Issue 12 | theinnovationenterprise.com
chief
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officer “THE TOP STRATEGY TRENDS FOR 2015” As 2014 draws to a close, we look at what we should be expecting in the next 12 months.
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by george hill
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Simon Barton talks us through how and why companies are trying to become more agile and flexible
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We investigate how ‘sharing companies’ are changing the face of B2B businesses across the globe.
LETTER FROM THE EDITOR Welcome to this issue of Chief Strategy Officer Magazine. As 2014 comes to an end, we wanted to look forward to the issues that may affect you in 2015, as well as some of the trends that are currently influencing the way you work. In this issue, we look at the top 5 trends that will be changing the face of strategy in 2015. From our research, we have identified the 5 most important, but as always, if you have any others that you feel should be included, please let us know. In addition to that, we also hear from Sebastian Mamro about how companies today should be leveraging Big Data to outperform their competition. We have seen that data has significant roles to play in the way that strategies are devised and implemented. Perhaps 2015 could see this increase even further. Robert Vaughan, Manager of Strategy & Economics at PwC, talks us through how being a ‘sharing company’ is revolutionizing B2B businesses across the world, after companies like Airbnb have taken it to the B2C world with such success. We also look at whether growing a company through
M&A or organically is better in the long term, something that many startups are considering at the moment. Simon Barton also talks us through the benefits of being an ‘agile company’ and how flexibility is not just a bonus, but a necessity in many businesses today. As always, if you are interested in contributing or have any feedback on the magazine, please contact me at ghill@ theiegroup.com.
George Hill Managing Editor
Managing Editor: George Hill Assistant Editors: Simon Barton Art Director: Joe Sanderson Cover Design: Chelsea Carpenter
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Contributors:
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Mark Lacey
Robert Vaughan Sebastian Mamro Michaela Jeffery-Morrison General Enquiries: ghill@theiegroup.com
2014
CONTENTS
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12 TOP STRATEGY TRENDS FOR 2015 Michaela Jeffery-Morrison guides us through her thoughts on the hot strategy topics for 2015.
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THE ART OF AGILE Is it better for companies to be agile? Simon Barton looks at why this is the strategy that many companies are striving for.
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8 LEVERAGING BIG DATA TO OUTPERFORM YOUR COMPETITION
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Data has become a big part of company strategies, Sebastian Mamro talks us through why it’s so important.
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HOW THE “SHARING COMPANY” IS REVOLUTIONIZING B2B Robert Vaughan from PwC explains how the ‘sharing company’ is changing B2B models.
M&A VS ORGANIC GROWTH Is it better to grow with external funding or to do it organically?
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THE
ART OF
AGILE
Simon Barton Assistant Editor
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THE ART OF AGILE
There are a number of adjectives that we now associate with successful companies, dynamic, progressive, visionary, but none resonate more than agile. Agility allows companies to move quickly, taking advantage of new market trends and the latest technologies or changes to an audience, it essentially makes a company more adaptive. It is assumed that because large companies have more employees their flexibility is compromised. It would be similar to the difference between an oil tanker and a speedboat, one can make directional changes in seconds, the other takes hours. But agility is not something that companies should assume will subside once their employee count rises. With care and attention, even the world’s largest companies can remain flexible and ready to tackle whatever the marketplace throws at them.
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One method that companies
agility is not something that companies should just assume will subside once their employee count rises
have looked at to make their enterprise more agile is to give teams more autonomy, allowing them to make decisions that don’t require the approval of a centrally based team of managers. However, fostering agility is not just a matter of decentralizing all your operations and processes. There needs to be an element of centralization in your business model or you’ll experience the same problems that strict bureaucracy brings such as increased response times and slower product development. With your business model, it’s a balancing act between bureaucracy and adhocracy as well as giving your workforce the environment it needs to innovate effectively. Your workforce is the cornerstone of your innovation efforts. To ensure that your company is agile, your workforce has to be capable of taking on a number of different roles, or are at least be aware of what other departments offer to the overall company. This requires regular staff training and the ability to look at alternative strategies. Many companies claim that they allow their staff to be open and entrepreneurial. A few larger companies also adopt what they deem to be a ‘flat structure hierarchy’ the idea that despite having a leader, every person’s opinion and ideas are equal and will hold the same weight. Too often this is thinly veiled recruitment
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language that does not equate to the way a company works.
