Accelerating to stay competitive

Accelerating to stay competitive: using new strategy system amid constant turbulence and disruption.

Extract from Harvard Business Review – John P. Kotter:

Perhaps the greatest challenge business leaders face today is how to stay competitive amid constant turbulence and disruption.

Any company that has made it past the start-up stage is optimized for efficiency rather than for strategic agility—the ability to capitalize on opportunities and dodge threats with speed and assurance. I could give you 100 examples of companies that, like Borders and RIM, recognized the need for a big strategic move but couldn’t pull themselves together to make it and ended up sitting by as nimbler competitors ate their lunch. The examples always play out the same way: An organization that’s facing a real threat or eyeing a new opportunity tries—and fails—to cram through some sort of major transformation using a change process that worked in the past. But the old ways of setting and implementing strategy are failing us.

We can’t keep up with the pace of change, let alone get ahead of it. At the same time, the stakes—financial, social, environmental, political—are rising. The hierarchical structures and organizational processes we have used for decades to run and improve our enterprises are no longer up to the task of winning in this faster-moving world. In fact, they can actually thwart attempts to compete in a marketplace where discontinuities are more frequent and innovators must always be ready to face new problems. Companies used to reconsider their strategies only rarely. Today any company that isn’t rethinking its direction at least every few years—as well as constantly adjusting to changing contexts—and then quickly making significant operational changes is putting itself at risk. But, as any number of business leaders can attest, the tension between needing to stay ahead of increasingly fierce competition and needing to deliver this year’s results can be overwhelming.

What to do, then?

We cannot ignore the daily demands of running a company, which traditional hierarchies and managerial processes can still do very well. What they do not do well is identify the most important hazards and opportunities early enough, formulate creative strategic initiatives nimbly enough, and implement them fast enough.

The existing structures and processes that together form an organization’s operating system need an additional element to address the challenges produced by mounting complexity and rapid change. The solution is a second operating system, devoted to the design and implementation of strategy, that uses an agile, networklike structure and a very different set of processes. The new operating system continually assesses the business, the industry, and the organization, and reacts with greater agility, speed, and creativity than the existing one. It complements rather than overburdens the traditional hierarchy, thus freeing the latter to do what it’s optimized to do. It actually makes enterprises easier to run and accelerates strategic change. This is not an “either or” idea. It’s “both and.” I’m proposing two systems that operate in concert.

The strategy system has its roots in familiar structures, practices, and thinking. Many start-ups, for example, are organized more as networks than as hierarchies, because they need to be nimble and creative in order to grab opportunities. Even in mature organizations, informal networks of change agents frequently operate under the hierarchical radar. What I am describing also echoes much of the most interesting management thinking of the past few decades—from Michael Porter’s wake-up call that organizations need to pay attention to strategy much more explicitly and frequently, to Clayton Christensen’s insights about how poorly traditionally organized companies handle the technological discontinuities inherent in a faster-moving world, to recent work by the Nobel laureate Daniel Kahneman (Thinking, Fast and Slow, 2011) describing the brain as two coordinated systems, one more emotional and one more rational.

The new strategy system also expands on the eight-step method I first documented 15 years ago (in Leading Change), while studying successful large-scale change: establishing a sense of urgency, creating a guiding coalition, developing a change vision, communicating the vision for buy-in, empowering broad-based action, generating short-term wins, never letting up, and incorporating changes into the culture.

More … http://hbr.org/2012/11/accelerate/ar/1?