Shaping Strategy in a World of Constant Disruption

Shaping Strategy in a World of Constant Disruption

AGENDA The IDEA THE CHANGE ROLES OF A PARTICIPANT THE THREE ELEMENTS THE SHAPING VIEW THE SHAPING PLATFORM SHAPING ACTS AND ASSETS

THE IDEA. . Shaping Strategy “Shaping Strategies” Proactive Stance • Use technology changes to create new business ecosystems that benefit the company (shaper) and other participants Companies Reactive Stance Focus only on existing market & performance Content providers Advertisers Potential customers

THE CHANGE HISTORICAL PATTERN Technical Innovations Supporting Infrastructure Industry & Commerce Transformations Stabilization Powerful & Changing Infrastructure Rapid Industry Reshaping Adaptation CURRENT SCENARIO Rapid Technology Development REACTIVE APPROACH: • Focus on core markets, capabilities & geographies • Seek control over assets & activities • Emphasize on short term PROACTIVE APPROACH: • Use technology changes to create new business ecosystems • Rethink their approaches to business strategy and embrace new management practices

Rethinking the Substance of Strategy Conventional wisdom: In the absence of equilibrium adaptation is the best strategy taking a step further Shaper’s wisdom: Aspire to do something far bolder than shaping the performance of its own enterprises Shaper’s Characteristics: • Strive to shape global ecosystems • Try to fundamentally alter industries and market • Diminish perceived risks and magnify perceived rewards

Shaping Strategies Cause Constant disruption. Example of such industries: Health care, electronic payments, alternative energy technology, and media Success factors Risk taking and unique insights Managers Convert shaping views and 3 rd party participations

The BIG question!!! Shaper Participant • If the company choose to be a participant, it must be able to: • assess the relative strengths of the shapers they might support • define their own roles within the shaping opportunity

ROLES OF A PARTICIPANT Participant Influencer Hedger Disciple • Influencer: Commits early and prominently to one shaping strategy • Benefit: An influencer increases asset efficiency, builds capabilities, and gains a strong market position by influencing the shaper. • Risk: The supported platform may not become the industry standard. • Example: Bank of America’s early influence on the Visa shaping platform.

Roles of a participant • Hedger: Develops its products or services to support multiple shaping platforms • Benefit: A hedger’s eggs are spread across several baskets—in several competing platforms. • Risk: Higher costs can be incurred if effort is duplicated to meet multiple platform standards. • Example: Advertisers that participate in both Google and Microsoft advertising platforms. • Disciple: Commits exclusively to one shaping platform • Benefit: A disciple has a clear strategic focus and direction; it does not invest in competing shaping strategies. • Risk: The supported platform may not be adopted. If the exclusive bet fails, an investment in another shaper must be tried. • Example: Dell’s exclusive commitment to the Wintel platform.

Q. How does a participator decide if it wants to be an influence, a hedger or a disciple? Q. Should a company be selective about participators so as to avoid competition from them? Q. What are the crucial factors which determine a company’s response to disruptive innovation?

THE THREE ELEMENTS

SHAPING VIEW Helps the participants to focus SHAPING PLATFORM Provides leverage to reduce the investment and effort participants need to make These three elements can be used to scrutinize the successful shapers of both the past and the present SHAPING ACTS AND ASSETS Persuade participants that the shaper is serious and can pull off the shaping initiatives The three shaping elements combine to help shapers quickly attract and mobilize a critical mass of participants

SHAPING THE VIEW • Change the way potential participants perceive market opportunities- provide a long term view, reduce perceived risk by exhibiting positive outcomes • Difference between vision and shaping view • Vision: • Too narrow or too broad (accommodating every action of the company) • Company specific • Shaping views: • Market specific • Detailed to leave a room for refinement • Clear to help participants take tough choices in near future.

A few examples for ‘Shapers’ Microsoft – 80 s • Computing • power was moving to desktop machines. • Companies • that wanted to be leaders in the computer industry • needed to be on the desktop. Google Facebook Continues to help shape the advertising business through Ad. Sense Opening up platforms for thirdparty developers.

SHAPING PLATFORM Why would participants put a lot of investment and efforts? Clearly defined standards and practices that helps organize and support the activities of participants Enables them to do more with less resources LEVERAGE: Development Interactive

Development Leverage • Reduces the investment required to build and deliver products or services. • The shaper may provide with some sort of development platform to assist participants. Effects • Example: amplified Salesforce. com Force. com for ashas a platform. Increases third party developers to easily create enterprise participation functionality applications. grows Accelerates Interaction Leverage • Facilitating interaction among the key. Decreases participants. revenue • Increasing coordination among theadoption activities of costs generation participants. • Key value lies in standardized protocols and practices. • Example: Google Ad. Sense connects advertisers, content providers and potential customers

Testing the platform Does the platform promise financial benefits to potential participants, especially by reducing their cost of entry, accelerating the prospect of generating revenue, or both? Does it support a diverse set of participants and offer opportunities for creating value in many distinct niches? Can the platform scale up by accommodating large numbers of participants without adding unacceptable costs for the shaper? Is it likely to generate increasing returns as participation grows? grows Will its functionality continually evolve, evolve providing an incentive for participants to engage regularly with the platform owner and share their own learning and plans?

SHAPING ACTS AND ASSETS How to persuade participants that the shaper is serious and can pull off the shaping initiatives? Participants might worry about competition from the shaper. Acts and assets must define shaper’s intentions. Example: Novell LAN operating system

Rethinking strategy development process • Company’s executive team needs to think FAST F-FOCUS on your long term goals and what relevant markets and industries might look like in 5 to 10 years. T-TIE it all together by integrating all the preceding activities and refining them based on the learnings all along the way. A- ACCELERATE the movement towards your preferred future by identifying two or three operating initiatives that need to be carried out over next six to twelve months. S-STRENGTHEN the process by identifying two or three major organizational obstacles which need to be addressed.

Strategic Alliances to shape acts and assets : Examples Microsoft in its early days enhanced its credibility by negotiating an important relationship with Intel , leading manufacturer of Microprocessors. Again Microsoft’s deal with the IBM to provide the PC operating system. Microsoft playing the reverse role by making a minority investment in Facebook. Google announcing the Open Handset Alliance for Android operating system the consortium consisting of such players like Sprint Nextel , T- Mobile , Motorola and Samsung.

WAYS TO EXECUTE A SHAPING STRATEGY • By achieving critical mass quickly: On perfect execution shaping strategies aggregate a critical mass of participants that then unleashes powerful increasing returns. • By mobilizing the multitudes: Companies need to develop the institutional arrangements and management practices that attract and mobilize masses of participants. • By shaping again and again: Once unleashed increasing returns have traditionally been a powerful force leading to disproportionate generation of wealth so successful strategies require a series of shaping initiatives over time.

Q. Give some examples where disruptive innovation wasn’t followed by a better adopting strategy which allowed competitors to capitalize on the innovation? Q. Strategy is a “long term” view, does it even exist in a world of disruptive innovation?

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