs have responded to the climate crisis with powerful innovations such as solar and wind farms, electric vehicles, battery-based storage systems, and more energy-efficient buildings.

These innovations also have implications for the structure of the global economy. While the world still consumes more oil, gas, and coal each year, the fossil fuel intensity of the global economy is declining. As a direct result, global trade flows will depend less and less on shipments of bulk commodities such as oil, gas, and coal.

More Gray Hair. The world is aging rapidly. Since 1990, the world’s median age has jumped from 24 to 32. This too is a side effect of rapid economic growth in emerging economies. Irrespective of ethnicity or religious beliefs, when people become better off and more educated, they choose to have fewer children. Rapid aging is most intensely evident in Asia, the world’s fastest-growing economic region. The demographic challenges in China are particularly acute, owing to the disastrous long-term effects of the country’s one child policy. By 2030, 26% of China’s entire population will be 65 years or older in age.

Aging of the population creates several economic challenges. Health care and social security costs increase rapidly. At the same time, the size of the working age population that can help grow the economy shrinks. Unless the elderly agree to delay the minimum retirement age, the only way out for governments is more debt and higher taxes. For developed economies, welcoming more immigrants from emerging economies would certainly help. Immigrants from the future (also called robots) could help as well.

Digitization of Everything. Each passing day, virtually everything is becoming more digitized. Our factories, our business processes, our entertainment, our sports, our work, our meetings, our cars, our highways, our homes, our environment, our watches, our clothes and sneakers, even our bodies.

Digitization of everything, coupled with decline in commodities trade and shorter supply chains for manufactured goods, means that globalization – i.e., cross-border integration among nations – is increasingly being defined by flows of bits and bytes rather than atoms. According to McKinsey, cross-border data flows are growing by 20% each year and already account for a bigger contribution to global GDP than trade in physical goods.

Strategic Implications for Global Companies

Evolutionary theory tells us that, when the environment changes, organisms need to change as well. Otherwise, they wither and die. The outlines of what the above-discussed megatrends means for global enterprises are already becoming clear.

Deepen Your Engagement with Local Ecosystems. Global scale remains important for global competitive advantage. As emerging economies scale up, no company – low-tech or high-tech – can hope to acquire the necessary scale without a deep commitment to win not just in developed but also in emerging markets.

Winning in large and intensely competitive markets is rarely possible without a deep commitment to and engagement with the local ecosystem, including the localization of a good chunk of the value chain. American companies discovered this early on in their battle for European and Japanese markets (and vice versa). This imperative is now becoming true for emerging markets as well. This is why Tesla has a giga factory in Shanghai, is building one in Mexico, and has signaled that its next giga factory after that could be in India.

Deeper engagement with local markets will require deeper market penetration in both urban as well as rural markets, localization of products and services, localization of production, much greater reliance on local talent, openness to local alliances, and deeper engagement with local stakeholders such as the media and the government.

Over time, these developments will mean that the global enterprise becomes more a federation of regional hubs than a centrally run monolith. As Enrique Lores, HP’s chief executive, remarked in a recent interview, “We’re going to go to a model that is going to be much more regional where there will be regional hubs both for manufacturing and, to some extent, design.”

De-Risk Your Global Supply Chain. Growing geopolitical tensions mean that pure efficiency can no longer be the sole driver of how global supply chains are designed. Companies also need to factor in risks of disruption from government mandates or actual conflict. Depending on the product, the path to de-risking lies in an optimal combination of friend-shoring, near-shoring, and in-shoring.

As an example, take Apple which has historically concentrated the assembly of virtually all products in China. Working with manufacturing partners such as Foxconn, Apple is steadily but rapidly developing new global manufacturing hubs in India and Vietnam. Over the last one year, India’s share of global iPhone production has grown from 2% to 7%. According to media reports, it is expected to hit 25% by 2025. Similarly, Apple has started diversifying the production of MacBooks from China to Vietnam.

Sustainability as a Core Plank in Your Strategy. Insurers are already starting to price in climate risks faced by companies. So are investors. The risks of ignoring environmental sustainability can only increase over time. Thus, companies must make sustainability an imperative in the design and management of every activity in the value chain – manufacturing, supply chain logistics, even office buildings. We are particularly impressed with Unilever’s efforts – what the company calls its “Sustainable Living Plan” – in this regard.

Given the growing awareness of the climate crisis among consumers, sustainability is also becoming an opportunity to increase the competitive advantage of the company’s products and services. Not surprisingly, in 2018, Unilever launched OMO EcoActive, a laundry detergent, designed to deliver excellent cleaning performance while using less water and energy.

Look for the Gold in the Gray. Aging of the population, while an economic challenge at the social level, also presents opportunities for companies. With the elderly accounting for a bigger proportion of the population, the demand for products and services that cater to their needs can be expected to grow at a faster pace than the overall economy. Pharma, retirement homes, in-home healthcare, robotic assistants, and wealth management are some of the industry sectors that should be beneficiaries of the demographic changes under way.

A New China Strategy: In-China-for-China. Companies with an already sizable market presence in China need to start compartmentalizing their China business from the rest of the global operations. Such a strategy would help the company stay committed to China while reducing the risks from potential adverse regulatory mandates from either China or the home country. A recent survey of 480 member companies by the EU Chamber of Commerce in China found that 27% of them had already started decoupling the Chinese operations from corporate headquarters.

Consider the German carmaker Volkswagen. Starting in 2022, VW has invested over $2 billion in a partnership with Horizon Robotics, a Chinese software and chip maker focused on autonomous driving. According to a company statement, any technology developed by the joint venture will stay in China.

Optimize the Management of Digital Assets. As we discussed earlier, for every company, the business value of digital assets is growing much faster than that of physical assets. Digital assets include software, digital platforms, product and process blueprints, data, and AI algorithms. For the global enterprise, creating and managing digital assets requires paying attention to a number of questions.

At which few locations in the world should the software and digital platforms be developed, maintained, and upgraded?
Which few locations will be given the charter to develop global product blueprints? And process blueprints e.g., regarding the design and management of factories?
How will the company protect its intellectual property?
How will the company make its software, digital platforms, and product and process blueprints accessible to and usable by dispersed local operations?
How will the company ensure that its data collection and transfer processes do not fall foul of data privacy and sovereignty regulations?
How will the company convert local data into global competitive advantage via the development of AI algorithms?

Organizations maximize their chances of survival when they mirror or adapt to changes in the external environment. The structure and dynamics of the global economy in 2030 will be dramatically different from those in 2010 or even 2020. Global enterprises that hope to stay or emerge as the winners in the new era must rethink and redesign almost all key aspects of their strategies and organizations. As the legendary ice hockey champion Wayne Gretzky exhorted, “Skate to where the puck is going, not where it has been.”

Anil Gupta and Haiyan Wang combined over 60 years of research, consulting, and global business management experience to co-found the China India Institute in Bethesda, Maryland. Gupta is the Michael Dingman Chair in Strategy and Globalization at the University of Maryland, College Park. Wang is managing partner of the China India Institute and has also been adjunct professor of strategy at INSEAD.

Announcing the Thinkers50 2023 Strategy Award Shortlist

Adina Nielsen — Mon, 04 Sep 2023 07:50:25 +0000

IN PARTNERSHIP WITH BRIGHTLINE, A PROJECT MANAGEMENT INSTITUTE INITIATIVE

Where you are going and how you intend to get there lies at the heart of management and leadership. Strategy is the intellectual and inspirational lifeblood of organizations. The Thinkers50 Strategy Award, in partnership with Brightline, a Project Management Institute initiative, celebrates the very best of strategic thinking. If you were running a corporation, who would you turn to for strategic advice?

Previous recipients of the Thinkers50 Strategy Award include W. Chan Kim & Renée Mauborgne, Rita McGrath, Alex Osterwalder & Yves Pigneur, and Richard D’Aveni.

The shortlisted thinkers for 2023 are (in alphabetical order):

1. Greg Bernarda
for spearheading the movement of ‘up-ruption’

Greg Bernarda borrows from the fields of leadership, psychology, innovation, and design to show executives how to create business models that bring positive change to their stakeholders and to themselves. He argues that while we are facing systemic issues and challenges, organisations can play a role in (re)designing new business ecosystems to further societal progress. Greg has developed the idea of ‘up-ruption:’ undoing something to steward it to something better. “Disruption shifts value around,” he explains. “Up-ruption lifts everyone up and creates a step change of progress.” Greg is co-author of Value Proposition Design (Wiley, 2014), the sequel to Business Model Generation (Wiley, 2010), and has co-founded a series of international forums, including the Hanwang Forum on sustainability in Beijing, the Lift: Lab in Geneva, and the annual NOE Programme in Evian. Previously, he worked at the World Economic Forum on initiatives to address global and industry challenges.

