Holler’s Vlad Mehakovic got along to the Chief Strategy Officer (CSO) Summit where Australia’s best strategists gave an insight into their craft.
The overarching message of the event was that strategy in today’s uncertain and ever-changing business environment is complicated. It involves a multitude of moving parts and it’s often difficult to see the signal from the noise. Below are the five key themes I walked away from the summit with.
1. Execution over perfection
A strategy or idea is only ever as good as its execution. Many of the summit’s delegates discussed the methods they use get a strategy from a PowerPoint deck into the hands of their customers.
Facebook’s insight was to launch new ideas early and often, with a replicable test framework in place to identify ideas deserving of further investment. Woolworths discussed the concept of testing ideas by highlighting that testing alone is not enough; one must also have the resources to pour fuel the fire if the strategy is indeed successful.
Schneider Electric evaluated their continuous pipeline of projects, identifying three different project types that mapped to Gartner’s Hype Cycle (early stage product to mature product). They emphasised the importance classification plays in enabling alignment of appropriate resources and KPIs.
2. The customer at the heart
The customer has never been more important or fickle. The ever-evolving technology and media space has led to a world where the consumer moves faster than business. It is therefore critical that businesses pay close attention to the ever-changing needs of the customer and align their business accordingly. To paraphrase one of the summit’s speakers, “if consumers decide to shift, you need to go with them. An industry can’t hold people back”.
Woolworths opened the summit with a discussion on ways in which they met the needs of their most under and over-served customers. This resulted in innovations such as their in-store sushi restaurants, which fast became Australia’s top seller of sushi.
Increasing competition, costs and claims meant Australia’s biggest health insurer, Medibank Private needed to completely revise its strategy from passive payer to active player in health. In doing so, the company invested in creating tools and companies that productively manage health.
Atlantis Healthcare followed Medibank Private with a similar message from the pharmaceutical industry. Big pharma is finally moving away from the ‘blockbuster’ drug towards providing value throughout the entire value-chain. Rather than asking, ‘how do we get the most money out of this drug?’ pharma is now beginning to ask, ‘how do we get patients engaged while minimising costs to the system?’
Nike is using customer-led design to place strict adherence guidelines around how their products are experienced in the retail channel. Experiences are constructed around consumer segments (think running or skateboarding) to create deeper customer connections. For example, running shoes are presented within the context of a running outfit, while skateboard shoes are only available in stores that sell decks and tracks.
3. Less polish, more pragmatism
As a collective, businesses spend an inordinate amount of time packaging their idea or strategy. The focus is often on selling in the idea or strategy, rather than ensuring robustness of execution.
In order to overcome ‘group think’ at a board level, the Bank Of Queensland (BOQ) created a critical questioning framework to purposefully challenge their strategies. This encourages board members to ask the right questions in order to understand the strategy, rather than responding with knee-jerk reactions.
Commbank outlined the value of planning in strategy development, encouraging businesses to plan across a wide spectrum of success (from ‘well’ to ‘very poorly’) in order to understand the wider implications. Planning at the outset also eliminates the need to hastily formulate plans during times of stressful crisis.
Roy Hill, a $12B iron ore mining company discussed the relationship between strategy and risk. With $7B of debt on their books, they are a company well positioned to understand risk. They defined strategy as a fundamental balance between reward and risk; risk management helps to identify and remove ambiguity within a strategy. Roy Hill went as far to state that every company is uniquely positioned to handle a specific set of risks, which ultimately comprise that company’s Unique Selling Proposition (USP).
4. Understand how emotions effect our decisions
Smart people make bad business decisions all the time. Microsoft’s CEO shrugged off the iPhone when it launched. In 1975, Kodak invented the world’s first digital camera and then hid it from the world. Industry leaders are consistently challenged by an inability to act on or identify the forces happening within the vertical they dominate. This can be attributed to the fact that as humans, our decisions are driven in part by our emotions.
Commbank listed some of the biggest blunders in business history, asking “why did these catastrophes happen?” They suggested that it is the perspective of the parties involved that influences the ability to make the ‘right’ decision.
AMP Capital expanded Commbank’s theory by suggesting that strategic decisions are inherently riddled with cognitive bias. These psychological tendencies are mental shortcuts based on general rules of thumb that ultimately lead to error in judgment. Biases can also stem from making decisions based on ego, as opposed to rational thought. We carry a multitude of biases. Our biases include ‘confirmation bias’, where we accept only the evidence that confirms our opinion, rejecting anything that serves as contradiction. Biases can also be more nuanced, such as the ‘affect heuristic’, which is a mental shortcut where the current emotion being experienced by an individual influences their decision.
Both Commbank and AMP Capital discussed a similar set of tactics to overcome individual and organisational biases. The first step is awareness. Simply being aware and mindful of biases can go a long way to counteracting their influence. Beyond awareness, businesses can take more structured approaches: evaluating a checklist of biases during important decisions, or engaging an independent resource to explore the contrarian view to the strategy being deployed.
5. Change is a compounding constant
A dominant theme of the summit was change and the speed at which it occurs. Disruption was also mentioned, albeit overused, in almost every presentation. However it seemed that the key question on everyone’s mind was how to reliably manage the ever-changing environment surrounding business.
One of the most startling facts presented was the speed that the average company takes to join the S&P 500, the most powerful group of companies in the world. In 1957 it took on average 75 years, in 2003 it took 25 years, and in 2013 it took the average company around 10 years to go from fledgling to one of the most powerful companies in the world.
Partnership is a critical component in order to manage change. When creating their highly successful Self Managed Super Fund (SMSF), AMP partnered with Super IQ to play to both businesses’ strengths. Beyond the partnership, AMP carefully hedged their IT budget against change, “work out your costs, double it, add 20% and double it again”.
Both Curtain and Macquarie University discussed the fact that their business was in the biggest flux since the printing press. Evolving student expectations, Massively Open Online Courses (MOOCs) and increasing costs of living meant that Australia’s third largest export needed to revisit their business practices. Their strategies included experimenting with MOOCs, personalising education through machine learning and developing close partnerships with private enterprise to offer specialist courses.
Vodafone is no stranger to change. Every 20 years the company needs to introduce a new generation of mobile telecommunications technology (think 2G, 3G, 4G). In order to offer this technology in a competitive timeframe, Vodafone needed to restructure how they evaluated technology and partnered with vendors to instigate their processes many years in advance.