Overview'of'VUCA'

Strategy'under'Uncertainty'
Traditional*approach*leads*executives*to*think*of*things*in*a*binary*way,*that*is*the*world*is*certain*and*
there*is*precise*prediction*about*the*future,*or*uncertain*and*hence*completely*unpredictable.*

Risk=averse*managers*suffer*from*decision*paralysis*as*they*avoid*making*critical*strategic*decisions,*
choosing*to*focus*instead*on*reengineering,*quality*management*or*internal*cost*reduction*programs.*
These*measures*however*cannot*be*used*as*substitutes*for*strategy.*

4*Levels*of*uncertainty.*

! Level*1:*Clear*enough*future*
" Managers*can*develop*a*single*forecast*of*the*future*that*is*precise*enough*for*strategy*
development.*Residual*uncertainty*is*irrelevant*to*making*strategic*decisions.**
" Analytics*Tool:*Traditional*strategy*tool*kit**
" Strategic*posture:*Adaptors*with*No=Regret*moves*
*
! Level*2:*Alternate*Futures*
" Future*is*described*as*one*of*the*few*alternate/discrete*outcomes.*Analysis*cannot*identify*
which*outcome*will*occur*and*most*importantly,*some*elements*of*strategy*need*to*be*tweaked*
if*the*outcome*were*predictable.*
" E.g.*in*Oligopoly*market,*primary*uncertainty*is*competitors'*plan*for*expanding*capacity.*
Decision*of*one*company*is*contingent*on*competitors'*decision.*Possible*outcomes*discrete*and*
clear*but*hard*to*predict*which*will*occur.*
" Analytics*Tool:*Decision*analysis,*Game*Theory,*Option*Valuation*models.*
" Strategic*posture:*Shaper*with*Options*allows*them*to*change*course*quickly,*more*flexibility*
*
! Level*3:*Range*of*Futures*
" Range*of*potential*future*can*be*identified.*No*NATURAL*DISCRETE*scenarios.*
" Companies*in*emerging*industries*or*new*markets*cannot*determine*the*level*of*latent*demand.*
" Analytics*Tool:*Latent*Demand*Research,*Technology*Forecasting,*Scenario*Planning*
" Strategic*posture:*Shaper*aimed*at*moving*the*market*in*a*general*direction*with*
Options/Reserving*the*rights*to*play.*
*
! Level*4:*True*Ambiguity*
" Multiple*level*of*uncertainty*interact*to*create*an*environment*that*is*hard*to*predict*
" Rare*and*will*shift*towards*one*of*the*other*levels*
" Analytics*tool:*Analogies*and*pattern*recognition*
" Being*a*shaper*would*help,*market*is*facing*a*new*uncertainty*and*multiple*possible*future,*
Shaper*can*come*in*to*provide*a*vision*of*an*industry*structure,*standards*and*drive*the*market*
to*a*more*stable*and*favorable*outcome.*
 *
Strategic*Posture*
1. Shaping*the*future=*Leadership*role*in*industry*
2. Adapt*to*the*future=*Win*through*speed,*agility*and*flexibility*in*recognizing*and*capturing*
opportunities*
3. Reserve*the*right*to*play=*Invest*sufficiently*to*stay*in*the*game*but*avoid*heavy*commitment.*

Portfolio*of*actions:**

1. Options=*Decision*that*yields*a*significant*payoff*in*some*and*a*small*negative*effect*in*others.*
2. No=regret*moves=*Strategic*moves*with*positive*payoffs*in*any*scenarios*
3. Big*bets=*focused*strategies*with*positive*payoff*in*one*or*more*scenario*but*negative*effect*in*
others.*
Conclusion*
It*is*dangerous*to*hold*a*binary*view*when*addressing*uncertainties.*Frameworks*from*identifying*
uncertainties*to*choosing*the*right*strategic*posture*can*help*companies*tackle*uncertainties*better*in*
the*VUCA*world*today.*
*
Putting'organizational'complexity'in'its'place'
Complexity*can*be*split*into**

1. Individual*complexity*
i) Poor*processes:*Processes*became*bureaucratic*over*time,*took*too*long*for*decision*to*
filter*through*to*frontline.*
ii) Confusing*Role*definition:**Overlapping*job*scopes,*resulting*in*too*much*time*spent*on*
internal*processes*and*not*enough*on*understanding*customers'*needs.*
*
2. Industrial*complexity*
i) Number*of*people*in*the*company*
ii) Number*of*countries*they*operate*in*
iii) Number*of*brands*managed.*

Addressing*complexity*

! Tackle*individual*complexities*will*benefit*company*in*LR*
! Train*employees*to*handle*complexity,*some*are*more*troubled*by*ambiguity*than*others.*
! Benefits:*Reduced*wasted*time*and*frustration,*raise*productivity*

