A holistic framework to explain corporate strategy in 3 steps
Updated: Jun 25, 2021
In the context of my speech next June 2021 at conference: Business Model Innovation and Strategy in an Uncertain Environment, I share with you some highlight of my presentation.
Illustration: Something is missing in your Corporate Strategy
A strong way to manage Strategy in an uncertain environment is to follow this framework in 3 steps. You will see that they finally lead to Business Model Innovation and even more those steps will explain how Managing sustainability is the solution to the current crisis and recovery environment.
Step 1 - The Business Units
At the core of the company you have the Business Units. Often they have very different activities, markets, customers, products. Here two example of large companies diversified portfolio of business and customers:
Dairy and plant based products
Early life nutrition
Defence and Security
Step 2 - The 5 strategic drivers
Around those business units you have 5 common denominators that unite them to drive prosperity and resilience. Those 5 strategic drivers ensure the company to grow on the long run, with significant revenue increase but also capacity to overcome major adversity.
Here is how they articulate:
Data: It is nowadays the core of each every company and this is why we place it at the center. New computing technology and accessibility of Big Data has enabled large companies to drive their activities from a very different perspective and enabling insight never accessible before. This explains why harnessing data has become one of the strongest role of corporate strategy division.
Humans: With fast acceleration of computing technologies, the company become only as strong as the people capable to complement them. This require highly qualified people and task the machine can't (yet) replace. This is also a shift of personality where profiles of creative, problem solving and highly collaborative people will make the difference. Managing the 'right' workforce the 'right way' is a key success factor for the transformation of the company.
Profit: For global companies, listed at the stock exchange, having shareholders like pension funds, delivering profits is a priority. This is the purpose of an enterprise. Each of the business units need to generate significant revenues to cover the current production expenses, pay for the market expansions, keep core administration running and invest in future innovation.. all of that while providing shareholders some dividends.
Agility: This is key role of the strategy. It starts with the right diversity of Business Units activities and exposure to global risk. Having a diversified portfolio of activities ensure to stay steady when an industry branch is threatened. We saw during the COVID19 crisis that industry such as aeronautics where massively impacted but major industry players where able to shift resources and capabilities to some less impacted business units sustaining revenues. Quoting Darwin: 'It is not the strongest species nor the most intelligent, it is the most adaptable to change that survive'.
Deeptech: Today, if you are a large industry corporation, you don't have to ask what but rather when you will master the deep technologies in order to survive the next decade. This will also require to re-train part of your workforce to master deep technologies concept either they have scientific background or not. The convergence of deeptech will serve as building blocks for very new products we will use in the next decade and will give a unique advantage to those they own the patents and have the people mastering the know-how. I created the acronyme b.e.n.c.h. to describe them: Biotechnologies, Electronics, Nanotechologies, Computation and Humanities
Step 3 - The 4 future oriented activities
Finally, from a corporate strategy point of view, it is very interesting at the last layer we have represented on our framework and that is the core of making the company successful. We looked at how the 5 strategic drivers build on each others and extracted 4 future oriented activities a large corporation should have under mastery:
Organization: At the interface of Humans & Profit, this is the core administration behind the corporation including HR, IT, Procurement, Controlling and other key functions. Organization remain certainly the key role of the CEO and its board and efficiency and economy of operations are more and more possible via globalisation and digitalisation.
New Markets: At the interface of Profit & Agility, this follow the acceleration of the world economical change, the emergence and access to fast growing market such as China or Southeast-Asia today and Africa tomorrow. Entering new markets increase significantly the companies incomes but require them to understand and adapt to different business culture, to adapt their practices, their offering, their policies.
Innovation: At the interface of Agility & DeepTech, this is where your company will create organically new business that will replace some dying ones and keep the company profitable on the long run. Today doing R&D only works if you have already a dominent position, and its purpose it to maintain the core of business units. When it comes to create new business, you compete with thousands of start-ups at high agility with behind them a financial engine of early stage investors who keep investing more and more. Therefore agility and mastery of deeptech become one of the only way to tame innovation.
Sustainability: At the interface of DeepTech & Humans, this is where large companies who can tackle global challenge will be the one surviving the next decade. In order to grow, large companies need to conduct M&A and for that they borrow very large amount of money with interest indexed on their so called 'credit ratings' from agencies such as Fitch, Moody's or Standard and Poors. Bank lending money are interested in getting their loan reimbursed and therefore avoiding the large company borrowers to bankrupt. Interestingly, with the risks brought by climate change and demographic growth, credit rating are according more and more importance to Environmental, Societal and Governance criteria. We saw in the case of COVID19 that the challenges are real and extremely damaging the economy. We also saw that here Humans with hospital care givers and Deeptech with vaccines, were the only solutions to go through. Humans and Deeptech are the key to ensure future sustainability and world wealth and they will be required for each every company that aim conducting an M&A.