2. Olaf Groth, Mark Esposito, and Terence Tse
for The Great Remobilization

Olaf Groth, Mark Esposito, and Terence Tse are the authors of The Great Remobilization: Strategies and Designs for a Smarter Global Future (MIT Press, 2023). The book diagnoses tectonic shifts in the global economy with a view toward designing a smarter ‘operating system’ for the world. Through their FLP-IT (forces, logic, phenomena, impact, and triage) framework for strategic leadership, the authors provide guidance for a new breed of ‘design activist leader.’ Olaf is a strategy professor at the Haas School of Business, UC Berkeley, and Hult International Business School. He is also CEO of advisory think tank and concept design studio, Cambrian.ai, and co-author of Solomon’s Code (Pegasus, 2018) and The AI Generation (Pegasus Reprint, 2018). Mark Esposito is professor of business and economics at Hult, where he directs the Futures Impact Lab. He is also on the teaching faculty at Harvard Business School; co-founder with Terence Tse of AI firm, Nexus FrontierTech, and think tank, Excellere; and co-author with Terence of The AI Republic (Lioncrest, 2019) and Understanding How the Future Unfolds (Lioncrest, 2017). Terence Tse is professor of finance at Hult and also the author of Corporate Finance: The Basics (Routledge, 2017).

3. Faisal Hoque
for Reinvent: Navigating Business Transformation in a Hyperdigital Era

Entrepreneur and thought leader, Faisal Hoque is the founder of Shadoka, NextChapter, and other companies focusing on enabling sustainable and transformational changes. A technology innovator, Faisal has developed over 20 commercial business and technology platforms and serves as an advisor to CEOs, BODs, and the US federal government. He is also a strategic partner for CACI, a $6.2 billion company whose mission and enterprise technology and expertise play a vital role in US national security. Faisal’s books include Reinvent: Navigating Business Transformation in a Hyperdigital Era (in association with IMD, Fast Company Press, 2023); Lift: Fostering the Leader in You Amid Revolutionary Global Change (with Jeff Wuorio and Shelley Moench-Kelly, Fast Company Press, 2022); and Everything Connects: Cultivating Mindfulness, Creativity, and Innovation for Long-Term Value (with Drake Baer, 2nd Edition, Fast Company Press, 2022).

4. Kaihan Krippendorff
for building the strategy community

Co-founder of strategy and innovation consulting firm, Outthinker, Kaihan Krippendorff also leads the Outthinker Strategy Network, a global peer network focused on solving the most pressing challenges. He is the author of five books, most recently the Edison Award-nominated, Driving Innovation From Within (Columbia Business School Publishing, 2019), as well as a new edition of his book, Outthink the Competition (Strategy Learning Center Reprint, 2022). A former McKinsey consultant, Kaihan has forthcoming books on the concept of ‘proximity’ (with Rob Wolcott, Columbia University Press) and creating a customer-centred culture (Wharton Business School Press). Kaihan’s recent research argues that emerging, alternative models of organisation feature several innovative characteristics, including the breaking of large hierarchical units into ‘micro-enterprises,’ turning support functions into profit centres, and relating to employees as intrapreneurs.

5. Tammy L. Madsen
for Co-Innovation Platforms

Tammy L. Madsen is the W.M. Keck Foundation Chair of strategic management and innovation, Vice President of the Academy of Management, and Senior Associate Dean at the Leavey School of Business, Santa Clara University. Tammy’s research and teaching focus on several specific themes including co-innovation platforms and ecosystem strategy, competitive heterogeneity and temporary advantage, and shocks and growth under uncertainty. Her recent book, Co-Innovation Platforms: A Playbook for Enabling Innovation and Ecosystem Growth (Palgrave MacMillan, 2021) was co-authored with David Cruickshank, and she also co-authored the fourth edition of Modern Competitive Strategy (McGraw-Hill Press, 2016) with Gordon Walker. A recipient of multiple awards for her teaching, research, and service contributions, Tammy began her professional career as a test and evaluation engineer for the weapon control systems on the F14 aircraft. She subsequently worked as a design engineer and program manager at Delco Electronics, General Motors.

6. Mohan Subramaniam
for The Future of Competitive Strategy

Mohan Subramaniam is professor of strategy and digital transformation at IMD. His work focuses on the digital transformation of incumbent industrial firms and new sources of competitive advantage in the digital age. Mohan’s 2022 book, The Future of Competitive Strategy: Unleashing the Power of Data and Digital Ecosystems (MIT Press), describes a new paradigm for competitive strategy anchored in data and digital ecosystems. It explains how legacy firms can harness their existing assets, infrastructure, and traditional strengths to leverage the new and explosive power of data by thoughtfully applying the best practices of digital titans such as Amazon and Google. Before joining IMD in August 2022, Mohan was an associate professor of strategic management at the Carroll School of Management in Boston College. He was previously an assistant professor at the University of Connecticut, a lecturer at Boston University, and a visiting faculty member at IMD between 2016 and 2018.

7. Stephanie Woerner, Peter Weill, and Ina Sebastian
for Future Ready

MIT research scientists, Stephanie Woerner, Peter Weill, and Ina Sebastian are the authors of Future Ready: The Four Pathways to Capturing Digital Value (HBR Press, 2022). Addressing the challenges of businesses transformation, Future Ready serves as a transformation playbook, providing a field-tested ‘four pathways’ framework that offers insights into the important dimensions at which a firm must excel to be competitive, as well as the organisational disruptions that every firm must manage as part of the transformation journey. With data from more than a thousand companies, the book includes instructive examples, sharp analyses, assessments to help companies benchmark themselves against top performers, and illuminating visuals to help crystallize the data and ideas. In Future Ready, Stephanie, Peter, and Ina demonstrate that the goal isn’t digital transformation but rather a profound business transformation.

8. Howard Yu
for future readiness

A former Hong Kong banker, Howard Yu is the LEGO® professor of management and innovation at IMD and director of IMD’s Center for Future Readiness, which produces the Future Readiness Indicator. The Future Readiness Indicator measures a company’s deep, long-term secular trends and consists of a composite of proven proxies to predict an organisation’s adaptability quotient — such as revenue generation or research and development spending. The ranking gauges within a given industry which companies are ready for a bold new frontier. The secret to stay ahead isn’t speed, explains Howard, it is to prepare. Howard specialises in technological innovation, strategic transformation, and change management. He is the author of the award-winning best-seller Leap: How to Thrive in a World Where Everything Can Be Copied (Public Affairs, 2018) and is on a mission to help companies become future ready. Howard was shortlisted for the Thinkers50 2019 Innovation Award.

Recipients will be announced at the Thinkers50 Awards Gala 2023 on 5-6 November 2023.

Thinkers50 LinkedIn Live with Mikko Ketokivi

enquiries — Thu, 27 Jul 2023 09:00:45 +0000

Professor of Operations Management & Organization Design at IE University in Madrid, Mikko Ketokivi is an organization economist interested in the design and governance of all kinds of organizations; small and large, public and private, for-profit and non-profit.
His new book, Efficient Governance: A Governance Approach, takes a practical look at organization design and governance questions.

Listen to this session, hosted by Thinkers50 co-founder Stuart Crainer, to hear from research scientist focusing on how organizations are designed.

WATCH IT HERE:

Professor of operations management and organization design at IE University, Madrid, Mikko Ketokivi holds a Ph.D. in business administration from the University of Minnesota. He teaches, or has taught, at business schools in the United States, France, Switzerland, Spain, and in his native Finland. Ketokivi is currently a distinguished visiting scholar at the Center for Values-Driven Leadership at the Benedictine University, Chicago.

Thinkers50@BUQuestrom: Passion & Purpose | Geoff Parker: B2B vs B2C platforms

enquiries — Fri, 07 Jul 2023 09:00:31 +0000

What drives the work of the world’s leading management thinkers?
That was the question posed at Thinkers50@BUQuestrom: Passion & Purpose, a live virtual event held at Boston University Questrom School of Business on 20th April 2023.

Co-sponsored by Thinkers50, Passion & Purpose sought to uncover the motivation behind top management thinkers: What inspires their research? What gets them out of bed in the morning? How do they translate their passions into purpose and impact for business?
To challenge the thinkers a little further, each one had just 15 minutes to deliver their idea – including questions from the audience.

During his 15 minutes of passion and purpose, Geoff Parker discussed his recent theories around inverting the firm – where value is created externally as well as internally – and specifically the different problems B2B and B2C platforms solve. B2C platforms, he explained, are essentially about solving a transaction cost failure, whereas in B2B, where the integration costs are prohibitive, it’s about solving for integration and enablement.

WATCH IT HERE:

Geoff Parker is a Professor at Dartmouth College and co-author (with Marshall Van Alstyne and Sangeet Paul Choudary) of the influential book, Platform Revolution (WW Norton & Company 2016). He is a Thinkers50 Ranked Thinker and recipient of the Thinkers50 2019 Digital Thinking Award and has been studying platforms with Van Alstyne since graduate school.

