Sook Ching Voo
Word Count- 1930 /PIN- 10234
Challenges and Opportunities, the Global Economy in the Transition Phase Find the Next Wave to Ride on — New Business Strategies in the Changing World Sook Ching Voo
The world is now facing high market volatility and extraordinary uncertainty like never before. Historically, mild recessions have typically led to piecemeal regulatory reform while steeper downturns portended seismic changes. With the global financial crisis, established theories surrounding the capital market suddenly became vague and questionable, while the range of organizations’ possible future has hence expanded. In addition of challenges of supreme magnitude, market crisis also presents itself with much rare attractive opportunities. In order to embrace these opportunities, enterprises need to be aware of the developing trends. “The world is changing and still continues to change” (Brabandere, 2005) Change is dynamic, necessary and inevitable. Depending on the strategic interest of business entities, changes in the environment could result in different impacts. Since 16th century, it is already known that companies that harness change could leverage this ability to sustain competitive advantage. English philosopher Sir Francis Bacon (1561-1626), acknowledged that there are external influences (for example nature and change) that we must understand if we want to harness them. In the 21st century, it means that business entities have to predict and also to prepare for changes. Well prepared businesses anticipate and welcome the flow of changes, catching the essence of change while unprepared businesses panic with the unexpected events, watching opportunities passes them to the hands of competitors. Increasing globalization has made the market more competitive than ever. Globalisation and subsequently the rapid overload of information on daily basis make it critical for companies to recognise and to respond to the flow of changes adequately. In this paper, I would like to propose involvement of business entities in respond to changes in four different aspects.
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Sook Ching Voo
“Economy is the best strategy� (Williamson, 1991) 1.0 Adoption of Emergent Strategy Emergent strategy is an emerging and changing strategy that survives by adapting as environment changes. According to Richard Lynch (2006), emergent corporate strategy is a strategy whose final objective is unclear and whose elements are developed during the course of its life, as the strategy proceeds. Businesses nowadays are being exposed to continuous flow of changes; adoption of emergent strategy at corporate level will allow sub businesses and the company as a whole to be agile to the changes, whenever necessary. Emergent strategy is practiced whereby the organisation’s strategy is derived as a result of continuous trial, experimentation and small changes forward. This strategy aligns with actual practice in many companies, especially businesses that are vulnerable to market changes. It also takes into consideration of leadership issues, culture and politics of an organization. It allows strategies to experiment and develop as strategic circumstances change, incorporating flexibility during the process. It allows businesses to use forecast, but also be prepared to respond to changes deemed necessary.
A critical part of the emergent strategy to implement good feedback system. This system is recommended in all the levels of the businesses. In order to ensure that it is able to capture the signals of changes effectively, the system has to be taken seriously. Individual feedback has to be answered in a satisfactory manner to encourage further feedback and a reward system has to be implemented concurrently to motivate people to give feedbacks. In an interview conducted by Lovallo and Mendonca (2007), Richard Rumelt agrees that strategy starts with identifying changes.
There are four main distinguished groups of emergent strategy theories (Lynch, 2006): 1.1 Survival-based route which emphasizes the survival of the fittest in the market place 1.2 Uncertainty-based route which regard prediction as impossible because of the inherently unstable nature of the environment and the need to have innovative processes
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Global Initiatives Symposium in Taiwan 2009
1.3 Human-resource-based route which places emphasis on people in strategic development. Elements of experimentation and learning takes into account motivation, politics, culture and the desires of the individuals. 1.4 Innovation and knowledge-based route which stresses the contribution of new ideas and radical ways of thinking and sharing knowledge. Emergent strategy is not necessary suitable to all business entities. However, every business should have some degree of emergent element to cope with developing trends.
“Stay committed to your decision, but stays flexible in your approach” (Robbins, 1936) 2.0 Incorporating Flexibility Business is always affected by the environment, and business leaders must adjust or drown in the wave of changes. When unusual circumstances emerge, businesses have to ensure that they have enough flexibility to cope, and to be ready to respond to the early signals. Flexible business processes does not only prepare companies to be agile in reacting to external or internal changes, it also enhances creativity, which is needed in return to be flexible. A manager who is flexible has the capability to invent the future. He continuously develops scenarios and looks for new ideas. These managers think for their company, and are assets to employers. They have the capacity to steer companies to take good position swiftly when the industry changes.
