The Top 20 Business Transformations of the Last Decade

In 2012, Denmark’s biggest energy company, Danish Oil and Natural Gas, slid into financial crisis as the price of gas was plunging by 90% and S&P downgraded its credit rating to negative. The board hired a former executive at LEGO, Henrik Poulsen, as the new CEO. Whereas some leaders might have gone into crisis-management mode, laying off workers until prices recovered, Poulsen recognized the moment as an opportunity for fundamental change.

“We saw the need to build an entirely new company,” says Poulsen. He renamed the firm Ørsted after the legendary Danish scientist Hans Christian Ørsted, who discovered the principles of electromagnetism. “It had to be a radical transformation; we needed to build a new core business and find new areas of sustainable growth. We looked at the shift to combat climate change, and we became one of the few companies to wholeheartedly make this profound decision, to be one of the first to go from black to green energy.”

That strategic impulse—to identify a higher-purpose mission that galvanizes the organization—is a common thread among the Transformation 20, a new study by Innosight of the world’s most transformative companies. Fortifying this new view, the Business Roundtable last month released a statement signed by 181 CEOs stating that serving shareholders can no longer be the main purpose of a corporation; rather, it needs to be about serving society, through innovation, commitment to a healthy environment and economic opportunity for all.

Our aim was to identify the global companies that have achieved the highest-impact business transformations over the past decade, using the same methodology as our 2017 study. Our research team screened all the firms in the S&P 500 and Global 2000 using three lenses:

1. New growth: How successful has the company been at creating new products, services, new markets, and new business models? This includes our primary metric: the percentage of revenue outside the core that can be attributed to new growth areas.
2. Repositioning the core: How effectively has the company adapted its traditional core business to changes or disruptions in its markets, giving its legacy business new life?
3. Financials: Has the company posted strong financial and stock market performance, or has it turned around its business from losses or slow growth to get back on track? We looked at revenue CAGR (combined annual growth rate), profitability, and stock price CAGR during the transformation period, which was different for each firm.

Our initial phase of research identified 52 companies making substantial progress towards strategic transformation—merely 3% of the public companies in our data set. From this second-round list, an Innosight partner panel voted to narrow it down to 27 finalists. For the third round, the following companies were selected as the Transformation 20 and ranked by a panel of management experts (see judges).

 

Each of these companies developed new-growth businesses outside its traditional core  which have become a significant share of the overall business. However, we believe it’s the decision to infuse a higher purpose into the culture, one that guides strategic decisions and gives clarity to everyday tasks, that has propelled these companies to success.

The #1 company, Netflix, is a case in point. In 2013, CEO Reed Hastings released an 11-page memo to employees and investors detailing a  commitment to move from just distributing content digitally to become a leading producer of original content that could win Emmys and Oscars.

As the memo said, “We don’t and can’t compete on breadth with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google. For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.”

Since unveiling that new purpose, Netflix revenue has roughly tripled, its profits have multiplied 32-fold, and its stock CAGR has increased 57% annually, versus 11% for the S&P 500.

Finding new purpose

In a comparable way, the purpose-driven mission of preventative healthcare has spurred major change at other large organizations that made the list. China’s AIA Group has moved beyond insurance to become a wellness company, whereas Dutch electronics giant Philips has largely divested its legacy lighting business to focus on healthcare technology.

The technology companies on our list also discovered ways to infuse purpose into their organizations as part of their fundamental change.

Siemens moved beyond a purpose of maximizing shareholder value to a mission of “serving society.” This transformation began in 2014 with a plan called Vision 2020 that called for harnessing technologies such as AI and the Internet of Things. However, changing the mission also called for changing the culture. “The biggest obstacle to any transformation is literally just the way we’ve always done things,” says Siemens USA CEO Barbara Humpton. Infusing a higher purpose into the company called for pushing decision making out from the center to every business unit, so that managers and rank-and-file employees feel they have a stake in future success. “Ownership culture is central to everything,” Humpton says. This shift in the culture at Siemens has propelled it to divest its core oil and gas business and redeploy the capital to build a new Smart Infrastructure business focused on energy efficiency, renewable power storage, distributed power, and electric vehicle mobility.

In the case of Tencent Holdings, the company was founded in 1998 to harness the Internet opportunity, launching online chat forums and video games for China’s new generation of digital natives. As of 2005, shortly after its IPO, Tencent defined its purpose in terms of “implementing our Online Lifestyle strategy, which strives to cater to the basic needs of our users.”

Only in subsequent years did founder and CEO Pony Ma Huateng broaden the firm’s outlook by embracing a mission of “improving the quality of human life through digital innovation.” Since 2011, Tencent has invested heavily in new growth ranging from education and entertainment to autonomous vehicles and ride sharing to fintech and the industrial internet—areas that together now represent 25% of its $46 revenue. Through its Tencent Education business unit, the firm is now developing educational content and services for individuals, schools, and education management. All of this growth helped Tencent become the first Asian company to surpass $500 billion in market valuation.

In 2019, Tencent refined its mission once again, in response to the growing global backlash against technology’s dominance in our lives, boiling it down to: tech for social good.

 Several companies found that refocusing the organization to help save the planet can be especially powerful. Ecolab, #16 on our list, is a prime example.

 In the early 2000s, when Douglas Baker Jr. became its CEO, Ecolab was an 80-year-old firm growing 10% annually by selling industrial cleansers and food safety services. “Our strategic plan was to sell more of what we had,” Baker says. To grow much beyond its $3.8 billion in revenue, the company could have kept moving into adjacent markets or new geographies, but Baker felt that wasn’t bold enough.

The transformation began by talking to customers, Baker says. The same customers who were buying its core products were also voicing concerns about access to clean water. And they weren’t alone. Projections for the year 2030 showed that 70% of the world’s GDP would be based in water-stressed regions, California and Southern India being prime examples.

In 2011, Ecolab had a $12 billion market cap when it acquired water technology company Nalco in an $8 billion deal. The combined company is now one of the world’s leading suppliers of hardware, software, and chemistry that helps manufacturers and service firms become more efficient users of water. A primary metric driving the organization is how much water is saved by its clients annually, which now stands at 188 billion gallons, against a 2030 target of 300 billion gallons.

“We broadened our vision and our purpose changed,” Baker says. “As our teams widened their awareness of global issues, our pride has been enhanced.” So has Ecolab’s market value, which has surpassed $55 billion, placing it among America’s top 100 most valuable firms.

Performing mission impossible

Such transformations are never easy. When the firm now known as Ørsted divested its coal, oil, and natural gas businesses, that created a giant revenue gap that urgently needed to be filled. The company had experimented with offshore wind power, but the technology was too expensive, producing energy that was more than double the price of onshore wind.

Under Poulsen, Ørsted embarked on what critics called an impossible mission: a systematic “cost-out” program to reduce the price of offshore wind while achieving scale. The company managed to cut the cost by more than 60% while building three major new ocean-based wind farms in the U.K. and acquiring a leading company in the U.S.