Thinkers50@BUQuestrom: Passion & Purpose | Roger Martin: Tackling the great enemy of poor management theories

enquiries — Wed, 05 Jul 2023 09:00:56 +0000

Roger Martin, Thinkers50 #1 Ranked Thinker in 2017, is passionate about tackling the great enemy of poor management theories and bad business models. Two of these, he argued, are the distinction that is commonly drawn between strategy and execution, and the idea that revenue forecasting is a useful exercise.

A major global influence on business strategy, Martin explained that if you can close the gap between what humans accomplish with bad models and what they could accomplish by adopting good business models, you will make the world a considerably better place.

WATCH IT HERE:

Roger Martin is a Professor Emeritus at the University of Toronto, where he also served as Dean. He is the best-selling author of 12 books, including Creating Great Choices (with Jennifer Riel, HBR Press 2017), Getting Beyond Better (with Sally Osberg, HBR Press 2015), and Playing to Win (with AG Lafley, HBR Press 2013).

Thinkers50@Hult with Matt Gitsham

enquiries — Mon, 19 Jun 2023 09:00:30 +0000

Thinkers50 2021 Radar member and Professor of Business and Sustainability at Hult International Business School, Matt Gitsham is also the Director of Hult’s Sustainability Impact Lab.

Matt has led numerous research projects on business, sustainable development and human rights for nearly two decades at Hult. These include exploring CEO perspectives on the implications of sustainability for business leadership, CEO advocacy for more ambitious government intervention on sustainable development, the role of business in shaping the UN SDGs, how companies are embedding the SDGs (in partnership with Business Fights Poverty), and corporate leadership on Modern Slavery (in partnership with the Ethical Trading Initiative).

Listen to this Thinkers50@Hult session to hear about sustainability transitions from an expert.

WATCH IT HERE:

Matt Gitsham is a Professor of Business and Sustainability at Hult Ashridge Executive Education, part of Hult International Business School, and a director of the Ashridge Centre for Business and Sustainability. He has led numerous research projects on business and sustainable development.

Choosing Where To Play in the New Ecosystem Economy

Adina Nielsen — Wed, 08 Feb 2023 14:24:18 +0000

Venkat Atluri and Miklos Dietz

Ecosystems, you’ll recall, are communities of interconnected digital and physical businesses that work across the boundaries between traditional sectors of the economy to provide what customers need. Businesses form ecosystems by partnering with one another—by sharing assets, information, and resources—and ultimately creating value beyond what would have been possible for each of them to achieve individually. Ecosystems, we should remember, are distinct from traditional partnerships among businesses like vendor and customer relationships. A vendor agrees to supply something to a customer and gets paid in return. In a typical ecosystem relationship, by contrast, multiple businesses collectively provide products or services to meet customers’ needs and share the value they have created in the process. As you begin to think practically about how you might adapt to this emerging ecosystem economy, it’s important to keep in mind this basic sense of what makes ecosystems so special and powerful.

This power can present differently to different people. Some will fixate on the daunting challenges it could pose, while others will focus on its potential to bring enormous wealth and success—and to effect a positive impact on society. As Napoleon Bonaparte famously remarked, “There are only two forces that unite men—fear and interest.” The French emperor clearly favored the former—he finished the thought by saying, “All great revolutions originate in fear, for the play of interests does not lead to accomplishment.” In the business world today, we tend to think that most important decisions are driven by a combination of the two. Whether you find fear or interest the more compelling message, it is probably the case that both will drive your thinking—and anyway, what is essential is that you heed their message. It doesn’t matter whether you’re motivated by the huge potential rewards of the ecosystem economy and the opportunity to make a positive change in society—or by fear of being made irrelevant. What matters is that you need to act.

As you start adapting to the new ecosystem economy, the first questions you need to answer are: Where will you compete now? And what should you do to evolve your value proposition? These are difficult, thorny questions, and it’s only natural to struggle with them. We will lay out for you a thoughtful, deliberative, and powerful process for finding answers to these questions. The steps we have devised include some measures you may already be taking—and some that will be new.

Of course, every company is already engaged in some manner of strategic planning. We are not proposing that you completely replace that. But what we are saying is that you will need to vastly expand your scope—and shift the nature of your planning. Doing so may push your thinking in ways that run counter to what your routine strategic planning is telling you—and you need to be prepared to wrestle with this tension. For instance, to survive in the evolving ecosystem economy, most companies will need to significantly alter their business models, which will inevitably involve painful sacrifices in the short term. You may have to cannibalize existing businesses to lay the groundwork for a future ecosystem play. Especially if the proposition you want to offer necessitates creating a new ecosystem or building a new platform, you may need to offer some services for free—and eat the associated costs.

As challenging as this new type of planning may be in the short term, it does not end there. Rather, this process needs to be constantly maintained and reassessed. Many successful ecosystem businesses got ahead not because they started with a master plan and flawlessly executed it exactly as originally conceived—rather, they succeeded thanks to their adaptability, their knack for recognizing shifting circumstances and course-correcting. A few other characteristics of successful ecosystem businesses include embracing an agile, adaptable mindset in order to compete in a highly dynamic world where customer needs and technology are taking unpredictable twists and turns. In a sense, what we’re saying is that you will be best positioned to take advantage of the effects of the ecosystem economy if you know which direction you want to go with your ecosystem business and adopt a mindset that allows for making adjustments as you go.

So many companies understand that they need to evolve their propositions but underestimate the scale at which change is needed. To do so effectively, you need to think backward from the future, not forward from the present—but this does not necessarily mean that you need to emulate tech companies or try to envision what amazing futuristic technologies we will have in 50 years. Instead, you need to fundamentally rethink how you define your customers’ needs, your customer base, your industry, your proposition, and the competitive landscape.

Venkat Atluri is a senior partner with McKinsey & Company, where he leads the Firm’s global Tech and Telecommunications practice.Miklós Gabor Dietz, CFA, is the managing partner of McKinsey’s Vancouver office. Since joining McKinsey’s Budapest office in 2001, Miklós has led more than 300 engagements for both private- and public-sector organizations across 40 countries.

Excerpted with permission from the publisher, Wiley, from The Ecosystem Economy, by Venkat Atluri and Miklos Dietz. Copyright © 2023 by McKinsey & Company. All rights reserved. This book is available wherever books and eBooks are sold.

The Provocateurs Episode 11 | Tiffani Bova: The Inside Track on Growth

mtapscott — Mon, 30 Jan 2023 08:55:24 +0000

Thinkers50 in collaboration with Deloitte presents:

The Provocateurs:

podcast series

EPISODE 11

ABOUT THIS EPISODE

Tiffani Bova: The Inside Track on Growth

Read the transcript

Tiffani Bova is the global growth evangelist at Salesforce and the author of the Wall Street Journal bestseller GROWTH IQ: Get Smarter About the Choices that Will Make or Break Your Business. Tiffani is a true change maker whose thought-provoking and forward-thinking insights have brought her international attention. She also hosts her own excellent podcast What’s Next!

Prior to working with Salesforce, she was a sales, marketing, and customer service executive for startups as well as Fortune 500 companies. After her success in the corporate world, she was also a Distinguished Analyst and Research Fellow with Gartner for many years.

In this conversation with Steve Goldbach and Stuart Crainer, Tiffani tells the compelling story of the development of her insights, ranging all the way from running E. K. Fernandez Shows to her time at Salesforce. She also spills exclusive nuggets from her forthcoming book, always with a keen eye on weighing both consumer and employee satisfaction and experiences.

This podcast is part of an ongoing series of interviews with executives. The executives’ participation in this podcast are solely for educational purposes based on their knowledge of the subject and the views expressed by them are solely their own. This podcast should not be deemed or construed to be for the purpose of soliciting business for any of the companies mentioned, nor does Deloitte advocate or endorse the services or products provided by these companies.

Hosts:

Stuart Crainer

Co-founder, Thinkers50

Steve Goldbach

US Sustainability Practice Leader, Deloitte

LISTEN NOW ON

Inspired by the book Provoke: How Leaders Shape the Future by Overcoming Fatal Human Flaws; Wiley, 2021.

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EPISODE 11

Podcast Transcript

Stuart Crainer:

Hello, I’m Stuart Crainer. I’m the co-founder of Thinkers50, and I would like to welcome you to the monthly podcast series, Provocateurs, in which we explore the experiences, insights, and perspectives of some inspiring leaders. Our aim is to provoke you to think and act differently through conversations with some fantastic people. This is a collaboration between Thinkers50 and Deloitte, so my co-host today is Steve Goldbach. Steve is the Chief Strategy Officer of Deloitte, and with Geoff Tuff is the author of two bestselling books; Detonate, which came out in 2018, and Provoke, which is subtitled How Leaders Shape the Future by Overcoming Fatal Human Flaws. Provoke inspired this series. Steve, welcome.

Steve Goldbach:

Great to be here Stuart, and especially given we have such a fantastic guest today. Today, we are joined by Tiffani Bova. Tiffani is the global growth evangelist at Salesforce and is the author of The Wall Street Journal bestselling book, Growth IQ: Get Smarter About the Choices that Will Make or Break Your Business. Tiffani is a true changemaker whose thought-provoking and forward-thinking insights have brought her international attention. She also hosts her own excellent podcast, What’s Next!, and we’ll place a link to What’s Next! in the show notes, so, check that out.

