October 2, 2016

Strategies that move the world: Observations from annual meeting of the Strategic Management Society in Berlin

When we think about the foundation strategy practice concepts covered in MBA courses and indeed our own Fundamentals of Strategic Thought and Practice course we are automatically focused on topics such as market positioning, sources of competitive advantage, BCG analysis, SWOT analysis and strategic plans.

Strategy practice today lives in another world.

We ourselves introduce the topic of Third Wave Strategy practice on both our Senior Leader and Advanced Strategy Practice courses. Insight into the dynamics of advanced strategy practices were presented by Joe Kaeser CEO, Siemens AG. Following his Lifetime Achievement Award in strategy awarded to him by the Society, Kaeser offered some insight into his view of modern day fundamentals of strategy as practice. It is a far cry from a quick SWOT analysis and an annual strategic plan. Kaeser was appointed CEO of Siemens AG in November, 2013. At that time the organization was well used to change. Following the cleanup that had been undertaken as a result of a bribery scandal that ended up costing Siemens some US$1.6bn in fines, it was Kaeser’s role to redirect the company’s focus on the future.

The challenge required to identify just what that future would look like was intense. At one end of the spectrum Kaeser and his team had an option to break the company up and split it into five different spin offs. At the other extreme (an implied favored option) Kaeser explored the option of continuing ‘as is’. The criteria Kaeser applied to this task was to seek answers to:

  • Where in our portfolio is there the greatest capacity for growth - economic and social?
  • Why Siemens? Where are the synergies and where is the greatest downside?
  • Is there sufficient evidence of ‘fit’ with our company?
  • Are there any significant downsides to a business that may be looming on the horizon?

The outcome was the separation of Siemens Health Division from the main business with the rest remaining as one entity. The reason was interestingly a result of the Board’s conclusion that there was too greater downside from the complexity looming on the horizon in this industry. In all other division’s they were prepared to ‘roll with the punches’. In directing future strategy for the remaining business the foundation for strategic though consisted of three specific concepts:

  • A Division’s ability to last: Realised through an inspirational vision for its future, expressed through its clear sense of purpose.
  • Innovative growth: Grounded in a strength in knowledge and an entrepreneurial focused, start up culture.
  • A strong commitment to ownership: Because owners think ahead, are agile and are quick to adapt to change.

Fundamental to Kaiser’s decision making was an imperative to reduce cost, or from our perspective as practical strategy professionals; a desire to find the greatest balance between the maintenance and growth of a firm’s resource base and its capacity to maintain, nurture and grow those resources. The overwhelming driver of this transformation was a constant awareness of the impact and application of impending digitization on their business. In order to manage the challenge of transformation through the emerging period of the Third Wave Super Industrial Revolution, adaptation was the name of the game according to Kaeser. Graduates from SMI courses and programs would of course contextualize those observations in the form of responsive (adaptive) change and prosponsive (inventive) change.

Kaeser was not alone in his observations that increasing volatility, uncertainty, complexity and ambiguity (VUCA) was shaking the global business environment at this conference. Harvard Professor Clayton Christensen reiterated his observations that many traditional business models were prone to disruption – even more so today with the imminent arrival of the next super technological revolution. Universities he noted were one of the greatest areas of risk.

Perhaps one of the most pivotal moments in the conference was the discussion around the room where many high profile and highly respected strategy professors were asked to debate the topic of: The State of Strategic Management Field: Challenges, Problems and Proposed Solutions. The debating team consisted of traditional purists who supported the maintenance of boundaries around which the well-defined elements of Strategic Management mentioned previously reside. The majority however sought to break down boundaries to strategic management and to embrace complexity in strategy research and in its practical application. To this end the majority of speakers embraced the freedom afforded them to engage in a broad field of topics. Fundamental to such a phenomenon was though a recognition of the need to maintain relevance with the business and consulting fraternity. The dimensions of that relationship were though difficult to define. Some of the topics that were allocated Key Note status in the conference provide insight. They included: “Climate Change and Energy Policy”, “Inequality and Poverty”. In addition, a similar sounding session that carried a much more positive and assertive title was that of: “Strategic Management: An Evolving filed ‘That Moves the World”. Fait accompli!

In a similar discussion orchestrated by the Strategy Practice special interest group there emerged furious agreement from representatives of each of the academic, practitioner and consulting field that although each had exactly the same levels of interest and needs, there is in fact little cooperation or alignment between each. As an organization promoting the representation of strategy practice at the level of a profession, the Strategic Management Institute (SMI) in Australia known as SMIKnowledge elsewhere is aiming to offer members from each community the opportunity to come together to share their knowledge and to learn from all. Although our online forum and networking capabilities already support such a notion, we also encourage face to face meetings as well. To this end we are proposing we host two national conferences on Strategy Practice to be held in Melbourne Australia in October 2017 and London in November 2017. Expressions of interest in a broad range of topics are warmly invited. We look forward to your engagement in whatever capacity suits you best.