The result: Previously about 80% owned by the Danish government, Ørsted’s IPO in 2016 was one the year’s largest. Operating profits have quadrupled since it began the transformation, and Ørsted is now the world’s largest offshore wind company, with about a third share of booming global growth market.

The takeaway lesson from these mission-changers is clear: In an era of relentless change, a company survives and thrives based not on its size or performance at any given time but on its ability to reposition itself to create a new future, and to leverage a purpose-driven mission to that end. That’s why strategic transformation may be the business leadership imperative of the 21st century

 

Eight Things Leaders Do That Make Employees Quit

Algorithms are becoming increasingly relevant in the workplace. From sifting through resumes to deciding who gets a raise, many of these new systems are proving to be highly valuable. But perhaps their most impressive, and relevant, capability is predicting which employees will quit. IBM is in the process of patenting an algorithm that can supposedly predict flight risk with 95% accuracy. Given that we are in a candidate-driven market, this is a significant innovation. There are now more job openings in the U.S. than there are unemployed Americans.

Losing an employee can have a drastic effect on team morale, and result in a domino effect that leads to poor performance and productivity. Not to mention, it is expensive, and not just because of lost talent. It takes an average of 24 days to fill a job, costing employers up to $4,000 per hire — maybe more, depending on your industry. The good news is that only about a quarter of employees that leave do so within their first year. This means you have plenty of time to assess flight risks and address them.

But not every company has a fancy algorithm to help them out. Even predictive models that can identify the behavioral patterns that reveal who will quit don’t excel at explaining why they do. This is likely because the reasons people quit are deep-rooted and complex. During my fifteen years working in data science, I have run countless predictive models on employee retention, student retention, and customer churn across industry verticals, including healthcare, energy, and higher education. Through my work, I’ve identified eight common leadership mistakes that help explain this why. Understanding them, and how they impact your team, will help you identify those who are at flight risk, and make changes that may convince them to stay.

Mistake 1:  Setting inconsistent goals or expectations.

Consider this scenario: A sales representative at a rental car company has to choose between serving her next client, or correctly logging her previous client’s information into the system. Her manager has made it clear that “slow service is poor service,” but she knows that improperly entering customer information could get her fired. Choosing between these two tasks causes her to experience high levels of stress on a daily basis, and as a consequence, she hates her job.

This situation is not uncommon. But when employees are forced to choose between tasks in order to meet competing expectations, the result is a team of stressed out people without clear priorities.

How can you avoid this situation? Take a note from Disney. Each worker in the Magic Kingdom is given a list of priorities with items ordered from the most to the least important. Safety comes first, followed by courtesy, show (or performance) next, and finally, efficiency. When a team members find themselves in sticky situations, no one is confused about how to manage them.

You can create this same kind of stability on your team by being consistent and clear with your expectations. Write them down — even if it is only for yourself — to see if any contradict or overlap. Then, make necessary changes and share. In doing so, you will empower your team and ease their stress by giving them a greater sense of control over their tasks. Most importantly, you will be making work a more pleasant place to be.

Mistake 2: Having too many process constraints.

Process constraints often occur when a lack of information, resources, or another factor, stops an employee from doing their job. I’ve seen this take place, for example, when a worker is forced to wait for several other tasks to be completed before they can move forward with a project. Such conditions will naturally inhibit performance — which are evaluated by managers — even if it is not the employee’s fault. In turn, the employee begins to feel powerless, and displays low morale, poor work quality, and frustration.

How can you avoid this situation? Consider context when evaluating performance. Look at the criteria, and consider how much control your employee has over their outcomes, as well as how much control you have over any constraints that may be affecting their output. Talk openly to them about their performance and ask questions that will help them communicate any concerns on their end.

If you find that process constraints are in fact affecting their performance, use your influence to try and improve the situation. Sometimes this might require having difficult conversations with other departments or leaders. But these conversations will ultimately benefit your employee, as well as your bottom line.

Mistake 3: Wasting your resources.

Pretend you are a marketing manager. You have until Friday to roll out a new campaign. It’s Tuesday, which should theoretically leave you with plenty of time. But there’s a problem. You have six meetings for a total of four and a half hours today. The following day, you have seven meetings, which eat up six hours. On Thursday, you have to attend a team training session for five hours. So, when are you supposed to work?

This is what we call resource waste. In the case above, and many others, the resource going to waste is time. Employees who are constantly crunched for time tend to get burned out faster, which impacts the quality of their deliverables. If you don’t give your team the resources they need to succeed, you are setting them up to fail. It’s not uncommon for employees in this situation to leave and seek out a company with a more sustainable work culture.

How can you avoid this situation? Sometimes busy weeks that result in wasted resources are unavoidable. But creating a list that ranks the importance and impact of your employees’ tasks can help. If your employee knows their campaign plan is due Friday, for example, help them itemize the tasks they need to complete by that deadline, and consider if doing so is realistic given their current workload. Before assigning them additional tasks or inviting them to meeting after meeting, ask, “Is this new task a priority? Does this employee really need to be in the room?” If the answer is “no,” give them space to do their most important work.

Mistake 4: Putting people in the wrong roles.

If you ever hear an employee say, “I went to college for this?” you can bet they are not happy with where they are or what they are doing. This is another example of waste, but I call it “knowledge and skills waste.” Unused abilities can leave employees feeling undervalued and faceless. An algorithm can easily take a job posting, outline the skills required for it, then take a resume, and infer the knowledge and abilities of a job candidate. But if there is a disconnect by the time that candidate becomes an employee, you’ve got a risk factor out of the gate.

How can you avoid this situation? It’s best to be transparent about the roles you are hiring for and what they require during the interview process. But if you’re already in too deep, there are a few ways you can handle it. Start by checking the job description your employee was hired into, and compare it against their current task load. Are there gaps, and if so, how wide are they? Take notes. Then discuss them with your team member to see which gaps are falling short of their goals, and which are the most important.

You may not be able to change the role entirely, and it may take time, but together, you can come up with a plan to help them take on more meaningful responsibilities, and drop tasks that add the least value to your team.

Mistake 5: Assigning boring, or overly easy, tasks.

Think about the last time you had to go to a work event that you really didn’t want to attend. Maybe you had to converse with too many people about uninteresting topics or sit through several hour-long seminars in a single day. How did you feel after the fact?

You were likely exhausted, very exhausted — even though all you had to do was talk a little and listen.

Why? Because you were suppressing your emotions. Suppressing, rather than acknowledging, any feeling can take a toll on your energy level, even if that feeling is boredom. If you have an employee with a light workload who constantly takes an excessively long time to finish their tasks, don’t assume they are lazy. Less work is not always easier work. When employees don’t have enough to do, they can lose motivation and experience negative emotions. If they suppress those emotions, they can become physically and emotionally exhaustion. The net result is a lack of work satisfaction and engagement, forcing employees to finally ask whether this job is the right fit for them.