So, prior to joining Salesforce, Tiffani was a sales, marketing, and customer service executive for startups as well as Fortune 500 companies. She left the corporate world and joined Gartner, becoming a distinguished analyst and research fellow. And additionally, Tiffani has a forthcoming book which will be out in May, The Experience Mindset, published by Random House Portfolio. Aloha, Tiffani.

Tiffani Bova:

Aloha!

Stuart Crainer:

So, I read in an interview with you, Tiffani, that your insights into business began at the E.K. Fernandez Carnival in Hawaii, where you were brought up. Can you tell us more?

Tiffani Bova:

Yes, that is often a great conversation starter, I must say. I say, “Everything I learned about business, I learned at the carnival,” and people are expecting something else and they go, “Wait, wait, I’m sorry, what?” They go, “You don’t look like a carny, nor do you act like a carny.” I’m like, “I’m not sure if that’s a compliment or not!” But let’s, you know, sort of back up and talk about it. My best friend growing up, her parents owned E.K. Fernandez Shows, the dad was second generation, his father actually started it in the early 1900s and then continued it and now her brother is running it. But her mom was the president of E.K. Fernandez Shows and then she decided she was going to open indoor arcades and to time this, this is in the early 1980s, and she was an amazing accidental mentor, if you will. She said, “You know what, why don’t you run our games at the carnival?” So, to win posters, you throw a dart, pop a balloon, throw the rings, get it over, pop bottles, all those sort of games. And what it taught me was how to provide great service, great experiences, how to hire people, how to train them. Mind you, I was 16, 17, 18 years old and I was running a part of a multimillion-dollar business and every Friday, we would set up. Every Sunday night at 2:00 in the morning, we would shut down. I would sleep in the teddy bear containers. So, I don’t think I’ve ever worked as hard as I worked in the carnival, but it was this amazing opportunity. I learned about supply chain. We had to order teddy bears, they had to come into Hawaii. The only way was by ship. If something happened to the teddy bears, we didn’t have anything to give away at the game. So, we had to be very mindful of how we ordered, when we ordered, then pricing and different plushies, and I could go on for a long time, but I would say that it was an accidental MBA class, if you will, and no offense to any MBAs out there or professors. But it was real-world experience that I think got me hooked on business itself, but more importantly the inner workings of business.

Steve Goldbach:

Maybe, Tiffani, if I could pivot for a second off that, what did you come to appreciate? I can imagine being as close to your customers as you are in a carnival. Was there any insights that you had about how customers behave that started to lay the, you know, Leonard DiCaprio-like, Inception-idea for customer experience, employee experiences later on in your career?

Tiffani Bova:

I would say customer experience for sure and the importance to detail specifically. Sometimes when I talk to leaders today, we talk about customer experience, it feels like this massive conversation, and I try to bring it down to all the little things that a company does in order to deliver that comprehensive experience. So, one example I often give from those days was when, Linda was her name, when Linda opened the largest store at the time was 15,000 square feet on the island of Maui for an indoor arcade. She said, “I want you to go run it.” It’s our flagship store. At this point, I’m in my early twenties, I’ve now worked for the family, I’ve gone away to college and over the summers continued to work for them for five or six years, and I had to open up this store and we tried to make the inside of this establishment feel like being underneath a big top tent at a carnival, full of all these light bulbs and I don’t know how many light bulbs they were, but there were thousands of them.

And she came in for the opening day and was walking down the line introducing herself to everybody that worked there. And I was at the end of the line. She said absolutely nothing to me. All she did was point up with one finger. Now, I didn’t know if that was, “Hey, Tiff, you’re number one.” I didn’t know, “Hey, are you doing a great job?” And she walked away and all of a sudden I said, “Maybe she was pointing up.” So, I let my eyes gaze up and I looked up and lo and behold one light bulb was out, one. Not 10, not 100, one. And that lesson I repeat all the time. It was kind of my light bulb moment, excuse the pun, but really-

Steve Goldbach:

So to speak. Yeah.

Tiffani Bova:

Yeah, so to speak, right? That little thing. If you don’t care enough about what your establishment looks like, if your sign in front has two letters that the light bulbs are out, and so, it doesn’t really show your name. High-end brands make this mistake, retailers make this mistake, companies make this mistake all the time. And whenever I see it, in my mind I go, “Oo-oh, Linda would be really upset.” She would walk in and say, “Do you really care about what you do?” And so, while Steve, that’s not sort of an example of the connection, it said something to; I then had to communicate to the employees, “We have to think about the little things.” That if you don’t show up and care about what you do, customers won’t care either. And I think accidentally that was a lesson that I learned, but I really took away from that – the customer experience lens of it, not really realizing the power that that has on employees actually loving what they do every day and it shows in the work that they put forward.

Stuart Crainer:

Yeah. I think there’s been some research done that’s about people who become CEOs. A lot of them have early experiences dealing directly with customers or sales roles. I interviewed a guy who was the CEO of Visa a few years ago and he’s began life selling dog food from the back of his car. So, I think there’s a lot about sales roles and direct communication with customers, it’s really formative, it’s full of light bulb moments.

Tiffani Bova:

I agree. And I think you can tell very, very quickly when a leader is not connected to their customers. And on the flip side of that same coin, when they’re not connected to their employees, I think there’s a lot to be said for that. And you nailed it, Stuart. When you have someone who has that keen insight from actually doing the job, they have much more empathy for what goes into doing the job, especially when it’s customer-facing. If you have a CFO that rises to the top and becomes CEO versus you have someone who is the chief revenue officer, maybe even a chief strategy officer, chief marketing officer, making it to the CEO level, it’s a very different kind of environment for those that work sort of all the way down the organization.

Steve Goldbach:

Yeah, I think, I happen to believe it’s probably not as much about the role, it’s about your ability to put yourself in the shoes of your customers and have an attention to detail because, at least I’d be curious whether you agree or disagree, and I actually would love it if you disagree. I actually think it’s less about… I think it comes from spending time with customers, but really at the end of the day, lots of folks spend time with customers. It’s those who can say, “I appreciate the things that matter to…” Like transitioning off the backs of spending time with customers to having that empathy that you described, that appreciation for, “I know what’s going to convince my customers that this is right,” and any little detail that is friction, that gets in the way of them choosing our brand, our business, like a light bulb being out, is something that they’re noticing – that probably has nothing to do with their enjoyment of the carnival, but because they’re noticing it, it’s taking away their attention from the thing that they should be noticing, which is a flawless and joyful experience.

Or if there’s crumbs on a table when you get to a quick service restaurant, it’s not that you couldn’t sweep the crumbs off and your food doesn’t taste the same, but it’s that I had to sweep the crumbs off and now it’s sort of a sullied experience in some way. So, it’s that appreciation of not having the friction. Is that kind of what you learned or is that? Because I think that can come from anywhere, but I’m curious if you think that it comes uniquely from a sales role.

Tiffani Bova:

I agree and disagree. I guess, I’ll take the middle road on that one, but that’s an easy thing to do. I sort of agree with you on both sides. It’s not that it doesn’t happen and listen, I have been in the room when many executives have sat with customers. I’ve run customer advisory boards, and I think some of it comes down to focusing on the wrong things, like what keeps you up at night? Is that the question that’s supposed to uncover all the things you’re supposed to know about with the customer? Or do you actually go out and behave like your own customer? Do you buy something from your own brand? Do you go sit at that sort of fast food restaurant or quick dining experience and you notice that it’s not clean, it’s very different from hearing from customers, “I had to wipe it off the table.” Right?

Actually experiencing it yourself is absolutely where you can’t fake it from a survey, from a report, from a round table. And so, there’s a lot of power in experiencing it. And to your point, Steve, does it mean you experience it because you were in the role or do you experience it because you get out of your office and you go experience it?

Steve Goldbach:

Yeah.

Tiffani Bova:

Right? I think that it’s the fact that it happens, and I don’t think that executives make enough time in their day to go experience it from a customer view and experience it from an employee view. They rely too much on either those around them or the reports to send them those early signals so they know that there’s a problem.

Steve Goldbach:

Tiffani, I couldn’t agree more. And there’s a quote that, as I was researching for this podcast, that I heard you say, that I absolutely love, which is, “We are all consumers in our personal life.” And so I love this concept of getting out of the ivory tower and getting to spend time with customers. One of my most formative executive relationships, before I was a partner with Deloitte, was working with P&G when I was with Monitor Group and A.G. Lafley, every time he went into a different geography to visit with his executive team there, he was insistent that he would do in-home visits and in-store walkthroughs. And the example he was trying to set was that if he can do it and he’s the chief executive, you better be doing this day in, day out to have an appreciation. So, in addition to doing the stuff that A.G. did, how can we learn from being consumers in our own lives? How can we have a greater appreciation for what our customers are going through, through our own consumption experiences?