Sufficient flexibility ensures that changes can be absorbed by businesses maintaining or increasing profit. Flexibility can be increased by maintaining the core business and outsource the rest. This method is recommended by McKinsey in facing the current economic turmoil and it is already adopted by many companies. In addition, I believed that networking can increase businesses’ flexibility. In the Net Generation, everybody has a network built on their own rights. A strong network can largely enhance a networker’s flexibility through the information that he is able to source and the learning process from the diversity of the people in his network. It is crucial for businesses to be aware of the importance of networks and the value of a well connected employee. Many companies realized the power of network and they 3
Find the Next Wave to Ride On - New Business Strategies in the Changing World
Sook Ching Voo
leverage social networking group as a platform for marketing. For example, McKinsey has set up The McKinsey Quarterly face book group that allows people to subscribe to premium services to access to premium articles. McKinsey has successfully responded to the power of social networking and created a new market for existing product. Flexibility can also be increased through openness to suggestions. This can be a convincing tone to employees that management is indeed flexible. On the other hand, quality feedbacks will provide watch outs for management if they have been blindly flexible. This is in line with emergent strategy approach where an effective feedback system is required for emergent strategy approach.
“It was not best that we should all think alike; it is difference of opinion that makes horse races.� (Twain, 1910) 3.0 Embrace Diversity In the information era, competitive advantage can consist of being able to recognise warnings before anyone else, to observe faster, and to be the first to be surprised. Diversity in business is more efficient to consider issues from many different perspectives. As a result, this business tactic is more responsive to serve a heterogeneous customer base. This is especially important as stereotype is breaking down and it is becoming more and more difficult to predict customer behaviour. Even though diversity is a well known strategy to nurture creativity and agility, many businesses still find it difficult to change their homogenous business culture. Nonetheless, cross border exchange ideas affects us more than we thought.
Diversity can be fostered straight from recruitment where a continuous stream of new employees is supplied to ensure that knowledge and technical know-how is retained in the company no matter who decide to leave the company. It is also critical to ensure that there is a balanced mix among race, especially in international businesses. Diversity will foster the company as an idea factory. However, cross cultural working environment requires a certain degree of trust and friendship.
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Companies like Siemens has long embraced diversity with the position as “Diversity is one of the key sources of Siemens’ competitive edge” (Siemens, 2008). For 160 years, Siemens diversity of employees and business partners fuels the innovative solutions that made the company a successful global leader. They actively seek to increase competitive advantage by diversifying and leveraging their workforce and suppliers, through management training programs, personal awareness and diversity training for employees, celebration of differences, to name a few.
“Ethics is the new competitive environment” (Robinson, 2009) 4.0 Corporate Social Responsibility Corporate social responsibility is the standards and conduct that an organisation sets itself in its dealings within the organisation and outside with its environment which is reflected in the mission statement (Lynch, 2006). The three prime considerations in developing business ethics are the extent and scope of ethical considerations, their costs, and the recipient of the responsibility. For many years, there have been different views on the long term benefit of both shareholders and the company for the company to play a role in the society beyond the minimum requirement described by the law. Many businesses would not invest more on social issues and this is completely acceptable in the capitalist economy. However, a good relationship with stakeholders is a difficult to replicate and an intangible resource. In the financial system, the core existence of a business entity is to maximise shareholders’ values. Economists would further argue that managers do not have the right to use company’s resources to response to stakeholder’s interest. This way of doing business might be feasible in the old economy, where the needs of customer were relatively easy to predict. However, in the new economy, customers’ behaviour is random and unpredictable. This arouses the need for feedback and measurements.
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Find the Next Wave to Ride On - New Business Strategies in the Changing World
Sook Ching Voo
Therefore, it is vital to be aware of the outside world, and watch out for the signals that could suggest that your business may be out of synch. This task is extremely challenging in the ever changing business environment. Businesses need to leverage all the information that they can get. It is not unusual for businesses to be blinded on one direction when the world is heading in another. At times like this, stakeholders play an important role to ensure the company is on track through various feedbacks and reactions. A good image of corporate social responsibility will foster a positive relationship with the stakeholders who are the key link in providing important feedback on the changing market. Corporate social responsibility is gaining increasing importance in the new era. Companies like Japanese car manufacturers actually listened to their stakeholders and have started to invest in sustainable technology for many years while American car manufacturers do not see the sign of changes. When Toyota has succeeded in manufacturing cars that consumed less oil, American car manufacturers’ business models become obsolete and they are too late to invest in new technologies that they have not acquired any knowledge about it. By failing to invest in resources that will be made valuable by the changes that are happening, businesses struggle just to survive.