How can you avoid this situation? Get creative. If your team member has a history of stable performance, they’ll likely be open to extending their capabilities and taking on more challenging work during their downtime. Before assigning tasks, ask your employee about their interests and passions. Based on their answers, give them work that will enhance their knowledge, skills, or help them grow in the right direction. A learning agenda with target goals, and a roadmap outlining how they will reach them, will also help you keep track of and check in on their progress.

Mistake 6: Failing to create a psychologically safe culture.

Hostile environments are easy to spot. If you notice your team members being overly agreeable or quiet in meetings, that’s a bad sign. When employees fear their thoughts or ideas will be met with repercussions, they tend to behave this way, which means you are likely operating in a fear culture. Employees who do not feel psychologically safe are more prone to error, and less likely to take risks, participate in healthy conflict, or grow in their roles. Contrarily, team members that feel psychologically safe are productive, innovative, and enjoy a sense of belonging.

How can you avoid this situation? To create a psychologically safe work environment, show your team that you are open to new ideas. In meetings, ask questions before posing answers and reward those who speak up by thanking them for their input or following up with additional queries. Consider all viewpoints when brainstorming solutions to difficult problems and make sure your team knows that there is no such thing as a “wrong answer.” If an idea has a lot of potential, you might even ask your employee to run with it and present what they come up with at the next meeting. The more you can incorporate your team’s feedback into projects and strategies, the more empowered, valued, and safe they will feel working for you.

In addition, show some humility. When you own up to your faults, or admit that you don’t have all the answers, you show your team members that it’s okay to “fail.” Take on the perspective that failure is an opportunity to grow, and your team will start to do the same.

Mistake 7: Creating a work environment that is too safe.

Studies show that a moderate level of pressure and friction at work is healthy for employee growth. But the key is moderation. When employees feel overly pressured to perform well in their roles, they can lose sight of what’s important, and in acts of desperation, use unethical means to excel. On the other hand, if your employees have no pressure at all, they may start to wonder if their work even matters. People who find no meaning or purpose in their work perform below their potential, are less productive, and are often less loyal than those who work in purpose-driven organizations.

How can you avoid this situation? One way to create a healthy amount of friction is to provide your team with regular feedback — both positive and negative. When delivered thoughtfully and without judgement, negative feedback can give people something meaningful to work towards. You should also be sure to remind your employees of what they are doing well, and how their role contributes to the goals of the larger organization (no matter how big or small their contribution is). In turn, they will begin to see how they fit into the big picture, and may even start to feel a greater sense of purpose.

Mistake 8: Leading with bias.

Consumer studies show how much customers value being treated fairly by the companies they give their money to, and the same can be said for workers on the inside, giving up their time. Leaders who are fair — without bias — are leaders who employees can trust, and a trusting manager-employee relationship “defines the best workplaces,” improves performance, and is good for revenue. A lack of trust, however, can result in low morale and a team with little or no guidance. Think of it this way: if your employees don’t trust you to lead them down the right path, how will they come together and align their efforts to meet a shared goal? Put yourself in their shoes. Would you want to work at a place without clear direction?

How can you avoid this situation? Practicing self-awareness is a good start. Managers who can recognize their implicit biases and make adjustments to overcome them are more likely to lead in a fair and just manner. Before you make an important decision consider what is driving you. Are you basing your choices off of evidence, or preference? Have you considered other perspectives? Are there any gaps in your knowledge you need to fill first? Asking for regular feedback from your team, and acting on it, will also build a culture of fairness and open communication.

It’s true that there is no way you can control every aspect of your team’s work experience. If someone wants to leave bad enough, sometimes they just will. That said, focusing on your own behaviors, what you can control, will do wonders to improve the performance and cohesiveness of your team. The better you manage, the more productive, innovative, satisfied, and most importantly, loyal your team will be.

 

https://hbr.org/2019/09/8-things-leaders-do-that-make-employees-quit

from hbr

three ways to build a culture of collaborative innovation

All organizations have the ability to be smarter than the sum of their members’ intelligence and talent. Unfortunately, most are actually dumber. The good news is there are a handful of practical steps to boost collective intelligence.

Create tools that allow everyone to communicate strategically about innovation. Good ideas can come from all corners of a company, but would-be innovators may need help developing a strong strategic argument. The Defense Advanced Research Projects Agency (DARPA), the innovative government agency focused on transformational breakthroughs in national security, uses a set of simple questions called the Heilmeier Catechism (named after a former director), to think through and evaluate proposed research programs:

• What are you trying to do? Articulate your objectives using absolutely no jargon.
• How is it done today, and what are the limits of current practice?
• What is new in your approach and why do you think it will be successful?
• Who cares? If you are successful, what difference will it make?
• What are the risks?
• How much will it cost?
• How long will it take?
• What are the mid-term and final “exams” [that will allow you to measure] success?

Materials science company W.L. Gore puts its key innovation criteria in the form of a one-page “Product Concept Worksheet,” which contains: a concise statement of the product concept, the technology to be utilized, the form of the product, and the customer needs that the product will address.

Either approach can easily be adjusted for use in most organizations; they provide common language that allows anyone to propose a new idea — and everyone to judge its merit.

Vet and refine ideas collectively and continuously. In nimble organizations, innovation ideas aren’t reviewed once or twice a year by a senior committee. Instead they undergo a constant process of review, refinement, and — if necessary — death. The goal is for only the best ideas to survive. In our research, we found that successful collective vetting depends on at least two things.

The first is clear, commonly understood guidelines (also known as simple rules) by which to judge proposed innovations. In an effort to rejuvenate its innovation pipeline, Corning created a set of simple rules, derived from successful past innovations:

• address new markets with more than $500 million in potential revenue
• leverage the company’s expertise in materials science
• represent a critical component in a complex system, and
• be protected from competition by patents and proprietary process expertise.

Second, diverse stakeholders are invited in early and often to help judge and refine the idea. At Gore, “passionate champions” for new innovations use the company’s tools to frame the strategic case for their idea, vetting it with customers and colleagues in the process. If the idea gains support, the champion schedules regular peer review sessions with people from manufacturing, R&D, sales & marketing, and other areas of expertise who are in a good position to judge and refine the idea. The company’s culture of frank talk drives these review sessions. People understand that their collective job is to kill bad projects as quickly as possible and accelerate those that show the most promise.

Guidelines make it easier for everyone to judge the value of new innovations and avoid large, bad bets on relatively untested ideas. Senior leaders periodically review the portfolio of project ideas that are bubbling up and knit them together, using their knowledge of organizational capabilities and market/technology trends to create organizational strategy.

Bust through barriers that block innovation. Most organizations have regular  procedures for leaders to determine which new projects should get funded and who will be assigned to these initiatives. But at nimble organizations, leadership is flipped upside down. The job of top leaders is to serve people who are close to the market. They do whatever they can to clear the way for promising new projects and get innovation teams the resources they need.