Tiffani Bova:

Yeah. So, I was part of the team, as you mentioned, prior to joining Salesforce, I was the research fellow at Gartner, and I was part of the team that made the prediction that the chief marketing officer would spend more on technology than the chief information officer. And I think we did that in 2008 or 2009 and we thought it was going to happen sort of 2015-ish, and the reason we thought that was going to happen was all about experiences, that we knew that the experience a customer had with a brand would last much longer than the price that they paid. That was sort of the anchor in what I started to talk about for well over a decade now.

And once we realized that that experience was going to play a greater role, it was; how do we uncover what the reality of those experiences were? And so do you say, okay, to your point, “I can’t believe in 2022, that that is still a provocative statement!” Steve, that, “Go out and visit with your customers, go in there, in this case in their home.” But what the pandemic showed us, if nothing else, was the fact that the experiences we have in our personal life with a brand now strings over to our business life, our B2B versus B2C experiences, out of industry. So, an experience you might have at a retailer, now why can’t I get it with my healthcare provider. An experience I have with my bank, why can’t I get it with my insurance company or whatever the case might be, right? Entirely different industries, but that experience expectation is threading across everything that we do. So, I actually call it B2E; business to everything, every experience, everyone. And that way we get out of this, “Well, every example you just gave, Tiffani, was a consumer, B2C, experience. We’re a B2B company, we’re different.”

You may think you’re different, but the consumer on the other end, right? A buying team, buying for B2B, is seven individual consumers who have experience expectations from their personal and professional lives that you are now having to deal with. And that’s where I think executives get very caught. They get caught in, “We are different.” They get caught in, “We are a very unique industry.” And if you’re highly regulated, I get that, that does have some uniqueness to it, of course, government regulations, things like that. But 85% of what all businesses do, look, they do two things; They make stuff, they sell stuff. That’s kind of it. I mean it’s just not more complicated than that. The stuff you sell might be a product, might be a service, might be a hard good, might be consumables, might be in healthcare, but at the end of the day you get the point, that how do you make what you sell and how you sell and how you engage much more meaningful at that experience level, experience layer.

And I think that that’s where people have to have a beginner’s mind in approaching these, “We’ve done this before, it didn’t work. We tried and it failed. We don’t have the culture that is open and willing to try these new things.” You, as a leader, have to provoke them to want to do it. Give them the why, show them the way, give them permission to fail and learn. But ultimately, the fastest way to figure out what is going on, to your point, is to make it a mandate as a leader, show yourself doing that and going and having those conversations and connections with customers, and others will follow. But if you just do it and you do it every once in a while, it doesn’t become part of your sort of cultural rhythm of the business, you’re just missing a huge opportunity.

Stuart Crainer:

Tiffani, can we go back? Can we go back to the light bulb moment in Hawaii?

Tiffani Bova:

Sure.

Stuart Crainer:

How did you get to Salesforce from there? One minute, you’re having a light bulb moment in Hawaii, two years later you’re at Salesforce. What was your journey between those events?

Tiffani Bova:

It was not very conventional. I was not a great student. I sort of figured out later on in life that I’m a kind of listen-visual learner and I’m not a read-write learner. So, school was always very tough for me. And so, I felt like all those lessons I had learned all those years ago really have played a part in shaping who I was eventually as a leader. But it also meant that my educational journey was a little different. In college, I went to a state school here in the US, and my college counselor, at the end of my second year, said, “Okay, we now have to pick a major.” And I thought my undergrad would be in business administration and then I’d probably go on and get my MBA or whatever it was going to be. And my college counselor said to me, “I don’t think business is for you.” Which, it was one of those moments where you just sort sit back and go, “Really?” She goes, “Yeah, you’re not doing very well in these classes.” And I said, of course, at 19 you think you know everything. So, I was sort of like, “Look, I just read this entire chapter and got quizzed on supply chain. That’s not actually how it works. I’ve actually seen it live in person.” Of course, I had this very narrow view of supply chain, but when you think you know everything at 19, it really turned me off to learning from a textbook that had no practical lesson experience, being taught by someone who had never actually done the job. So, I had to find another way, got through college with a very different degree, and kind of went on this journey of doing, and learning that way, and then finding those things that I would excel at. And I accidentally found myself in technology after I’d left working for E.K. Fernandez Shows. And that opened up these tremendous doors for me that tech changed significantly, very quickly, all the time. So, it kept me curious. I was always learning. I changed jobs every 18 months in my thirties, taking on more responsibility and getting more experience across different aspects of tech, software and hardware, and networking, and cloud computing.

I was one of the very first in the 2000s, I was selling domain names in the mid 1990s. I was very early in this thing called the World Wide Web, which gave me this window into where I thought business would go. And then I really thought I wanted to be a CEO along the way. I kept moving up the ranks and I ended up running a division of a Fortune 500 company and built a $300 million business within it. And I thought, “Ah, this is what I want to do. I want to be a leader and really, sort of, take a business forward.” I knew I wasn’t an entrepreneur, but I knew I wanted to be a leader.

And then one day I woke up and looked in the mirror and I just didn’t recognize myself. I felt like I had, for the past three and a half years, I hadn’t slept in my own bed in seven straight nights. I was really grinding. The executive team wasn’t listening to my ideas, they were disconnected to what was happening in the market and with our customers. And I was sort of fighting this battle that I knew I could not win. I tried multiple ways to win it. And so, I hit eject and I said, “Maybe that’s not for me.” And I landed myself at Gartner and that was as an analyst and consulting firm, the largest in the tech field. And it took me about two years. I didn’t know how to be a consultant. I didn’t know how to be an analyst, I didn’t know how to write research reports.

It was very out of my comfort zone. But I knew that I had some insights and advice that I could give to tech companies. And lo and behold, kind of year three, year four, I started to get my rhythm and sort of year five, my customer base, our customer base, started to really see and find my superpower and then they kind of taught me what my superpower was. And once I learned what that was, I really put my foot on the gas and said, “I could really shape companies and help them be successful.” And of the largest five tech companies in the world, they were clients working with me on their go-to-market models and sales transformation and the impact of digital to the way they market and engage with brands and indirect channels. I was setting and helping, participated in setting strategy for very successful brand new… that became billion-dollar divisions of some of the largest tech companies in the world.

And that was, wow, a front row seat to how to be a successful leader, how to influence change, and also how to play behind the scenes. One of the kind of hidden figures that was helping these companies be successful and have it really be about their success. And I got to play some small part in that.

Stuart Crainer:

You weren’t attracted by the world of being an entrepreneur?

Tiffani Bova:

So, that’s a great question. It was one night over a bottle of wine in Australia with a friend of mine, Naomi Simson who’s a Shark on Shark Tank Australia. And we were talking about this very topic, we were talking about, “Why don’t you just break out on your own? Why don’t you just go start your own consulting shop or something like that?” And after about two hours, I really realized, I gave myself permission to say that, that’s just not my thing. I don’t have the risk quotient for it. It’s not that I don’t want to bet on myself, but I just really realized that wasn’t my path. And so, I felt like if I could help lots of entrepreneurs somewhere in their growth cycle, some of them were just startups. You know, “I have two employees, I’m about to hire my third, what should I do?” to “I’m 50 employees, and I’m trying to get to $5 million or $10 million turnover,” to “I’m a billion-dollar brand, starting a brand new product category.” Somebody like Amazon with AWS, or Microsoft going from on-prem to cloud, that I could have such a greater impact on so many other entrepreneurs out there in the marketplace that I chose that path. And maybe it’s a little bit of a cop out, I don’t know. But it really wasn’t. Once I realized that it wasn’t for me, it actually was freeing. I felt the pressure was taken off my shoulder to go try and do something that I thought others might have wanted me to do, but I never really felt comfortable doing. Maybe I should have tried to listen to my own advice, get super uncomfortable, try it, what’s the worst that could happen? I would fail. But I think that I have been able to be an entrepreneur in many unique ways.

Salesforce came and offered me an opportunity, they created a position for me to keep doing basically what I was doing at Gartner, but do it for our clients. And to me, I feel like I’m a little bit of an entrepreneur in a very big organization helping so many of our customers be successful.

Steve Goldbach:

So, Tiffani, speaking of helping entrepreneurs, I’ll ask you another “agree, disagree”-kind of question. I’d love to get your take on this. So, an observation I’ve had, and this is the tyranny of the anecdotal, is that there is a litany of entrepreneurs who are enamored with a particular technology, whatever that technology might be, but their path to entrepreneurship is through the technology. And my observation is that I think that the ones that really have an appreciation for the customer experience, and the combination of that technology with the customer experience, are so much more likely to be successful. So, a couple of questions. So one is, do you have that same observation? And two, why is it, do you think that folks that are so technology inclined tend to view it through that technology lens primarily and not how it helps a customer do something that they either couldn’t do or do something they do better or solve a customer problem? Why is that a hard lens, it seems for that set?