*
Types*of*Complexity*

1) Imposed*complexities:*Laws,*industry*regulations*and*intervention*by*NGOs.*
2) Inherent*complexities:*Cannot*be*resolved*unless*company*exits*from*a*portion*of*the*business.*
3) Designed*complexity:*A*result*of*choices*made,*where*the*company*operates,*what*it*sells*and*who*
it*sells*to.*Removing*will*however*mean*simplifying*valuable*wrinkles*in*the*business*model.*
4) Unnecessary*complexity:*Growing*misalignment*between*the*needs*of*the*organization*and*the*
processes*supporting*it.*

Understanding'context:'From'the'lens'of'speed'

Adaptability'B'The'New'Competitive'Edge'

The*Ability*to*Adapt*and*Act*on*Signals*

! Making*use*of*data*analytics*in*our*VUCA*world*today.*Tesco*continually*perform*detailed*analysis*of*
purchasing*pattern*of*customers*in*its*loyalty=card*program,*which*enables*them*to*customize*
offerings*for*each*store*and*provide*early*warning*of*shifts*in*customer*behavior*
! Companies*can*leverage*on*the*rich*database*and*analytical*capabilities*to*produce*a*stream*of*
direct*income.**
! Google*algorithms*increase*revenue*since*its*pay*per*click.*
*
The*Ability*to*Experiment*
! Procter&Gamble*Connect+Develop*model*leverages*on*open*innovation*networks*to*solve*technical*
design*problems.*Vocalpoint*allows*P&G*to*test*products*with*friendly*audience*before*full*launch.*
! IKEA*experimented*with*two*different*business*models*simultaneously,*retailing*stores*as*well*as*
developing*and*operating*malls.*

Ability*to*Manage*Complex*Multicompany*Systems*

! Industry*structure*is*better*categorized*nowadays*as*competing*web*or*ecosystems*of*codependent*
companies.*Companies*with*effective*strategies*at*a*network*or*system*level*will*benefit.*
! Adaptive*companies*learn*how*to*push*activities*outside*of*the*company*without*benefitting*
competitors.*
! E.g.*Apple*as*an*adaptive*competitor*overtaking*Nokia*

Ability*to*Mobilize*

! Organizations*need*to*create*environments*that*encourage*knowledge*flow,*diversity,*autonomy,*
sharing*and*flexibility*to*create*adaptability*
! E.g.*Whole*Foods*team*leaders*are*given*autonomy*over*what*to*stock,*decentralizing*and*making*
the*organizational*structure*more*fluid.*Arguably*this*may*create*uncertainty*and*an*adaptive*
organization*will*need*to*set*simple*general*rules*to*facilitate*interactions.**
! E.g.*Netflix*nine*core*values*and*two*important*rules:*those*designed*to*prevent*irrevocable*
disasters*and*those*designed*to*prevent*moral,*ethical*and*legal*issues.*

Conclusion'
Look*at*the*mavericks/new*players.*How*have*they*adapted*and*adopt*pattern*recognition.*Identifying*
and*addressing*uncertainties.*Putting*an*initiative*on*every*risk,*address*every*source*of*uncertainty*
with*an*initiative.*Increasing*the*clock*speed*will*accelerate*changes*when*annual*planning*processes*
become*lighter*and*more*frequent.*

TimeBPacing:'Competing'in'markets'that'won't'stand'still'

The*traditional*event*pacing*refers*to*making*changes*in*respond*to*events*in*the*market.*This*is*built*
upon*the*assumption*that*the*market*is*stable,*and*it*is*seen*as*an*opportunistic*and*effective*way*to*
deal*with*change.**

Event*Pacing*on*the*other*hand*refers*to*scheduling*changes*at*predictable*time*intervals*,*following*a*
specific*timeline*rather*than*changes*in*the*market.*In*the*constantly*changing*market,*it*creates*a*
predictable*rhythm*for*change*within*the*company.*It*is*usually*fast*but*it*is*not*directly*related*to*the*
speed*of*the*pacing*itself.*