NASA’s leaders are undertaking an intensive effort to understand and transform several major barriers to innovation. They asked their employees to help; people responded with nearly 300 recommendations. Some of these aimed to encourage more idea generation by giving people more time, money, recognition, and dedicated physical space for innovation. Others focused on reducing process requirements for innovations, for instance, fast-tracking low-cost missions and giving special treatment to high-potential technologies. One proposal would require new flight programs and projects to include an element of innovation to encourage informed, appropriate R&D risk, as a means to counter the agency’s risk-averse culture. The outcome of this effort remains to be seen, but NASA’s leaders are certainly making a concerted effort to tackle the blocks to innovation.

Using these three practices, companies can harness the insights and energy of all of their people through a collective “prediction market,” in which innovation ideas are examined, improved, and pushed forward by the many, not the few. An innovation prediction market makes many small bets on new ideas at early stages, only a few of which will pan out after intensive collective vetting. In so doing, nimble companies aggregate the intelligence of their workers to better predict future success, and act to make that future real.

From: https://hbr.org

? If the Key to Business Success Is Focus, Why Does Amazon Work

Harvard Business School Professor Sunil Gupta explores the infiltration of Amazon into dozens of industries including web services, grocery, online video streaming, content creation and, oh, did we mention physical bookstores? What’s the big plan? Is the company spread too thin? Or is it poised for astronomical success?

 

Brian Kenny: In the world of computer science, Jon Wainwright is kind of a big deal. A computer language pioneer, he was the principle architect of both Script 5 and Manuscript. What makes John a legend has nothing to do with programming. Let me explain.

On April 3, 1995, Jon was in need of work-related reading material. He fired up his T1 modem and navigated the fledgling internet to the beta version of a new online bookstore. With the click of a mouse, he became the very first customer to make a purchase on Amazon.com. Fluid concepts and creative analogies, the book he purchased, never became a best seller, but Amazon took off like a rocket ship and hasn't slowed down since. With a market cap larger than all other retailers combined, including Walmart, Amazon owns 49 percent of all online sales. In the time it takes me to read this introduction, the company will earn over $300,000. Will we ever see the likes of it again?

Today, we'll hear from Professor Sunil Gupta, about his case entitled, Amazon in 2017. I'm your host Brian Kenny. You're listening to Cold Call, part of the HBR Presents network.

Sunil Gupta is an expert in the area of digital technology and its impact on consumer behavior and firm strategy. He is the author of the recently published, Driving Digital Strategy, a Guide to Re-imagining Your Business. This case is the perfect stepping-off point to cover some of the ideas in that book. Sunil, thank you for joining me today.

Sunil Gupta: Thank you for having me.

Brian Kenny: The case is a great foundational piece to launch into some of the ideas [of the book]. I'm going to assume that anybody listening to this podcast has purchased something on Amazon, or watched something on Amazon Prime. I had forgotten about their modest beginnings, and just how much they've grown and expanded and changed… Let me start by asking you … what led you to write the case?

Sunil Gupta: As you said, everybody knows Amazon. At the same time, Amazon has become quite complex. They have grown into a business that defies imagination. That raises the question, is Amazon spreading itself too thin? Are they an online retailer? Are they video producers? Are they now making movies? In strategy, we learn everybody should focus. Obviously, Jeff Bezos missed that class.

You start to wonder, what is the magic behind this? What is the secret sauce that makes Amazon such a huge success? Their market cap almost touched a trillion dollars a few months ago.

Brian Kenny: Insane. The case takes place in 2017. (Editor’s note: Amazon in 2019 has just been published.) Start us off by setting it up. How does the case open?

Sunil Gupta: At that point in time, Amazon had just bought Whole Foods, which was very counterintuitive. Amazon has been an online player. Why is it getting into an offline business? That was against their grain as an online player. The second thing is, food is a very low-margin category. Amazon is a technology company; its stock is going to stratosphere. Amazon had been (operating) Amazon Fresh for 10 years, and hasn't succeeded. Why don't they give up? That was a starting point. Of course, the case describes all the other 20 things they have done in the last 20 years and asked the question, what is Amazon up to?

“IT'S ALMOST A 25-YEAR-OLD COMPANY THAT STILL WORKS LIKE A STARTUP.”

Brian Kenny: Amazon and Jeff Bezos are sort of synonymous. He's a cult of personality there, like Steve Jobs was with Apple. Jeff's been in the news a lot lately for other reasons, you know, personal reasons. He is probably one of the best-known CEOs in the world. What's he like as a leader?

Sunil Gupta: I don't know him personally. Based on the research I've done, he certainly is very customer obsessed. He's focused on customer. He always says, "You start with the customer and work backwards." He still takes calls on the call center. The culture is very entrepreneurial, but also very heart driven. I mean, the idea for Amazon Prime evidently didn't come from Jeff Bezos, it came from a person low in the organization. He's quick to adapt the ideas if he sees some merit in it. It's almost a 25-year-old company that still works like a startup.

Brian Kenny: Was the original concept for Amazon ... I mean, he sold books originally. Was it ever really a book company?

Sunil Gupta: I think it started more as an online retailer. Book was an easy thing, because everybody knows exactly what you're buying. It's no concern about the quality. His premise in the online store was a very clear value proposition of three things. One was convenience, that you can shop in your pajamas, so we don't have to fight the traffic of Boston or Los Angeles. The second was infinite variety. I don't have the constraint of a physical store. Even if I have Walmart, which is a huge store, I can only stock so many things. As a result, you only have the top sellers. In Amazon, I can have the long tail of any product, if you will. The third was price. It was cheaper, simply because I don't have fixed costs of the brick and mortar store. I can reduce the cost structure and therefore I can be cheaper. Those were the three key value propositions. That's how it started. The idea was, I'll start with books and then move on to electronics and other things. But then of course, it moved far beyond being an online retailer.

Brian Kenny: This gets into some of the ideas in your book. I was really intrigued in the book about the notion of what kind of business are we in? Just that question alone. At face value, it looked like Amazon was a retailer. They went in directions that nobody could have imagined.

Sunil Gupta: Right. The purpose of the case was to illustrate how these are all connected. From a distance they look completely disconnected, and completely lack focus. Let's start with how the concept evolved.

The first thing was, as I said, it was online retailer. Very soon it became a marketplace. Now, what is a marketplace? They basically allow third-party sellers to also sell on the Amazon platform, which is distinct from a traditional retailer. Walmart doesn't allow me to set up shop within Walmart, but Amazon allows me to do that. Now, why would they do that? Simply because it increases the variety that they can sell on the platform. Therefore, consumers are quite happy with the variety of the product they can get on Amazon. Amazon gets commission without having the inventory and the capital cost.

Perhaps the most important thing about becoming a platform is that it creates what we call network effects. If everything I can buy is available on Amazon, more consumers are likely to go there. Because there are more consumers, more sellers are likely to go there. It just feeds itself and becomes a virtual cycle. That's why there is only one Amazon. Even if I start an online retail [store] that is in many ways better than Amazon, nobody's coming to gupta.com, because buyers and sellers are not there. That became the next phase, changing from an online retailer to a marketplace. Then it went into AWS (Amazon Web Services), and you say, "How can it go into being a technology company and compete with IBM and Microsoft?" It was competing with Walmart before.