Tiffani Bova:

Yeah. And so, I’m going to lean into the title of this podcast, right? I think I make a very provocative statement, considering where I work, that we don’t have a technology problem, we have a people process problem. And it’s not lost on me that I work at Salesforce. Obviously, a lot of companies are powered in this particular category by Salesforce. But why I say that is, as I mentioned, I was very early in the cloud, and so the marketing technologies stack. Back then I was Eliquis beta client, I was Constant Contact’s beta client. I mean, I was early. And back then, there was half a dozen technologies, if you will, available to even have something even remotely similar to the conversation we’re talking about around customer experience. Now, there’s some 8,500 or 9,000 unique marketing technology products in that stack that can play some part of that role, splitting the hair 8,500 ways. Do I need nine tools to do this? Do I need 10 tools to do this? Do I still need a tool to do that? And so, unfortunately we’ve got a bloat in the stack that makes it unfortunately much more complicated for an employee to do their job. And so, if you are way too focused on technology and you don’t have a good discipline around change management and putting rigor into the fact that every time you add something, should you remove something? Every time you add something, should you look at the processes it touches to make sure that they are still working? Every time you add something, do you have the right people swarmed around it? Does the organizational structure still match what you need to do? People don’t ask those hard questions. They keep sort of putting technology at a potential problem or opportunity without doing the hard work on the people process side. And all of that comes down to the culture. If your culture isn’t willing to ask those hard questions all the time, and also admit, “You know what? We deployed this technology, it wasn’t a fit, we need to pull back.” Which should teach you, you need to do something before you fully deploy, so you catch those things before you spend all that money. And I think that that puts many on their back foot because they don’t have someone who’s the head of strategy or they don’t have a change management division, or the CIO is unfortunately so focused on “keeping the lights on” that they’re not able to focus on innovation and growth initiatives. And they most definitely are not paying attention to the complexity that their decisions are having on those people that have to do the jobs.

And so, there is so much underneath that question, but technology spending continues to increase. Job satisfaction of employees continues to decrease. Customers are looking at brands to improve that experience, that continues to go up. Underneath that is a lot of reducing the effort for the customer. And the unintended consequences of those two things is: the experience for the employees declining and the effort is going up.

Stuart Crainer:

At Salesforce, is there a very distinctive management philosophy or a culture you’ve bought into, do you think? How would you describe it?

Tiffani Bova:

Yeah. So, I would say this. When I was changing positions and I made the decision to leave Gartner, I was fortunate enough to have a number of companies that were interested in having me join. And the decision that I made to join Salesforce came down to really one thing. It was the fact that I had attended probably 1,000 technology conferences over the course of my almost 25 years in tech. And there was only one where I left saying, “I wanted to be a better human being.” That I wanted to have a greater impact, that I actually could see the impact that technology had on communities and not-for-profits and societies and individuals. And that was Salesforce. So, I knew that, as I was looking for what to do next, that I wanted to find a way where I could balance doing a job but also giving back.

And this culture was a perfect place for me to do that. And it also opened my eyes up on the power that culture has in the ability to innovate, to grow, to deliver compelling experiences, that purpose over profit is something that we should all aspire to do, and really how can we in a sustainable way leave the planet a better place because we were all individually here, but as a corporation do that as well. And I think that it is a great blend of all of the things I just said. Not that other companies don’t do it. There obviously are those that do, but in my space, in where I felt I could have the greatest impact, Salesforce was a perfect choice for me.

Steve Goldbach:

So, just pivoting a bit to sort of your background to the ideas in Growth IQ, can you share a bit about what… Was there a particular insight that was the driving force behind the book? Was it a collection of things that you were observing that you just felt you had to coalesce into one particular effort? What was the genesis behind the Growth IQ?

Tiffani Bova:

Yeah. It was pretty simple, actually. For those of you who don’t know what the analyst companies like Gartner does, we do a couple of, or they do, a couple of things. One, they do things called inquiry calls. So, customers would call up and, say for a half an hour, schedule a call with an analyst like myself and say, “Okay, we’re seeing a growth stall. This is happening in our customer service organization. Our net promoter score is dropping, we’re launching a new product.” It was whatever the question might be. And we would have a half hour to share best practices, give some advice on what to happen. And over my decade, I had about 4,500 of those calls from around the globe, all the way from startups with two employees to the largest technology company really at the time in the world, IBM, at that time.

And so, you would say, “Okay, what was the commonality?” Well, when growth started to get hard, here are the three things I would hear. “Tiffani, should we spend more marketing dollars? Should we hire more salespeople, or should we cut costs?” Those were the three levers they would pull and eventually I was like, “It cannot only be those three.” So, I started to uncover, “Well, okay, it has to be more than that.” And so I coined a term, the Seller’s Dilemma – obviously a big play on Clayton Christensen’s Innovator’s Dilemma – but the seller’s dilemma was, how do you hit numbers at the same time you’re transforming? And for a leader, that’s very difficult.

And so, as I was looking across the landscape and having those conversations, it was very interesting for me: I would start to push back on those tried and true ways to do things, and clients at the time would either be very receptive to it or, guess what, they wouldn’t call me again, because I was making them really rethink everything they were trying to do. And a lot of it was because I had all these data points, kind of like your CPG example of going into their home and seeing it live. I was going into these businesses and seeing it live, work and not work, and I could collate that and aggregate those best practices. And that kind of became that superpower I was mentioning earlier. And it landed me on these 10 paths to growth. And let me be really clear, it’s nothing new, it’s nothing earth-shattering.

I took the Ansoff Matrix, which is tried and true from the middle 50’s and said, “How do I modernize something like that with all the things we now have at our disposal, like social, mobile, cloud, and big data? What are the things that companies can now do in launching products in new markets very easily and working with and through partners and partnering in a cooperative way?” Right? Someone you might compete with in the past. Coming up with the COVID vaccines is a great example of coopetition, right? Competing companies working to solve a big problem. You could think of the USB port in computers, everyone could have had their own, but they standardized it to make it better for customers. And so, how do you apply technology in these shifts at the Fourth Industrial Revolution that we now can use and companies can grow?

And I did it in a really easy, simplistic way that everybody could understand, sort of move and kind of play. Lego was one of the stories, but it’s kind of a Lego block. Which growth path can you pick at what time? But I will tell you, the Aha-moment that came out of all that for me was, it wasn’t actually which growth path people chose, it was the order in which they did it. Sequence was the determining factor to success. You can’t do everything all at once, so in what order do you do things? And once I grabbed onto that sequence as a part of the framework for Growth IQ, it really opened up rich conversations that, should you reorder things, that you need to do and that I think started to separate Growth IQ from other sort of works that have been put out around how to grow a business that really it isn’t, I’m going to tell you because everyone’s context is different. Everyone’s customer base and employee base is different, but the sequence in which they did it really was the one that I think separated Growth IQ from the rest.

Stuart Crainer:

That’s nice to hear you mention Igor Ansoff, who doesn’t get mentioned very much these days.

Tiffani Bova:

Yeah, I’m a little bit of an anthropologist on growth. You got to go back because interestingly enough, in one of the chapters, I talk about optimizing the way you sell. And one of the questions I ask on stage all the time, and I’m sure I’ll ask you two guys, we’ll have a little fun with it. What year do you think sales strategies that are used today, like actually demoing the thing you are selling, creating compensation plans, creating winner circles – right, top sellers get to go to some location to celebrate their greatness, creating a change curriculum on selling solutions, what year do you think that was created?

Stuart Crainer:

(Laughter)

Steve Goldbach:

I was going to say it could be either the 1800s or it feels like, if you put them all together, it could be a Mad Men style 19-late 40’s, early 50’s, post World War II. But it also could be like as we got through the Industrial Revolution, it could have been that. But I legitimately don’t know. And I’m curious about the answer, Tiffani.

Tiffani Bova:

So it’s the late 1800s and it was by a gentleman with the last name Watson at a company called NCR, with the cash registers, and it was literally demoing the cash registers. You could walk in and say, “Look, I’ve got this thing called a cash register.” And people were like, “What? What? It doesn’t make any sense to me.” It was, “No, come to our showroom and see it in action.” And Watson, as we all know, went on to be one of the founders of IBM and through the 20’s, 30’s, 40’s, 50’s, 60’s and early 70’s, IBM was a selling machine and people would say, “You don’t get fired for buying IBM.” They were known for their rigor and their power in selling. It was absolutely a framework and a foundation. And so, if you look back, say, to Stuart’s comment about the Ansoff Matrix, if you look back, we’ve done all these things, right? The job to be done doesn’t change, the solution is what changes.

And so, that was what Growth IQ was about, the job doesn’t change, make stuff, sell stuff. It’s now, we have different tools at our disposal in order to communicate with customers, text messages instead of smoke signals or direct mail or faxes. Now we can send a text message. And so, you still want to communicate with a customer, now you do it via social versus doing it via a letter in the mail or a fax. And so, job to be done remains the same, the solution is what changed. So, if you’re an anthropologist and a historian in what you do, you will learn that what’s old is new again, but now we have new ways of doing it.