TIME*PACING*

! 3M*dictates*30%*of*its*revenue*will*come*from*new*products*every*year.*
! Starbucks*open*300*store*per*year*to*hit*the*goal*of*2000*by*year*2000.*
*
What*is*so*good*about*time=pacing*
! It*creates*a*predictable*rhythm*for*change*in*the*company*
! Usually*fast*but*not*=*to*speed.*
! Choreograph*transition*and*shorten*time*taken*to*execute*it.*E.g.*Gillette*doesn’t*release*its*Sensor*
razor*till*a*follow=up*prototype*Excel*is*in*development.*This*reduces*the*opportunity*for*
competitors*to*copy*Gillette*products*in*one*market*and*introducing*them*into*another*before*
Gillette*does.*
! Bank*One*assigning*new*acquisitions*with*"mentor"*institutions*and*the*best*transitions*helps*a*
company*grow,*adopting*the*best*practices*from*acquired*banks*and*applying*it*throughout*its*bank*
network.*
! Companies*have*to*note*the*external*sources*of*rhythm*as*well.*E.g.*Intel*has*to*create*value*with*
new*users*for*its*new*products.*Its*complementers*such*as*software*developers*have*to*be*able*to*
keep*up*with*its*pace.*

Modularity*role*in*keeping*pace*

Leveraging*upon*modularity,*firms*can*time=pace*and*stick*to*a*schedule*by*separating*and*recombining*
its*products*to*give*rise*to*"new"*ones.*E.g.*Shiseido,*having*to*meet*the*demands*of*Japanese*
consumers*who*expects*updated*offering*every*month*adapts*by*modularizing*their*products,*
separating*the*development*of*products*themselves*from*the*packaging.*This*allows*them*to*meet*the*
changing*consumer*demands*by*refreshing*packaging*in*size,*color,*shape*of*bottles.*

Conclusion'

Organizations*have*to*find*a*balance*between*change*and*changing*too*rapidly.*If*an*organization*reacts*
too*quickly,*it*never*truly*learn*things*of*value*and*will*not*be*good*at*anything.*Time=pacing*help*
organization*resist*the*extremes*of*changing*too*much*and*it*helps*manager*persist*long*enough*to*
avoid*overreacting*to*shock*or*"noises"*which*are*common*in*new*ventures.*This*balances*the*
perseverance*necessary*to*overcome*obstacles*along*the*way*with*change*required*when*the*current*
course*of*action*is*failing,*something*hard*to*achieve*in*rapidly*changing*markets.*

Understanding'Context:'From'the'lens'of'disruption'

Meeting'the'Challenge'of'Disruptive'Change:'Clayton'Christensen'

Where*does*a*company's*capability*reside*

! Resources:*Tangible*ones*like*cash,*people,*technologies*and*less*tangible*ones*like*product*design,*
brand,*supplier*distributor*relations*
! Processes:*Patterns*of*interaction,*coordination,*communication*and*decision*making*to*transform*
resources*into*something*useful.*
! Values:*Standards*by*which*employees*set*their*priorities.*

Migration*of*capabilities*

Many*companies*flame*out*after*an*IPO*based*on*a*single*hot*product*because*their*initial*success*is*
grounded*in*resources*and*they*fail*to*develop*processes*that*generates*a*series*of*hot*products.*E.g.*
Avid*Technologies*digital*editing*system*for*television*was*its*star*product*but*yet*its*lack*of*effective*
processes*ultimately*tripped*the*company.*Companies*with*strong*processes*such*as*McKingsey*&*Co*
isn't*that*fixated*with*its*resources*such*as*people.*Hundreds*of*MBA*join*and*exit*but*its*core*
capabilities*are*rooted*in*processes*and*values*rather*than*resources.*

Sustaining*vs*Disruptive*innovation*

Sustaining*innovation*

! Innovations*that*make*a*product*or*service*perform*better*in*ways*the*customers*in*mainstream*
market*already*value.*E.g.*Merril*Lynch*Cash*management*account.*

Disruptive*innovation**

! Creates*an*entirely*new*market*through*the*introduction*of*a*new*kind*of*product*or*service,*one*
judged*worse*by*the*performance*metrics*that*mainstream*customers*value.*
! Minicomputers*were*a*form*of*disruptive*innovation*against*Mainframe*computers.**
! Television*LCD*vs*CRT*TVs*
*
*
FinTech*vs*traditional*banks**
FinTech*being*a*form*of*disruptive*innovation*removes*the*need*for*a*bank*as*the*middleman*to*
facilitate*peer=to=peer*lending.*Market*targeted*is*actually*small*businesses*rather*than*large*
corporations*looking*for*loans.*
*
Established*companies*find*it*hard*to*cope*with*disruptive*innovations*due*to*the*resource=process=
values*framework.*They*are*organized*to*develop*and*introduce*sustaining*technologies*rather*than*go*
into*an*entirely*new*product*that*is*deem*inferior.*
Smaller*disruptive*companies*lack*resources*but*their*values*can*embrace*smaller*markets,*and*their*
cost*structure*can*accommodate*low*margins.*
*
What*can*established*companies*do?*
1) Create*new*organizational*structures*within*corporate*boundaries*in*which*new*processes*can*be*
developed.*
# Chrysler*created*heavyweight*teams*that*were*removed*from*the*existing*organization*and*
boundaries*were*drawn*around*this*group.**
2) Spin*out*an*independent*organization*from*the*existing*one*and*develop*new*processes*and*values*
necessary*to*solve*the*new*problem.*
# HP*transferred*its*ink=jet*project*away*from*the*mainstream*HP*business*as*it*was*seen*as*a*
disruptive*innovation,*spinning*it*off*into*a*separate*division*in*Vancouver.*
3) Acquire*a*different*organization*whose*process*and*values*closely*match*the*requirements*of*the*
new*task.*
# Cisco*acquired*two*small*companies*whose*market*value*was*on*its*resources*and*plugged*
them*into*its*effective*development.*
# IBM*and*Rolm*failed*when*IBM*tried*to*incorporate*the*resources*of*Rolm*into*its*own*
corporate*structure.*It*tried*to*force*Rolm*products*into*the*processes*honed*in*large*
computer*business*and*it*failed.*