Sunil Gupta: In fact, at that point, Wall Street was very down on that. They said, "What is Bezos thinking?" The idea, if you think about it, was very simple. Amazon was building (web services technology) for its own purpose, and then started giving this technology, using this technology, for third-party sellers who were selling on its platform.

Brian Kenny: Let me just interrupt for a second. That's a marked change in direction. They had always been a consumer platform. Now they're in a business-to-business play. I bet a lot of consumers don't even know about Amazon Web Services.

Sunil Gupta: Correct. That was not saying in a traditional sense, "This is my market." That's simply saying, I have this capability. There's a demand for this capability. Can I do it?" Part of that was opportunistic, also. If you remember in 2001, the dot.com bubble crashed. If you're a B2C company, you hedge your bets and get into B2B business. Part of that may have been luck. And then Amazon started producing hardware, Kindle, and now competing with Apple.

You sort of say, why is an online retailer getting into hardware production? If you think a little bit about it, the answer is very easy. Kindle was designed to sell eBooks as people move from buying hard copy books to downloading eBooks. The Kindle is the classic razor and blade strategy. I sell razors cheap in order to make money on the blades. I'm not making that much money Kindle, but I'm making money on e-books, which is very different from Apple's strategy. Apple actually makes money on devices, but Amazon is not making money on devices, or at least not making huge money. Similarly, it moved into online streaming of the video content and suddenly became a competitor of Netflix. You say, "Why is a retailer becoming a competition of Netflix?" Again, if you think a little about it, the answer becomes clear. As you and I moved on from buying DVDs [to] streaming the stuff, that's what Netflix did. They used to send the DVDs to us.

Brian Kenny: I remember that. I still have a couple.

Sunil Gupta: Amazon is very good in moving with the customer. If the customer moves from buying books to e-books, Amazon moves in that direction. If customers move from buying DVDs to streaming, it moves in that direction. Now, can Amazon do it? Of course, they can. They have AWS. Netflix is one of the largest AWS customers.

“AMAZON IS VERY GOOD IN MOVING WITH THE CUSTOMER… IF CUSTOMERS MOVE FROM BUYING DVDS TO STREAMING, AMAZON MOVES IN THAT DIRECTION.”

Brian Kenny: Are they leading or following? Are they creating a market? In the beginning it seemed like they created something entirely new. Now, are they anticipating, or are they just sort of reacting to what's happening?

Sunil Gupta: It's a combination of both. In some ways they are following the consumer behavior. [When consumers started] moving to streaming, Amazon was not the first—Netflix started the streaming thing, and then Amazon comes up with it. If you think about it, Amazon not only distributed third party content on videos, but now they have Amazon Studio. They are making movies. The competition now becomes Hollywood instead of Walmart.

You sort of say, "What has gone wrong with Jeff Bezos? Why is he making movies?" Making movies is a pretty expensive business and highly risky. Again, the key is to understand the purpose of the movies, which is to hook consumers on Amazon Prime. If you remember, Amazon Prime started at $79 dollars per year. The benefit at that time was two-day free shipping. Now, you and I are smart enough to do the math, saying, how many shipments do we expect next year, and is $79 worth it? Bezos does not want you to do that math. He basically says, "Oh, by the way, I'll throw in some free content, some free music, some free unique movies.” Now you can’t do the calculation. Why does he care about Prime? Right now, Amazon has about 100 million Prime customers globally. Let's say I get an average 100 dollars per year, that's $10 billion in my pocket, before I open the store.

Brian Kenny: Right.

Sunil Gupta: The research also shows that Amazon Prime customers buy three to four times more than non-Prime customers. I mean, if you're a Prime customer, you don't even price shop.

Brian Kenny: Once you're Prime, you’ve got to justify being a member. You buy everything on Amazon.

Sunil Gupta: Exactly. Your purchases increase. You become price insensitive, which is fantastic. Jeff Bezos has said that every time we win a Golden Globe award for our content, we sell more shoes. The purpose of creating their own content is not to make money on the content. This is a different razor, to sell you more shoes. Once you understand that, what looks like disparate business is actually extremely tied together.

Brian Kenny: It all comes right back to the core. They haven't always had good ideas. Have they had some misses along the way too?

Sunil Gupta: I think the biggest failure was Fire phone.

Brian Kenny: Remind us what that was?

Sunil Gupta: Amazon launched their own phone. They were obviously very late in the market. iPhone was already there. Samsung had done very well. You have two major players, if not many others, who are very well established. Consumers love their iPhones. The question of course was, why is Amazon launching a phone? What are the odds of success? Clearly the odds of success were low.

The reason was they didn't want to be beholden to the iPhone or to the Googles of the world. They know that the world is moving towards mobile, in terms of shopping. Certainly in emerging markets everybody's moving to mobile shopping. If tomorrow Apple or Google sort of restrict … availability or use of Amazon—because they're all competing with each other now—it becomes a challenge. Not all innovations succeed, but you've got to take a shot. If you think about it, all the technology and thought processes that went into Fire phone were not a complete waste. That went into Echo. Now Alexa is a big hit.

Brian Kenny: They're a market leader in that in that space. Let's talk a little bit about the ideas that underlie this Amazon case. I think it starts with knowing what business you're in. Your book addresses this. I think I know we're in the education space here at Harvard Business School. Should we be thinking about other businesses?

Sunil Gupta: I think you're right. The bigger question that Amazon case raises is, how do you define what business you are in? Most of us tend to define business by the traditional industry boundaries. If I'm a bank, I'm in banking and other banks are my competition. I think industry boundaries are getting blurred today. Amazon can get into banking. If I have lots of customers, I can start giving loans to small and medium enterprises.

Brian Kenny: You would know a lot about those customers.

Sunil Gupta: The key asset now is customers and data, not the product and services that you offer. Once you know about customers, you can do lots of different things. Industry boundaries are getting blurred. You need to think not about competition, but what do customers want. Do I have capabilities to serve that? The second thing is that the traditional definition of where competitive advantage comes from is changing. When I learned my MBA, we used to read Michael Porter's competitive strategy stuff. If I were to simplify and summarize what I learned in competitive strategy it was that competitive advantage comes from making your product better or cheaper. Differentiation or cost leadership, which makes sense. If you think about it, it's very much product focused. I think in today's world competitive advantage comes from connecting products and connecting customers. The Kindle, and e-books is an example of connecting products, multiple products, right? Making movies on Amazon and selling more shoes is connecting products. Razor and blade have been around forever. I think what’s different today is razor and blade could be in completely different industries. Movies and shoes.