Steve Goldbach:

Tiffani, I couldn’t agree with you more about there seems to be a pervasive desire in the world of thought leadership to declare certain concepts dead all the time. And the latest one I always hear is ‘strategy is dead.’ And it’s like, “No, no, no. Strategy is about, how do I position myself to be different in the eyes of the customer?” To your point, it’s ‘make stuff, sell stuff.’ Because that’s to some extent what your strategy choices all have to do. And are there different ways to distinguish yourself in the eyes of the customer? Absolutely. But it’s the same objective, but somehow we have a tendency to declare things dead and things of that sort. I’d be curious, what are the things that you find that are the hardest to do in getting executives back to those basic first principles in thinking? Especially around the area of customer experience, employee experience, where do you find them hard to just remind them like, “This isn’t rocket science, but you’ve kind of lost the way by thinking about all this fancy new jargony stuff?”

Tiffani Bova:

Yeah, so I would say this. I’d say in my opinion anyway, what has changed in strategy is the volume of inputs that play a role in setting that strategy, where it comes from. Strategy might have been “What my gut tells me.” Let’s go way back, we didn’t have everything. And then it might be, “I’ve tried this, it didn’t work, we tried that, it worked, and that’s why my strategy is going this way.” But now we have all this input, right? We have the ability to use big data and analytics and prediction and personalization. We have all this new ability to actually listen to customers. And so, those inputs to inform the strategy has drastically increased over the last 25 years. I don’t know if… Do you agree, Steve?

Steve Goldbach:

I do. And I think that we would have a very interesting debate if one of your Thinkers50 colleagues, Roger Martin, were here, who would talk about there’s no data from the future. And the big data is a challenge to making decisions about the future because it by nature causes executives to believe that the data from the past is the answer that they do. I don’t hear you saying it. I hear you very clearly saying it’s informing the choice, which I very much like and agree with because I think there’s more context and you should know how customers are behaving today, but that doesn’t necessarily imply that they’ll behave that way in the future. And I think with the advent of data, it just gives us more, rich ability to come up with creative ways we might delight them in the future by knowing what is delighting them today. I don’t know. I’m curious if we’re just batting this back and forth for a second, Tiffani, what do you say?

Tiffani Bova:

No. And I would tell you, Roger and I had the exact same conversation and so here’s what I said to him. Here’s how I’ll say it back to you. I said ‘inform,’ right? And so it is one of the inform points. Another inform point is you go out and you have these conversations with customers and employees. Another inform point may be that you’re looking for industry trends, it’s all pieces to help you make a decision on where you think the market is going. Now, as far as I know, you ask Henry Ford what customers want? If I asked them, they’d say they want faster horses, right?

Steve Goldbach:

Faster horses. Yeah.

Tiffani Bova:

Right? And Steve Jobs would say, “I never asked my customers.” Okay. And we could probably land that onto two hands, where you have an executive that has that kind of foresight, that kind of a Marc Benioff on software-as-a-service. There’s a handful of them, but the mean is saying, “I’m going to let that. They don’t know what they want, I’m going to tell them what they want.” So, that’s the opportunity for us to, once again, to use the term, to be provocative to ourselves and say, “Interesting. The data is telling me this, but the customers are telling me that, and our employees are telling me something different.” So, if we say it’s somewhere in the middle of those three informed sources, we can make better decisions. But to just ignore those sources and say, “That’s looking backwards. It’s not going to inform my forward.” I think that really misses an opportunity. And Roger and I could debate that all day, but we’ll leave it at that.

Steve Goldbach:

Maybe we should have that. We can arrange for that. We can arrange for that.

Tiffani Bova:

Yep, yep.

Stuart Crainer:

Roger’s capacity for debate is quite high though, we should say.

Tiffani Bova:

Yeah, we did it on a LinkedIn Live. So, we had this conversation on my LinkedIn Live for What’s Next! and it was like the second or third time I’d had him on and we’ve talked extensively about this whole strategy conversation because I love his perspective and I think he’s spot on. Sometimes I would push back and say, “How do I action that in real life? Tell me how I could action what you just said in real life. Like I’m sitting on a billion-dollar business or a 100 million-dollar business, I have 300 employees, how do I action what you just said in real life?” And that’s where it gets a little more challenging.

Stuart Crainer:

So, The Experience Mindset comes out in May 2023. Tell us briefly, Tiffani, about the research ‘employee experience drives revenue and profit.’ I mean, in some ways, you think, “Of course it does.”

Tiffani Bova:

Yes.

Stuart Crainer:

It’s like so many of these ideas and so many of the stuff you’ve talked about in Growth IQ, you think, “Oh, yes.”

Tiffani Bova:

Yes.

Stuart Crainer:

“Yes, but” is the reality.

Tiffani Bova:

Yeah. And so look, I’m not the first to say it. Herb Kelleher from Southwest, Richard Branson, right? Happy Employees leads to Happy Customers. You have those things. Customers come back, you sell more stuff, you have growth. There’s nothing new in that statement. Going back to what we were just talking about with the Ansoff Matrix, right? There’s nothing new, but I would tell you that there was very little, if any, causation research out there to show what are the pieces and parts of employee experience that lend itself to a greater customer experience so that executives can focus there and then realize those greater growth rates. And, oh by the way, we were able to prove out what that growth rate would be, which was probably the first of its kind. And so, ultimately when I’ve shared this research around the globe, regardless of region, company size, or industry, that’s what I’d hear back, Stuart. If it’s so obvious, why isn’t anybody doing it?

Well, the first thing was nobody owns employee experience at companies. Two, they have employee data but they don’t know what to do with it. So, they’re not actually actioning that employee data. And the Great Resignation unfortunately was a masterclass and the fact that we haven’t really been taking care of employees because if they were really happy, they wouldn’t have left. And the employee satisfaction index from Gallup has showed, it’s remained fairly flat over the last decade. So, even with all these advancements in technology, even with all these insights around what people want in work, whether it’s diversity and inclusion, whether it’s employee resource groups, whether it’s employee roundtables, whatever it was, we have just been, unfortunately, failing at every level, at least according to the research. But the greatest disconnect between employee and executive on what is holding them back from growth was outdated technology.

Going back to what Steve said, it’s just gotten very sort of bloated in the stack that it’s asking employees way too much to do on their job. And so, the book is an output, a highlight of the research that we did globally, that Salesforce did and I was the lead on. And then examples just like I did in Growth IQ of companies that have gotten it right and what are the things that companies can do right out of the gate to start to improve it. We did a roundtable here, on Thinkers50, talking about this very subject, with Rita McGrath and myself and some others, really trying to dig into what’s different. But I will tell you this, that we now have the ability to show exactly what pieces and parts of the employee experience have the greatest impact and influence on having happy customers. And it all starts with employee.

And that is a mindset shift for executives who have been so squarely focused on becoming the most customer-centric company in the world. It’s all about the customer, customer, customer, customer. And rarely do you hear executives talk about employees until the last two years when employees took over customers as the number one stakeholder to long-term company success according to the Edelman Trust Barometer. So, there is tons of great insights and actionable ideas for leaders to action, but at the end of the day, I think it starts right back where we were at the beginning of this conversation, which was going out and spending time with your employees just like you do yo ur customers, making sure you’re always solving to what they need and not doing it for the customer at the expense of all else and expecting your employees to just pick up the slack where you haven’t been able to lead appropriately.

One last thing I’ll leave on the research was when we asked that question of employees and executives, what are the top reasons you’re unable to grow? Number six out of eight for employees was lack of leadership and vision, but it was last for leaders. They don’t think they have a leadership and vision problem, which has a lot to do with why the employees aren’t so happy. And maybe back to your point earlier, Steve, about strategy, that they’re just not able to share that how and why with employees.

Steve Goldbach:

Yeah. And it’s great to be in this conversation on this particular day. I don’t know if you saw that Fortune released their World’s Best Workplaces today and both of our companies were in the top 10. And so, it’s great to have this conversation on this particular day. I know the podcast is going to be put out a few months after this particular day. I guess I’d wrap with one last question and it’s trying to mix the concept from Provoke, which is this notion of an ‘If trend’ becoming a ‘When trend’ and just hear you hum a few bars about this because I know Salesforce has been a leader in offering this. I think it’s a matter of when. Hybrid workplaces are… It’s not a question of whether they’ll become pervasive and the norm, it’s a question of how and to what extent. While I say that there’s a role for in-person, I think we can’t put the genie back in the bottle to say that there’s not going to be the flexibility.

So, how do you start to get companies focused on creating their version of the employee experience offering this hybrid workplace? Because clearly you’re doing this from your home probably and I’m doing it from an office, so we’re all going to be in the places we want. How do you create something that creates an amazing employee experience when you’ve got people strewn out all over different locations? How are you thinking about that? How is Salesforce thinking about that? How should business leaders think about that?