“We can no longer have everything we want, but we can be more than we imagined.” (Jerome, 2009) Heraclites the ancient Greek who was born in 530 BC wrote that, “You can never walk into the same river twice, for other waters are ever flowing on to you. The sun is new every day. Everything changes” (Brabandere, 2005). From the discovery of electricity to the World Wide Web, the world has not stopped changing since the beginning of the history. Changes of today are both different and greater than before. We do not know when or how the next wave is coming; still we need to predict, to observe the variation of prediction, and to be prepared for it. All of the four proposed steps of business involvements to response to developing trends involve good feedback systems. Indeed, an affective feedback system is the key to organizing a company. Emergent strategy prepares the company to be agile to the changing environment. Furthermore, competitive edge can be maintained when diversity and flexibility foster the company to be an ideas factory. When uncertainties increase, nonstop creativity is required. In managing sustainable business, corporate social responsibility can hardly be neglected 6
Global Initiatives Symposium in Taiwan 2009
References Brabandere, L. D. (2005). The forgotten half of change: achieving greater creativity through changes in perception. Chicago: Dearborn Trade Publishing. Pg. 24, Pg. 2. Jerome, H. (2009). Inspiring quotes. Retrieved February 9, 2009, from http://www.zerowaste.ca/quotes.html Lovallo, P. and Mendonca, L. T. (2007, November). Strategy’s strategist: an interview with Richard Rumelt. The McKinsey Quarterly. Retrieved February 9, 2009, from http://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Strategys_strategist _An_interview_with_Richard_Rumelt_2039 Lynch, R. (2006). Corporate Strategy. England: Prentice Hall Financial Times. Pg. 43, Pg. 56, Pg. 372. Robbins, T. (1936). Flexibility quotes. Retrieved February 8, 2009, from http://thinkexist.com/quotations/flexibility/ Robinson, P (2009). Corporate Social Responsibility. Retrieved February 9, 2009, www.interpraxis.com/resources.htm Siemens diversity and inclusion Web site. (2008). Retrieved February 9, 2009, from http://www.usa.siemens.com/en/jobs_careers/diversity/index.htm Twain, M. (1910). Diversity quotes. Retrieved February 8, 2009, from http://www.wisdomquotes.com/cat_diversity.html Williamson, O. (1991). Strategising, economizing and economic organization. Strategic Management Journal, 12, 75-94.
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Find the Next Wave to Ride On - New Business Strategies in the Changing World
Sook Ching Voo
References Brabandere, L. D. (2005). The forgotten half of change: achieving greater creativity through changes in perception. Chicago: Dearborn Trade Publishing. Pg. 24, Pg. 2. Jerome, H. (2009). Inspiring quotes. Retrieved February 9, 2009, from http://www.zerowaste.ca/quotes.html Lovallo, P. and Mendonca, L. T. (2007, November). Strategy’s strategist: an interview with Richard Rumelt. The McKinsey Quarterly. Retrieved February 9, 2009, from http://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Strategys_strategist _An_interview_with_Richard_Rumelt_2039 Lynch, R. (2006). Corporate Strategy. England: Prentice Hall Financial Times. Pg. 43, Pg. 56, Pg. 372. Robbins, T. (1936). Flexibility quotes. Retrieved February 8, 2009, from http://thinkexist.com/quotations/flexibility/ Robinson, P (2009). Corporate Social Responsibility. Retrieved February 9, 2009, www.interpraxis.com/resources.htm Siemens diversity and inclusion Web site. (2008). Retrieved February 9, 2009, from http://www.usa.siemens.com/en/jobs_careers/diversity/index.htm Twain, M. (1910). Diversity quotes. Retrieved February 8, 2009, from http://www.wisdomquotes.com/cat_diversity.html Williamson, O. (1991). Strategising, economizing and economic organization. Strategic Management Journal, 12, 75-94.
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Global Initiatives Symposium in Taiwan 2009