The other side is connecting customers. We are in a network economy. That's why there is only one Facebook, or one WhatsApp. If you are the only person on Facebook, what's the value of Facebook? Not much, unless you love yourself. As more and more people get onto Facebook, the value of Facebook increases. It's not about improving product. Without changing product, Facebook value increases. I think in this connected world that we live in, it's about connecting products and connecting consumers.

Brian Kenny: We've got a lot of listeners out there, many of whom are probably leading firms of one kind or another. How do they go about exploring or redefining their business?

Sunil Gupta: I think again, you need to think about what is your key asset? Everything starts with the consumer. In the Amazon case, you move with the consumer to some extent. I asked the same of a company for a medical device manufacturer. I said, "Who's your competition?” The typical answer is: the other medical devices. Medical business is now becoming a lot about data. Google is getting into that. Apple. iPhone is becoming a medical device. Suddenly you have a very different kind of player getting into this thing. When I say, "What business are you in?" you need to think about who might get into that business, and that changes the whole picture.

Brian Kenny: Why is Amazon so good at engaging customers?

Sunil Gupta: I think it comes from the culture of being customer obsessed, that no matter what the customer is right. They deliver on that promise. The level of convenience that customers expect from companies has changed. It used to be that if a company delivered a product within a week that was considered good. Now, if you don't deliver on the same day, it just seems awful. They've raised the bar in everything. Of course, they're using technology very effectively, whether it's in their warehousing or now investing in drones. I think they're still a 25-year-old startup.

Brian Kenny: That's another point that I wanted to touch upon. They're able to adapt their supply chain it seems almost effortlessly to whatever business direction they move in. Is it possible for another entry to come into this space and scale in the same way that Amazon has? Is this a once-in-a-lifetime type thing?

“THAT'S THE KEY QUESTION: ARE THE PIECES FITTING TOGETHER NICELY, OR DO THEY JUST HAPPEN TO BE ANOTHER BUSINESS BECAUSE IT'S PROFITABLE?”

Sunil Gupta: That's a tough question. It's not that they're adapting supply chain for everything, right? For example, I don't think the Amazon supply chain is ready for delivering frozen food. If I have a supply chain to ship you electronics, I can use the same supply chain to ship you prescription medication. That opens up another several-billion-dollar market. If I call myself an online retailer, I will never think of prescription drug delivery. If I think of my capabilities, I have the warehouse to deliver electronics and books. Why can't I deliver your prescription medication? That opens up completely different businesses.

Brian Kenny: What are the kind of pitfalls that you need to be careful of, as you start to move into adjacent markets?

Sunil Gupta: I think definitely the big challenge is: how far do you go? On one hand it's good to expand the business scope, because the industry boundaries are getting blurred. The danger is, do you lose focus? The classic challenge of losing focus. There's a balance. I think in Amazon's case, if you notice, everything is very tightly connected. If you remove one part, the whole becomes less. That's the key question: Are the pieces fitting together nicely, or do they just happen to be another business because it's profitable?

Brian Kenny: We've done a couple of cases on Cold Call that touch on the organizational impact of firms that move into new businesses. Some of them are examples of where it’s benefitted the employees. In other cases, it seems to have disrupted the culture in negative ways. How do you see this playing out at Amazon? Does it impact them in any way?

Sunil Gupta: Amazon has grown the top line 20, 25 percent every quarter without fail, except for one quarter in 2001. Right now, in 2019, their sales are @232 billion. I don't know many companies that can grow at that rate, even when they're over $200 billion. I think that as an employee, if you're on a winning team it has to energize you. If you are in a culture which encourages experimentation and innovation, it has to excite you. At the same time, I'm sure it's a very demanding culture, and there have been reports about how demanding the culture of Amazon is. It probably is not for everybody. For the people who are innovative, who are entrepreneurial, who want to be on a winning team, I'm sure it's an exciting place.

Brian Kenny: There are sort of shades of Apple there. I mean, I think Apple had the same reputation. Have you've discussed this case in class with students?

Sunil Gupta: Oh, many students.

Brian Kenny: What are sort of the top line things that surprise you as you discuss it?

Sunil Gupta: I think the nice thing about this case is that everybody knows Amazon as a consumer. Everybody has shopped at Amazon. People see it as very surface level. They sort of don't realize the deep insights that comes out. As a three-page case, you think you’ll be done in 10 minutes, but then you peel the layers of the onion. That was a shocking thing to them, as to how you peel the layers of the onion and how you see the connection across different things. Why did Amazon buy Whole Foods? It makes no sense. Why did they get into AWS? It makes no sense. When you start unpeeling that layer, you see the connection as to why Amazon is doing all these different things. I think that's the “A-ha” moment that comes across.

Brian Kenny: Much more on that in your book. How's the book doing?

Sunil Gupta: Book is doing great.

Brian Kenny: I bet you can buy it on Amazon.

Sunil Gupta: You can certainly buy it on Amazon.

Brian Kenny: That's great. Sunil, thanks for joining us today.

Sunil Gupta: Thank you very much Brian.

Brian Kenny: If you enjoyed Cold Call, you should check out HBS SkyDeck, a podcast series that features interviews with HBS alumni from across the world of business, sharing lessons learned and their own life experiences. Thanks again for listening. I'm your host Brian Kenny. You've been listening to Cold Call, an official podcast of Harvard Business School, and part of the HBR Presents network.

 

From:

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Are You a Digital Manager?

Linda Hill explains how the digital workplace is generating greater burdens on managers but also creating new opportunities to shine. PLUS: Book excerpt.

Complex trends in globalization, demographic shifts, and new technologies are raising urgent challenges for managers on an everyday level. Because of the number of companies undergoing digital transformation, managers need to navigate an intense speed-to-market landscape while juggling virtual teams within and sometimes outside their organization.

This raises questions like: How will you innovate? How will you bring out the best ideas in your teams working together near and far? How will you drive change within the organization and the broader business ecosystem?

As Harvard Business School Professor Linda A. Hill and Kent Lineback write in the new preface to their book Being the Boss: The Three Imperatives for Becoming a Great Leader, first published in 2011 and reissued this spring, “Leadership has always been hard, and in a world in which the competitive rules are being upended, we know it's getting harder. We all need to keep learning and adapting.”

We asked Hill, the Wallace Brett Donham Professor of Business Administration, to discuss how managers can work faster, embrace digital transformation to cultivate collaboration within and beyond the organization, and build networks for innovation.

Martha Lagace: How can you as a manager guide your reports through a business world where speed-to-market is everything?

Linda A. Hill: In Being the Boss we describe three interrelated imperatives:

·         Manage yourself.

·         Manage your network.

·         Manage your team.

It comes as no surprise that so many managers are overwhelmed and burned out these days. In our dynamic, competitive environment, speed matters. If managers do not develop their people so they can delegate to them, or if they do not turn their groups into agile teams able to learn and adapt together, then they cannot leverage themselves. If they cannot leverage themselves, they have no time to build relationships with their peers and bosses to get access to the resources their teams need to deliver. And let’s face it, reaching out and cultivating relationships in global companies often means staying up late or getting up early to cope with time zone challenges or living in airports sometimes being 50 percent of a manager’s time.