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It doesn’t matter how flat your organizational structure is, leaders will always be present. Leadership, however, has changed significantly since the recession and when cultivating an agile environment, management holds the key to a company’s success. Leaders
To ensure that your company is agile, your workforce has to be capable of taking on a number of different roles, or at least be aware of what other departments offer to the overall company.
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THE ART OF AGILE
should learn to question their judgement and be aware that their subordinates may well have ideas that can add something valuable. One of the ways that employees are trying to make the most of this mould/ re-mould system is through embracing generation flux. The idea of generation flux is that employees want to empower themselves and make the most of future changes. It means allowing for research and training that may not be obviously related to their core role in the business. It could be anything from reading an article or newsletter focussed on technological development, to off-site training funded by the company. Embracing this change as a company does not mean that an employee is wasting time, but will instead prepare them to perform effectively if market conditions change. There’s no reason why large companies can’t be agile in today’s environment. It’s a process that’s easier said than done and one that might even
require a cultural shift, but it’ll be worth it in the long run.
HOW ANALYTICS ARE HELPING TO PREDICT BLOCKBUSTERS
IMPROVING SALES PERFORMANCE:
HOW TO LEVERAGE BIG DATA TO OUTPERFORM YOUR COMPETITION Sebastian Mamro PROS General Manager for Europe
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LEVERAGE BIG DATA TO OUTPERFORM YOUR COMPETITION
While many sales professionals have heard the mantra “you need to sell smarter, not sell harder” this advice takes on a whole new meaning when you understand how to leverage Big Data analytics to improve the performance of your sales management and field sales organization. That’s because companies today are discovering the power of Big Data to transform their sales function with automated pricing and quoting solutions. Below are several Big Data opportunities you can use to improve your sales performance and effectiveness: MAKE BETTER SALES AND PRICING DECISIONS You can optimize the data you already possess in your ERP and CRM systems with pricing software solutions that automate the process of analyzing and segmenting your customers. These solutions identify customers with similar profiles and purchasing patterns, and help you determine the size and scope of markets, what to offer, and what prices and discounts will win more deals when negotiating individual contracts. In one recent example, a large chemical manufacturer in Europe was able to take large amounts of data scattered throughout its SAP systems and turn it into actionable
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information, while eliminating unwieldy, manual spreadsheet practices. Using Big Data analytics and automated pricing tools, the company developed and implemented a comprehensive, coherent pricing solution within a matter of months and transformed its sales effectiveness at headquarters and in the field. Empowered by Big Data solutions, your sales and marketing management can price your products to increase margins, grow market share and maximize the revenue from negotiated contracts and deals. You can also identify overlooked opportunities and focus limited sales resources on those key customers with the highest potential returns.
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COLLABORATE TO KEEP EVERYTHING AND EVERYONE CONNECTED
Automated pricing and sales effectiveness solutions provide a common repository of company-wide sales knowledge. This includes all pricing contracts and opportunities within a customer account along with contract terms, promotions and applicable discounts. These tools allow sales managers and field sales reps to connect all the dots during the sales cycle, utilizing pricing guidance to properly price hundreds to thousands of products and submit quotes faster than ever before. Using mobile devices such
as tablets or smartphones, field reps can price and quote accurately and quickly to outperform competitors, while preserving margins and minimizing discounting. A large oil and gas company based in Europe, for example, has used automated pricing solutions to generate real-time customer quotes that dynamically incorporate market index fluctuations – a strategic advantage their competitors could not match. In another example, a hardware manufacturer was able to automate and condense its highly complex, multi-product quoting process from several days or even weeks to a single day turnaround. The enormous time savings helped to significantly increase revenue, allowing
In one recent example, a large chemical manufacturer in Europe was able to take literally tons of data scattered throughout its SAP systems and turn it into actionable information
LEVERAGE BIG DATA TO OUTPERFORM YOUR COMPETITION
field sales reps to focus more on developing customer relationships and boosting their productivity.
