STRATEGY & INNOVATION : HOW TO DEFINE STRATEGY IN UNCERTAIN TIMES •
By
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Kamal Bouzinab
On the agenda Uncertainty and turbulence types - levels & implication for strategy
Innovation types - nature & implication for strategy
Strategy, Innovation & Uncertainty Integrating dynamic capabilities, foresight and scenario planning: a framework for strategy making
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Uncertainty was there and will stand‌
Source: Pwc, 23d Annual Global CEO Survey, 2019-2020
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Covid-19 is not a threat for the financial services industry‌
Source: Mintel, June 2020
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Big-techs are on their way into financial services…
J Frost, L Gambacorta, Y Huang, H S Shin and P Zbinden, “BigTech and the changing structure of financial intermediation”, BIS Working Papers, no 779, April 2019. https://finance.yahoo.com/news/secret-behind-amazon-mercadolibre-apos-140000714.html
nent, C., Elvers, H. and Jandrig B. 2007. The ethics of uncertainty. In the light of possible dangers, research becomes a moral duty. Embo Reports, 2007, Oct, Vol. 8(10). https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2002561/
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Big-techs are on their way into financial services…
https://www.bis.org/publ/arpdf/ar2019e3.pdf
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Big-techs are on their way into financial services…
Source: 11: FS, banking as a service report, 2020
Source: Gopal, Manasa and Schnabl, Philipp, 2020 available at SSRN: https://ssrn.com/abstract=3600068
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Embracing uncertainty starts by seeing it as a continuum…
Moderated uncertainty
Low uncertainty
Several possible futures/limited outcomes
Predictability
• Situation analysis : Approach for strategy making
Industry analysis (5F) Internal analysis Key value drivers Forecasts and DCF Strategic options Decision and implementation tactics Risk and sensitivity analysis
High uncertainty
Limitless possible futures and outcomes
Range of possible futures and outcomes
• Situation analysis • Basic Scenario •
Ambiguity
• Situation analysis • Advanced Scenario analysis and
planning Game theory
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planning Game theory Real options
• Strategic Intent • Advanced scenario • •
planning Future backward approach Weak signal systems and analysis
Innovation…a process? a capability? a function? a strategy?
he problem with innovation : many uses and interpretations; confusion between innovation best practices and strategy; Epistemological choice :
« Innovation is bringing an insightful idea successfully to the market. »
Verloop, 2007
« Strategic innovation is a game-changing innovation in products/services, business models, business processes and/or positioning…..to improve performance. » Afuah, 2009
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Verloop, 2007
Innovation and strategy making under uncertainty: an integrated framework‌ Broader environment
Geopolitical context
Economic growth
Demography
International Trade
Future(S)
Present
Technology Social trends
Scenarios
Financial system
Ecological Issues
Task environment T+n
Task environment
Task environment T+n
investors Task environment T+n
NGOs Suppliers Regulators
Competitors
Customers
Firm level
Strategy at T0
Value proposition
Resources and Core Capabilities
Strategy tomorrow ?
Innovation Agility
Vision? Dynamic Capabilities
Mission?
Organizational system: Structure, culture, people, processes
Sensing Kamal Bouzinab, Copyright, 2019-2020
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Seizing
Transforming
Some takeaways…
Regarding uncertainty…
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uncertainty should be embraced not avoided;
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when facing higher uncertainty and ambiguity situations, forecast should be replaced by foresight;
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probability methods dont work in higher uncertainty situations, we should replace it by plausibility;
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uncertainty is not industry-specific, it is issue-specific.
Regarding innovation…
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innovation is not a business strategy; strategic innovation is at the heart of business strategies that creates new games;
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innovation is non just about disruption, routine innovation cloud create huge value ;
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in a rapidly changing environments, strategic innovation becomes a must to have capability. 1
Some takeaways…
Regarding Dynamic Capabilities…
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foresight, scenario planning and strategic intelligence should be embedded in the sensing capability of the firm ;
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seizing capability requires and agile organization with clear flat structure, flexible teams, decentralized and fast decision making processes, collaboration, learning and knowledge sharing culture ;
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transforming capability requires the right governance systems with boards deeply engaged in strategy making, able to balance the need for quick short-term action with firm long-term vision and stakeholders interests;
Regarding Strategy making under uncertainty…
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always start with situational analysis to sense the present context and identify its underlying drivers and the sources of your distinctive capabilities;
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clarify your current mission and your vision of the future ;
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identify critical factors and drivers with high potential impact for the future and assess their degree of uncertainty ;
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develop future scenarios around critical uncertainties and derive their strategic implications ;
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test your current strategy within each scenario and develop strategic options for each of them;
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Define a strategy the optimizes pay-offs and reduces downside-risks across all scenarios ;
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Monitor your environment, identify signals leading to one or the other of the scenarios or to a different one, adjust your strategy 1 accordingly.
To meditate‌
We try to surround ourselves with as much certainty as possible, but to live is to navigate a sea of uncertainties, through islets and archipelagos of certainties on which we refuel ...
Edgar Morin, April 2020, Le journal, CNRS. Free translation
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Kamal Bouzinab, Ph. D Full Professor of strategy Director of EMBA program
Discussion period…
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Kamal Bouzinab Professor of Strategy & Director of Local and International Executive MBA Program at ESG UQUAM bouzinab.kamal@uqam.ca
www.lhoft.lu
Alex Panican Head of Partnerships & Ecosystem at the LHoFT alex.panican@lhoft.lu