“IT COMES AS NO SURPRISE THAT SO MANY MANAGERS ARE OVERWHELMED AND BURNED OUT THESE DAYS.”

Many companies are working overtime to break down the silos in their organizations. But managers need to do their part and devote time and attention to aligning their interests and cultivating collaborations across the organization. Only when everyone understands the big picture and feels a part of it can they prioritize and focus together on that which is urgent and important to the enterprise.

Lagace: As you teach MBA students and Executive Education participants, are they describing new pressures that weren’t there before?

Hill: Leadership is truly getting more demanding. I don’t think anyone ever succeeded by him- or herself anyway, but for sure they don’t now.

In fact, the “managing your network” imperative that we address in Being the Boss is becoming as important to being a great leader as managing your team. C-suite executives tell us it is no longer enough to just be a value creator—that is, someone who is delivering value for today. If you want to be high potential, you also have to be a game changer—someone who is delivering value for tomorrow. Consequently, we need managers who build teams that are “collaborative-ready” and who can cultivate healthy relationships across the organization. In today’s world, horizontal collaborations are key if companies are to reap the benefits of digital transformation and platform plays, or deliver a differentiated end-to-end customer experience.

Another challenge we’ve seen for managers is that if they want to attract and retain top talent, they need to make sure the work is meaningful. There has to be a sense of shared purpose; managers need to answer not just what the team should or could be doing, but also why doing so matters. All of us, particularly the younger generations in the workforce, want to be in organizations where we can make a difference. If MBAs are to work hard and take the risks necessary for companies to thrive today, managers need to make sure team members can have an impact on an organization whose purpose they deeply care about.

Lagace: You’ve spoken recently about the importance of building ecosystems. What do you mean?

Hill: For innovation to happen and take hold nowadays, managers often need to build ecosystems, networks with those both inside and outside the organization. We are collecting data on how managers build partnerships, even with other industries, to gain insights into how to drive innovation in their organizations. For instance, a manager in the entertainment industry might be working with peers in pharmaceuticals or defense to accelerate the development of virtual reality capabilities.

In my work, I use the ethnographic methods of anthropology to study transformation as it takes place through shared mindsets and everyday behaviors and practices. With these methods—and with attention to ecosystems—we are watching “up close and personal” as managers build innovation labs or corporate accelerators to facilitate innovation in their companies. We are interested both in understanding how to most effectively build out these labs and accelerators and how to ensure that the innovations produced in these entities actually get integrated and scaled in the core business.

Lagace: How is the digital age helping or hurting new managers?

Hill: In class, when we talk about how to build a team, the discussion includes how to build a virtual team with different nationalities, languages, and diversity in the broadest sense.

“THERE ARE A NUMBER OF SPECIAL CHALLENGES ASSOCIATED WITH WORKING VIRTUALLY.”

There are a number of special challenges associated with working virtually. How do you build trust? Without mutual trust, it’s very hard to work together. We have not evolved as people as fast as the business world has required us to—to be able to innovate with people so different and far away from us. Research makes clear that, as people and colleagues, we much prefer firsthand evidence and direct experience with people to help us figure out whether they are trustworthy. New technologies do help, but there is still no substitute for face-to-face interactions.

It’s a human reality we all need to thoughtfully build into our work processes. There is a leader at a major automaker who realized there was no way his company could build a global brand unless everyone all met physically at least once. For sure, he had invested in the latest video and e-communication technologies. Still, he used a significant portion of his budget to have everyone meet together to develop a sense of shared purpose. It was important for them to practice new ways of thinking, working, and making decisions together if they were to fully embrace the rich diversity of culture, expertise, and experience the team represented.

As one manager in a global company put it, “Social media will never replace the dinner party.” Leaders are realizing that such investments are required to build healthy relationships. And, on this basis, global teams can work together virtually on any number of complex problems and exciting opportunities.

About the Author

Martha Lagace is a writer based in the Boston area.
[Image: metamorworks]

From:

https://hbswk.hbs.edu

Annex -management system

you can download Annex of Management system here

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شرح خدمات (Consult and Train Services)

 

 

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بنده احمدی هستم و جهت مشاوره، و برگزاری دوره همراه با صدور گواهی نامه معتبر  در موارد ذیل در خدمت شما هستم:

 

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2-  استراتژی و کارت امتیازی متوازن (BSC)

 

 

3-    بهبود کسب و کار

 

4- مشاوره سیستم های مدیریتی (ISO)  و اخذ گواهینامه از سوی شرکت های معتبر:

 

 

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Strategies Thrive on the Right Amount of Tension

After expending considerable effort on formulating a strategy, most executives would like to see their company’s strategic plans fully executed. Deviations from the strategic plan are often assumed to be detrimental to corporate performance. However, compliance with the strategy doesn’t necessarily correlate directly to performance.

The gap between strategy and the execution of that strategy is often referred to as “strategic dissonance.” We like to call it “strategic stress.” The “Yerkes-Dodson Law,” which has been used in research that examines the relationship between stress and individual performance, shows that stress increases performance up to a certain point, but not beyond that point. In a similar vein, “strategic stress” can improve your company’s performance – up until a point.

 

Strategic stress is characterized by three zones, which executives must consider and effectively manage:

Strategic Burnout (too much strategic stress). Excessive strategic stress is typically a result of one or more of the following causes: (1) Too much autonomy, i.e. employees that follow their own agendas at the expense of corporate alignment (2) unrealistic strategic plans, i.e. the organization is not able to live up to the plans put forth by top management, and (3) market dynamics, i.e. external developments that push the organization in other directions than what was initially planned. When strategy execution moves too far away from the initial strategy, the link between the plan and reality is broken, resources are wasted, and the organization lacks guidance. This scenario is characterized by many divergent projects, fragmented activities that have little in common with the initial strategic plan, and projects that do not fit together. The outcomes of such anarchy are random and, as such, unpredictable. Such organizations experience strategic burnout. Strategic burnout can occur if prophets and experts (that is, employees who enthusiastically work on projects outside the predefined strategy) dominate the organization without the counterweight of executors and gamblers, who drive projects related to the planned strategy (here, executors implement low-risk strategic projects, and gamblers bet on high-risk  projects that are within the confines of the predefined strategy).

INSIGHT CENTER

• The Gap Between Strategy and Execution

  Aligning the big picture with the day-to-day.

An example of strategic burnout can be found at Lego around 2004. The company had expanded into too many different and overly complex projects, which essentially created high levels of strategic stress. The multitude of projects drove the company in numerous directions at the same time. The resulting complexity was an underlying cause of the company’s strategic burnout. A turnaround subsequently lowered strategic stress to a productive level by discontinuing many of their seemingly unrelated projects, re-focusing on their core business, as well as streamlining operational processes that improved coordination activities.