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PROMOTE A BIG DATA MINDSET IN YOUR SALES CULTURE While it’s essential you leverage Big Data to find the right price, you must also be able to successfully implement these prices in the field. To genuinely empower your salesforce with price and quote guidance, you should develop a Big Data culture that helps demonstrate its value in concrete ways. For example, a change management initiative by one European distributor not only assisted sales representatives
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To genuinely empower your salesforce with price and quote guidance, you should cultivate a Big Data culture that helps demonstrate its value in concrete ways in adopting new pricing technologies that increased margins and compensation, but also provided insights into where specific sales training investments could pay off in higher sales performance and revenues. The opportunities to leverage Big Data to improve sales performance are just beginning to be fully understood and appreciated by companies in
Europe. Those who act now to exploit the potential of Big Data will gain a more efficient, autonomous and effective sales team that has the ability to close more business faster and outperform competitors, while actually enhancing customer perceived value.
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TOP
Y G E T A R T S 5 1 0 2 R O F S D N TRE 1
Michaela Jeffery-Morrison Head of Strategy, IE
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TOP STRATEGY TRENDS FOR 2015
The last few years have seen considerable change in the way that companies approach their strategies, from the use of new digital products to the more open sharing of ideas between businesses. Below are what we believe will be the key trends in strategy in 2015.
PARTNERSHIPS Innovation is coming from different areas of companies and they are quickly realizing that many of these ideas may be best aligned with products or services that are being offered by other companies. An open approach to strategic collaboration can bring benefits beyond what two separate companies or projects could achieve individually. With companies often looking at similar areas, we believe that 2015 will mark a watershed in the amount of collaboration that will take place. There have already been strides taken towards a more open approach to collaboration. For instance, Google’s work on Android alongside companies like HTC and Samsung, has more than just provided software to compliment hardware, it has shown how companies can work together to build products that are better than they could be without the collaboration.
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TOP STRATEGY TRENDS FOR 2015
OPEN INNOVATION
TRADITIONAL TO DIGITAL
Open innovation, as a strategy, is becoming more important for companies who are looking to optimize their products and services. The difficulty that some companies have had with the idea is that it requires a level of data and idea sharing that many have traditionally been wary of.
Digital strategies have traditionally been seen as one element of the overall company strategy. We believe that 2015 will see an increase in the importance of digital strategy across the enterprise. It will become integral to successful companies as a whole, rather than just part of the marketing of a company.
We believe that 2015 will mark the year when the legal processes that surround the protection of these ideas and data will be quick and simple enough to make it a more widespread practice. As this is a relatively new idea in terms of business strategy, the uptake has been quite slow, but we strongly believe that 2015 will be a tipping point.
We have seen the monumental failures that can be caused from having an insufficient digital strategy and the impacts that these have on the overall company performance. A business with a poor website is a company that people are not going to be working with. 2015 will see more companies realizing this and placing their digital outreach at the centre of their overall company strategies.
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Companies like Unilever are the benchmark due to their use of the practice and with their success and case study, it will be possible for others to use them as an example.
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TOP STRATEGY TRENDS FOR 2015
CONTENT WILL BECOME STORIES Content strategies are old news. If a company doesn’t have an effective content strategy then they have missed the narrative, as the pace of change has meant that we have moved through and beyond it. There is so much content for any imaginable product online that there is no conceivable way that anybody could view/read/ listen to it all. People no longer want to see basic content. 200 word articles with a click-bait title no longer fit. If a consumer sees one poor article from a publisher, they are going to stop using them simply because they can get the same thing elsewhere. 2015 will be the year that people see this and realize the importance of quality story based writing, rather than cleverly titled, but poorly written content.
WEARABLES WILL BECOME A STRATEGIC BATTLEGROUND For the last four or five years, technology experts have been predicting that wearable technologies will be a huge growth area ‘in the coming year’. Although they have seen strong growth, the truth is that they are yet to have the kind of adoption rates that make companies care about creating strategies around them. However, 2015 promises to be different simply because the Apple Watch is being released. Due to the curiosity surrounding the new product and the faithful user base that Apple has, the chances are that the adoption will increase significantly. This will then force companies to look at how they are approaching this from a strategic standpoint, either based on the increased amount of data that can be gained from them or how to produce complementary products. Even just being able to advertise effectively on a screen significantly smaller than anything that they currently work with, is going to take a completely new way of thinking.
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HOW THE
“SHARING COMPANY” IS REVOLUTIONIZING B2B Robert Vaughan Manager, Strategy & Economics, PwC
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“SHARING COMPANY” - REVOLUTIONIZING B2B
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Since the mid-2000s, the so-called sharing economy has grown from almost nothing to a pool of global businesses valued in the billions of dollars. The concept, people using technology to find and purchase one another’s extra resources, represents a triumph of trust and crowdsourcing. Peer-to-peer financial firms such as Lending Club, transportation services such as Uber, and lodging brokerages such as Airbnb have all rapidly taken off, using Internet-based platforms to connect people directly without highly paid intermediaries. It’s no wonder investors are so intrigued, and the rest of us are a little enervated by all the hype.
