Adaptive Imperative

Date: 5 Oct 2010

Venue: NUS Bukit Timah Campus

Speaker: Jeff Chua, Boston Consulting Group

I have attended a talk recently about developing business strategies in turbulent times when it is difficult to see trends beyond two or three years. The speaker mentioned the following observations:

The context of strategy has changed since changes happen frequently.

1. Market leadership does not necessarily imply the same extent in profitability.
2. It is harder to define industry boundaries.
3. It is harder to predict the future.
4. Market position is unstable. Those on top do not stay on top for very long.

Example of a Market Leader losing out to latecomer:

Blockbuster vs Netflix

Blockbuster was a market leader in video rental. But on 23 Sep 2010, it filed for Chapter 11 of the US Bankruptcy Code or protection against creditors.

Netflix is also in the video rental business and started in 1997. It deployed no strategy other than encouraging compulsive dissent and experiments. They tried sending out DVDs on envelopes, posting them and pricing them on a flat fee for as many DVDs customers care to watch. Then they continued to stream videos across different channels. By 2007, they passed the billionth DVD delivered.

This, the speaker claimed is evidence of increased unpredictability and turbulence.

Businesses would need to have:

- Responsiveness (agility)

- Resilience (robustness)

- Readiness (anticipation)

- Recursion (experimentation)

Example of two market leaders deploying very different strategies:

Google – using open systems

Apple – using closed proprietary systems.

The speaker continue to suggest that businesses should adapt using their:

1. Signal Advantage
2. System Advantage
3. People Advantage
4. Simulation Advantage
5. Social Advantage.

My opinion:

I think the speaker had focused too much on the form and not enough on the essence of the apparent ‘changes’.

The underlying common denominator of the current observations is merely the advent of technology and its easy and cheap availability. For instance:

- Netflix triumph over Blockbuster because of the former’s clever use of technologies.

- Large companies no longer make the proportional scale of profits as they used to because clever technologies are no longer just affordable by big companies, but they are affordable to small ones too. It is now possible even to become a one-man multi-national company.

So things aren’t that unpredictable or turbulent if we focus on the common denominator of ‘technology’.

Also, while Google appears to be ‘open’ and Apple being ‘closed’ using propriety systems, the commonality is that both makes money through their own propriety ‘orifice’. Google’s orifice is their search engine, while Apple’s is iTunes. And we have another major orifice called Microsoft Windows. Businesses love orifices. So in this respect, they are the same. So there isn’t the unpredictability or turbulence.

In summary, observations may appear different in form, but in essence there are usually common causes. The trick is look beyond the raw data to derive meaningful meta-information. The luminary Buckminster Fuller (Bucky) believed that the universe is one system obeying a set of generalized principles, and that in the early days when equipment are limited in ability and accuracy, different phenomena appeared to behaved differently. That resulted in the formation of different disciplines. So some scientific observations became ‘physics’, some became ‘chemistry’, some became ‘biology’,…etc, but in truth, they all belong to one system in the universe.

By those measures, it doesn't matter if Apple is a computer company, a mobile phone company or a lifestyle company. The fact that businesses have be categorized wrongly as stoke pipe industries with clear boundaries, doesn't mean that they need to continue to be so. A fresh look at them as eco-systems in one universe with their outreach enabled by technology would be closer to the reality.

Once the causes are identified it’ll be easier to help companies to cope up. So now you cure the causes, not the symptom. That means a simpler remedy, but usually that means you cannot sell expensive ‘medicine’ and make a lot of money. Bucky said, “You either make sense or make money, they are both mutually exclusive.” To date, I am still pondering over this question, "Can we make both money and sense?"