Strategic Boredom (not enough strategic stress). When strategy execution aligns perfectly with initial plans, the organization does not experience sufficient strategic stress. This results in strategic boredom. The concept of strategic boredom does not necessarily suggest that the content of the strategy is boring, but that the conformity and limited challenges give rise to the risk of strategic complacency, which may result in rigid execution that is blind to emerging risks or opportunities. Strategic boredom can occur if executors and gamblers dominate the organization without the counterweight of prophets and experts who push for new ways to drive the business.

An example of strategic boredom is illustrated in Clayton Christensen’s famous work on the disk-drive industry. Leading disk-drive manufacturers found it nearly impossible to maintain their success when the technology and market structure began to change. In other words, their previous success meant that employees failed to challenge the once-successful strategy—that strategy was instead challenged by new market entrants.

Strategic Sweet Spot (just the right amount of strategic stress). When strategy execution differs moderately from the initial plan, the organization is in the strategic sweet spot. This scenario is characterized by a sufficient balance between alignment and nonconformity, which is needed to ensure strategic success. The sweet spot can be reached if there is a balance among the four project-manager types: executors, experts, gamblers, and prophets. The optimal amount of each will depend on the specific organization and the situation, and on changes in technologies, customer needs, and the competitive context.

An example of the strategic sweet spot is documented in Gary Hamel’s study of a gang of unlikely rebels who woke IBM up in time to catch the internet wave. Certain project leaders at IBM started an initiative to build a community of web fans, i.e. early adopters of the web, that would subsequently transform the company. The group developed an internal “Get Connected” manifesto that helped guide and leverage the web at IBM. Moreover, a variety of popular, public websites for sports events were developed to illustrate the potential of the novel technological development. The strategic stress generated by these employees was enough to change the organization while not moving it too far away from its original strategic domain.

What can you as a leader do to ensure that your strategy is experiencing just the right amount of stress? We suggest the following:

• Adopt a mindset for stress: Make sure that you do not view strategic stress as a problem from the outset—you want your strategy to be subjected to some stress. Therefore, emphasize the value of both challenging and executing the strategy when communicating with your employees.
• Set up for stress: Proactively think about how emerging autonomous projects can influence your strategy and its execution. Build structures and processes in the organization such as hackathons and innovation days that provide one-day bursts of autonomy to enable employees to experiment with alternative projects. By providing a clearly limited space for employee autonomy, you ensure that you won’t step into the “too many different projects” pitfall, potentially leading to a strategic burnout.
• Diversify for stress: Employ a mix of people so that your organization can carry out different projects, some of which focus on executing the strategic plan and others that challenge that plan.

Strategy making involves both the deliberate execution of intentional plans and responsive actions to emerging issues. Both activities are necessary to ensure strategic success and corporate longevity. Therefore, your strategy needs a level of stress that requires you to cope with the gap between the plan and its execution.

Too much stress to your strategy can be detrimental; but a sufficient amount of strategic stress ensures that your organization moves forward efficiently, and keeps you alert and responsive to emerging developments. Just like a diamond is the valuable outcome of constant pressure from multiple sides, strategic success results from balanced pressure on your strategy.

---

Carsten Lund Pedersen is Postdoc at the Department of Strategic Management and Globalization at Copenhagen Business School, where he researches in project-based strategy, employee autonomy and matching employee types with business development projects.

Ten Tips for Perfect Organizational Charts

Whether you are using org chart software such as SmartDraw or some other tool, here are 10 tips to help you build the perfect diagram for your needs.

1. Format the chart to fit on a single page

Use a combination of a horizontal arrangement of boxes at the top of the chart, and vertical below to fit as man

y boxes on a single page as possible.

A combination of horizontal and vertical arrangement of boxes fits more boxes on a page.

Using only horizontal arrangements of boxes makes the chart wider.

2. Group people with the same title into one box

Putting all of the people with the same title into one box saves a considerable amount of space compared with assigning each person their own

 box.

3. Make all boxes the same size and space them evenly

Charts look much better if all of the boxes are the same size (except for multi-person boxes) and the spaces between boxes are the same.

Choose organizational chart software that does this automatically.

4. Show assistants with a side bar below the manager

Assistants should be shown with a box that comes off the line that connects the manager to his or her subordinates. This distinguishes the role of the assistant from other people that report to the manager.

5. Put the title of the position first, then the name of

 the person occupying it

The title of the position (the job title) should be shown above the name of the person occupying it because positions define the organizational structure, not the people who currently occupy them. You can change people's

You can also hyperlink boxes in the chart to other electronic documents, such as the job description of the position without changing  the structural arrangement of the chart.

.

6. Show managers with two titles as two different boxes in the chart

Particularly in smaller companies, one person may manage multiple parts of the organization. For example in this technology company, the CEO, Paul Smith, also acts as the VP of Engineering. Both the management team and the programmers report to him. The best way to show this is to include both positions in the chart and show Paul as occupying both of them. Remember, the organizational structure is based on positions; not the people that occupy them.

7. Use dotted lines sparingly

Sometimes it can be helpful to show relationships with a dotted line connecting the boxes of two positions. One common example is an assistant that works for three managers.

Jane is connected to Toby and Linda by dotted lines because she assists them, as well as Dan. She reports directly to Dan, as shown by the solid line. It's not useful to try and impose the structure of multiple teams on the organization chart with lots of dotted lines. Too many and the chart becomes a mess. To show teams, it's better to use separate charts such as this one.

8. Draw your chart automatically by importing employee data

The best organizational chart software programs will create your chart automatically. This is accomplished by importing a data file that lists the title of each position, the name of the person assigned to it and the title of their manager in each row. You can create one of these in a spreadsheet program, such as Excel®:

You can use any application, not just Excel, to create a file formatted this way, including PeopleSoft® or SAP R/3®. 

9. Create an online version of your chart with hyperlinks to more information

Most people are familiar with printing an organizational chart on paper, but distributing them online can be much more useful. Both let you see the structure of an organization and read the names and titles of the people that work in it, but only an online chart lets you interact with it.

If you want to know who the VP of Sales' assistant is, you can find out from the org chart. With a printed chart if you want to contact her, you can find her name, but then have to look up her email address. With an online chart, her name can be linked directly to her email address, so that clicking on it in initiates an email to her automatically. Positions can also be hyperlinked to other documents, like job descriptions, or even records in the employee database. Your org chart can become a visual interface to more detailed information.

10. Break up large charts in to multiple smaller linked charts

In any format, a very large chart is cumbersome to view. An org chart showing every employee of a large company like GE is impossibly too big and complex to be useful. A more manageable approach is to break the organization up into smaller groups, each with a reasonably-sized org chart, and then link them together. For example, here is GE's top-level organization chart:

Each of the presidents heads up a different company within GE. Their positions can be linked to the org chart for that company. For example, the box for Healthcare links to the org chart for GE Healthcare:

The healthcare chart itself is so large each of these positions links to charts for the CIO's organization, the Business Development organization, and so on. Each sub-chart links back to its parent, so no matter where a reader is in the hierarchy, they can find their way back to the top.