But there’s a less flashy trend emerging from the sharing economy, and it probably presents a larger opportunity than consumer sharing. It is the open sharing of resources among businesses, peer-to-peer enterprise exchange. Probably the most widespread sharing-company practice to date involves unused real estate. If you’re reading this in a typical office, half the desks around you may be vacant. However, businesses can now find digital platforms that create global connections between owners and renters and help them use these assets more effectively. Sharemyoffice.
As online platforms that are oriented toward industrial companies emerge, it will be more feasible to share large raw materials, distribution infrastructure, and other capital costs co.uk, for example, offers a service connecting short-term tenants to businesses with spare office space. Similarly, as Rachel Botsman noted in the September 2014 issue of Harvard Business Review, the Marriott hotel chain has converted empty conference rooms into rentable work spaces through the online platform LiquidSpace.
desire for greater flexibility. As online platforms that are oriented toward industrial companies emerge, it will be more feasible to share large raw materials, distribution infrastructure, and other capital costs. Shared sourcing platforms could also make it easier for companies to pool
These examples are largely related to business-toconsumer opportunities. However, the real power of peer-to-peer enterprise exchange may be found in B2B transactions. Take manufacturing, where the versatility of digital fabrication and other flexible manufacturing technologies allows companies to share their production facilities and equipment. This matters when today’s factories operate at an average of 20 percent below capacity. In 2011, Med-Immune (the biologics unit of pharma company AstraZeneca) agreed to share its manufacturing facilities with fellow pharma giant Merck— pairing the former’s excess capacity with the latter’s
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“SHARING COMPANY” - REVOLUTIONIZING B2B
involved in bringing products to market. The potential here is not just to garner ideas from outside inventors through open innovation. Nor is it to open up a platform for third-party developers to introduce ancillary products and software, as computer companies have done for decades. The real potential is for new platforms to evolve that offer a segment of a company’s intellectual property base to the world at large, so that others may do things with it, and the patent holder may profit.
their purchases of materials with low environmental impact. The sharing market for intangible assets—a company’s brainpower, knowledge, and intellectual capital—shows just as much promise. In many companies, for example, technical expertise is severely underused, simply because the work of the R&D staff doesn’t fit with the company’s current strategic priorities. But rather than divest its facilities, a company can share its staff. In a sense, companies have been exchanging their brainpower this way for years. Early-stage R&D investment in the pharmaceutical and automotive industries often takes place through a consortium of partners, with secondment of key people
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occurring whenever leaders see the right opportunity. But now experts can be lent to other companies in a much more fluid, comprehensive fashion, through platforms for staff exchange. One online staffing market run by Elance and oDesk, exchange sites for freelance work that merged in 2013, brokered US$750 million worth of work that year.
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Intellectual capital is another intangible asset with sharing potential. Technology-intensive companies amass huge stockpiles of patents. The top five U.S. patent filers—IBM, Samsung, Canon, Sony, and Microsoft—together filed more than 21,000 in 2013 alone. But only a fraction of all patents filed are put to productive use, because of the investment
In the current form of this relationship, the two parties collaborate to bring innovations to market. The Chinese appliance company Haier, for example, invites inventors from outside the company to propose
The Chinese appliance company Haier, for example, invites inventors from outside the company to propose innovations they could produce together
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“SHARING COMPANY” - REVOLUTIONIZING B2B
innovations they could produce together. But collaboration might not always be necessary. A company with a patent for a new type of battery technology, for instance, might choose not to develop it, but by placing the battery technology on an exchange, the company could make a connection to another company with a complementary technology that would otherwise never have been made. In some technology-intensive industries, a more liquid market in intellectual property is seeing competitors become collaborators. Apple announced a wide-ranging patent licensing deal with HTC in 2012. Google and Samsung have just agreed to share all new patents filed over the next decade. There is potential for such deals to help prevent costly patent wars, freeing up resources with which companies can focus on innovation.