Tiffani Bova:

Yeah, and I used to, in my analyst days, answer a question like that right off the bat, right? I’d go, “Well, here’s what I think.” Right? Just kind of “Blah, here’s what I think. And aren’t I so brilliant? That’s what I think!” You know, parted my wisdom on you, but I think I did a little bit of a disservice. So, my answer back to that question now, Steve, would literally be “Ask your employees.” I don’t know the answer to that because everybody’s company is different, everybody’s culture is different. And if you’re global, every region is different, and every division is different. So, what Salesforce did is we created flex agreements in groups. So, as a team you decide how your team in a flexible way in-person, remote, a hybrid of that, come into the office twice a week, whatever the decision is, is at a team level versus a corporate mandate level.

And that really starts to open up that some teams may be equally as successful remote as those that would be successful in the office, but to make a blanket statement that this is what we’re going to do because this is what we want to do collectively, you’ll start to lose some of those employees. So, it goes back to this entire conversation of if you want to know the answer to big strategic questions like that, ask. Become a master asker, which was from Mark Victor Hansen who wrote Chicken Soup for the Soul. And he wrote a new book called Ask. And it’s all about how do you become a master asker. If you can ask better questions, you can uncover those answers that will give you that competitive edge. And if you’re looking to hire talent in a time like this where talent is difficult to find and keep, then you better know what your people want and what they’re expecting.

Steve Goldbach:

Right. I love that and I think it’s a great way to end our segment because it’s a reminder that doing things differently at different places is actually a great thing to do. Not everybody has to follow best practices. I think you can design something that’s unique and we appreciate the push to go and spend time with your customers, spend time with your employees, ask them lots of questions, try to figure out what will make their lives better. So, Tiffani, it’s been an absolute pleasure spending the last close to an hour with you. And you were gracious with your time, and both Stuart and I hope to have you on the podcast again, and we’ll send a link to your podcast in the show notes. And good luck with the forthcoming book. Thanks so much for spending time with us today.

Tiffani Bova:

Oh, thank you for having me. I appreciate the sport. As always from Thinkers50, it’s an honor to be part of the crew.

Expanding Competitive Strategy Mindsets from Industries to Digital Ecosystems

mtapscott — Tue, 11 Oct 2022 08:00:55 +0000

Industries play a monumental role in the business world. They bestow firms with an identity. They help them find common buyers and suppliers, as well as identify key rivals. They provide a rich context for firms to organize their value chains and to position their products/services in their markets. In addition, select traits of industries, such as fixed costs, propensity to develop economies of scale, or number of competitors, allow firms to amplify the value of their products/services and their market positions to drive competitive advantage. Not surprisingly, for several decades now, firms have used industries as their primary anchors to shape competitive strategy.

Yet, times are changing. Digital platforms like Facebook, Amazon and Google have given us irrefutable evidence that data — not just products, are formidable drivers of revenue. And digital ecosystems — not industries, amplify the value of data. Digital ecosystems are networks of data generators and recipients. We all are familiar with how Uber and Airbnb harness their networks of drivers/riders or renter/homeowners to amplify the value of their data. And by harnessing the power of their data and digital ecosystems, Facebook, Google, and their ilk have even displaced mighty industry-anchored legacy giants such as Boeing and Exxon Mobil as the most valuable companies in the world.

Legacy firms however are not digital platforms. They operate through value chains. But modern technologies like sensors, IoT and artificial intelligence (AI) allow them also to use data in new ways, similar to those adopted by the digital platforms. These new approaches can empower them too with expanded value generating scope. This requires framing competitive strategy in digital ecosystems, not just industries.

Sleep Number, a legacy mattress producing-and-selling company, is now generating data on users’ heartrates, breathing, and body movements to track the quality of their sleep. By harnessing this data in newly constructed digital ecosystems, they have generated new capabilities to identify health issues such as sleep apnea and restless leg syndrome. These capabilities are opening opportunities to generate fresh revenue streams and expand their business scope. Partnering with the Mayo Clinic, Sleep Number is planning on being a wellness provider, not just a mattress provider. A host of legacy firms can avail of such new opportunities — whether they make toothbrushes, asthma inhalers, construction equipment, sell newspapers, or are insurance companies and banks.

All of them can generate new revenue streams from data and drive competitive advantage through their digital ecosystems.

How can legacy firms build new digital ecosystems?

For digital platforms, digital ecosystems are a natural habitat as their business models intrinsically rely on data sharing/receiving networks. Legacy firms however need to conceive of their digital ecosystems differently — in ways relevant to their prevailing business models. In my book, I offer a new framework for digital ecosystems tailored for legacy firms. I see them as a combination of production and consumption ecosystems.

Production ecosystems emerge when value chains turn into data generating and sharing networks. They started with firms using information technologies to improve their value-chain operational efficiencies. Today, production ecosystems enriched by sensors, IoT, and AI firms can not only substantially enhance operational efficiencies but also generate new revenue streams. Caterpillar uses their production ecosystems to track product use in construction sites, anticipate component failures, and offer new predictive maintenance services. Sleep Number’s capabilities to predict select sleep-related health conditions and to drive new revenues from them, similarly, come from their production ecosystems. Operations, R&D, product development, marketing, sales, and after-sales service units — when digitally connected to receive, analyze, generate, share, and react to sensor and IoT data — can harness new value from data. The richer these production ecosystems, the greater their power to generate a data-driven advantage.

Consumption ecosystems go beyond a firm’s internal value chain infrastructure. They are external networks of connected third-party assets and entities that complement a product’s use and expand the ways a firm’s products are consumed. Smart mattresses can shut off lights, music, or televisions just when a user falls asleep. Smart toothbrushes connected to a network of dentists that track users’ dental health to predict and prevent cavities. Smart inhalers (used to manage asthma) can track environmental allergens and warn a user before they trigger an asthmatic attack. To operate in consumption ecosystems, firms must extend their value chains into digital platforms and facilitate exchanges among product users and these third-party entities, just as how Uber does with drivers and riders. The contours of these digital ecosystems do not follow industry boundaries.

Furthermore, consumption ecosystems allow firms to envision their business scope beyond what is defined by their traditional value chains or industries. Firms who perceive new ways by which smart products and customers can be connected to a growing set of complementary third-party entities, will thrive in the modern digital world. Conversely, firms that remain stuck in prevailing industry mindsets will face competitive peril.

Concluding thoughts

Digital ecosystems, whether production or consumption ecosystems, provide new avenues to harness the power of data. They are necessary for firms to move from a “products/services only” world to a “data-driven also” world. This does not mean that traditional strengths in products, value chains, and industries are not relevant in the digital world. They remain important foundations and offer legacy firms a useful springboard to leapfrog into the digital world. Rich production ecosystems stem from robust value chains. Vibrant consumption ecosystems emerge from strong networks of connected products. But this new competitive landscape requires legacy firms to expand their competitive mindsets from industries to digital ecosystems.

Mohan Subramaniam is a Professor of Strategy and Digital Transformation at the International Management Development (IMD) Business School in Lausanne, Switzerland. He is the author of The Future of Competitive Strategy: Unleashing the Power of Data and Digital Ecosystems (MIT Press, 2022).

Strategy – Thinkers50

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Global Enterprise 2030

Announcing the Thinkers50 2023 Strategy Award Shortlist

1. Greg Bernarda for spearheading the movement of ‘up-ruption’

2. Olaf Groth, Mark Esposito, and Terence Tse for The Great Remobilization

3. Faisal Hoque for Reinvent: Navigating Business Transformation in a Hyperdigital Era

4. Kaihan Krippendorff for building the strategy community

5. Tammy L. Madsen for Co-Innovation Platforms

6. Mohan Subramaniam for The Future of Competitive Strategy

7. Stephanie Woerner, Peter Weill, and Ina Sebastian for Future Ready

8. Howard Yu for future readiness

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Thinkers50@Hult with Matt Gitsham

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Choosing Where To Play in the New Ecosystem Economy

The Provocateurs Episode 11 | Tiffani Bova: The Inside Track on Growth

The Provocateurs:

podcast series

EPISODE 11

ABOUT THIS EPISODE

Tiffani Bova: The Inside Track on Growth

Tiffani Bova

Hosts:

Stuart Crainer

Steve Goldbach

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EPISODE 11

Podcast Transcript

Expanding Competitive Strategy Mindsets from Industries to Digital Ecosystems

How can legacy firms build new digital ecosystems?

Concluding thoughts

1. Greg Bernarda
for spearheading the movement of ‘up-ruption’

2. Olaf Groth, Mark Esposito, and Terence Tse
for The Great Remobilization

3. Faisal Hoque
for Reinvent: Navigating Business Transformation in a Hyperdigital Era

4. Kaihan Krippendorff
for building the strategy community

5. Tammy L. Madsen
for Co-Innovation Platforms

6. Mohan Subramaniam
for The Future of Competitive Strategy

7. Stephanie Woerner, Peter Weill, and Ina Sebastian
for Future Ready

8. Howard Yu
for future readiness