AUTHOR PROFILE: Robert Vaughan is an economist with PwC’s economics and policy team, and is based in London. For more thought leadership on this topic, visit the s+b website. “The Sharing Company’” by Robert Vaughan adapted with permission from the strategy+business website, published by PwC Strategy& Inc. © 2014 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
Consumer-sharing efforts like Airbnb suggest that participants become more collegial and empathetic because their experience is not just transactional. They are staying in one another’s homes. Something similar could happen in business, as executives and employees share their resources, their intellectual property, their time, and their work space. That could be the greatest benefit of all, resulting in greater efficiency, a more energized workforce, and new products and services that meet consumers’ needs.
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M&A VS
A N G I C R GR O O
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George Hill, Managing Editor
M&A VS ORGANIC GROWTH
With the number of startups and SMEs increasing all the time, many are wondering if it is better to have M&A investment or attempt to get the same results with organic growth. There are clearly benefits to both, but ultimately which is going to be best for your company?
M&A BENEFITS With M&A investment from a larger company, growth can often be quicker and safer. Although many startups are agile and have the ability to innovate and implement quickly, they often lack the most powerful tool; capital. After an M&A investment, there is capital to be spent and growth can be faster, better people can be brought in and salaries can be increased for the most influential in the organization. With a vested interest in the success of the company, there will be advice available from those in the ‘senior’ company who have been through similar
processes before to help maximize ROI from this capital. It also means that there will be access to the ‘senior’ company’s processes and internal systems. This can be an important cog in growth as it allows software or expertise that would be beyond the budget of many smaller companies. As the ‘senior’ company in this case has a monetary interest in the success of the company, the chances are that new systems that may not have been at either company can be bought with the new funds available.
DRAWBACKS The management of an M&A deal can often be complex and require skills from both sides that many will never have needed to think of before. For instance, even at the basic branding level it can become complicated with smaller companies wanting to maintain a degree of independence but the larger company wanting to have their involvement known. In the current climate, many have chosen to work at a startup because of the flexibility and the culture that generally exists there. As soon as a company is bought or merged with another, the culture will change. This could lead to situations where despite monetary benefits, the
most important and passionate employees will leave to seek out the startup culture elsewhere. Growth is expected to be rapid, meaning that management of an increasing number of new recruits, production costs and suppliers can often cause stress and lead to mistakes. A previously seamless and well oiled machine can quickly grind to a halt when it goes beyond a certain size. This pressure for growth can often lead to other problems, such as senior managers needing to work in stricter conditions, where they used to experiment, with decisions now under a microscope there is often a tendency to take the safe route.
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M&A VS ORGANIC GROWTH
ORGANIC GROWTH BENEFITS With organic growth, the people who had the initial idea for the company are likely to maintain the vision that has seen them get to this point. It means that company culture can stay the same and people understand the way that the business works. Senior and influential employees who have helped to create this culture are more likely to stay and help to promote it further as growth increases. The growth will not be as fast as M&A backed growth. This allows management to target specific areas of growth to make it more sustainable, creating areas of the business that need to have the most attention to achieve future growth rates.
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M&A backed companies may get more capital to grow the business quicker, the ultimate goal of this is for those who have invested to make profit. This is not the case with organic growth. Once the growth has reaped the rewards of increased profits, this can be ploughed back into the company, without a cut being taken out by those who have made an investment. This means that as the company becomes more successful, the success breeds more success and growth, creating a spiral of profitability.
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DRAWBACKS With M&A investment another company has an interest in yours, so will do everything it can to stop it falling into financial trouble. This is not the case with organic growth. Although it may ultimately end up with more profitability for those who worked to create the company, if a big decision fails and puts the company in trouble, there is nobody to pick up the pieces. With M&A it could be argued that there is a safety net, whilst organic growth means you are alone. Speed of growth is not as quick. This is because there is not an initial capital injection or access to new expertise or services that help to fuel growth. M&A organizations may put pressure on companies to perform to a certain level, but this comes with significant investment to help achieve their expectations.
Both options will appeal to different companies and different industries. Service based industries for instance, will not necessarily require as much capital investment as retail or manufacturing simply by their nature. It means that payment (or at least part of it) for the service often comes in before the task is undertaken, whilst with those producing physical products, this is not an option, so investment is needed initially to produce the products that will eventually be sold. There is no clear cut better option, both hold significant benefits and flaws. If you want to grow a business quickly then M&A is the best way to do so but if you want to be patient then the payoffs from organic growth can be significantly larger.
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