The'Disruptive'Opportunity:'Gilbert'C'

An*innovation*will*transform*the*existing*market*by*introducing*simplicity*,convenience*,accessibility*and*
affordability.*Established*companies*usually*fail*to*recognize*disruption*as*opportunities*because*new*
markets*lies*outside*of*their*resource*base.*Growth*originates*in*a*space*in*the*market*not*served*by*
established*players.**

Three*Phases*of*Disruption*

• In*the*first*phase,*innovation*creates*a*new*non=competitive*market*independent*of*the*
established*business.*(Minicomputers*creating*a*new*market)*
• Phase*Two,*the*new*market*will*expand*and*cause*a*slowdown*in*the*growth*of*the*established*
business*(Minicomputer*market*overtook*the*mainframe*market*in*1993)*
 • Phase*Three,*the*disruptive*innovation*having*improved*over*time*will*significantly*reduce*the*
size*of*the*old*market.*(From*then*on,*revenue*for*mainframe*fell*as*minicomputer*market*
overtook*them)*

Look*at*Nintendo*vs.*PS4*=*Nintendo*made*use*of*disruption*opportunity*to*target*a*whole*new*market*
group,*catering*Wii*to*non=gamers.*It*doesn't*target*the*needs*of*hardcore*gamers*but*rather*they*
created*a*need*with*it*being*cheap*and*affordable*to*non=gamers.*

How*can*companies*react*to*disruptive*innovation.*

Ask*themselves*what*do*customers*need?*

Companies*need*to*be*smart*about*the*issue,*make*use*of*the*useful*tools*available,*the*new*
technology*and*social*networks*available*to*work*around*disruptive*innovation.*

Established*companies*are*all*about*sustaining*innovation.*Upgrading*existing*products*to*attract*higher*
paying*customers.*Eventually*they*segment*the*market*into*those*higher*paying*customers*and*those*
who*simply*wants*a*low*cost*alternative.*

Entrepreneurial*companies*jump*in,*serving*these*customers.*

Steel*mini*mills*first*produced*low*quality*rebar,*eventually*producing*sheet*steels,*replacing*business*
from*the*larger*steel*mills.*

Carmakers*such*as*Toyota*and*Honda*first*came*out*with*a*market*that*served*those*looking*for*
economy*model*cars,*then*moving*upmarket*into*the*higher*end*to*luxury*cars.*

Large*companies*can*only*tackle*disruptive*innovation**by*launching*a*disruptive*innovation*of*their*own.*
Segregate*this*from*their*existing*firm*and*treat*it*as*a*separate*project,*ask*what*jobs*customers*need*
to*be*done,*segment*customers*by*job*and*develop*low*cost*solutions*

E.g.*Procter*and*Gamble*came*up*with*crest*whitestrips,*a*disruptive*innovation*that*is*targeted*towards*
cheaper*DIY*dental*healthcare.**

New*Business*Models*to*cater*to*New*customers*
Established*players*tend*to*find*it*difficult*to*conceptualize*new*business*models*that*would*allow*them*
to*serve*the*new*market*profitably.*
E.g.*Print*newspaper*industry*despite*going*digital*did*not*tap*on*those*advertisers*who*had*not*
traditionally*advertised*in*established*newspapers*market,*losing*out*customer*base*to*the*new*entrants*
like*Yahoo!*
*
Sticking*with*new*customers*
HP*KittyHawk*targeted*at*emerging*customers,*but*pressure*for*results*from*CEO*resulted*in*them*trying*
to*serve*the*established*market.*This*ended*up*in*KittyHawk*being*not*good*enough*for*established*
market,*but*too*expensive*for*the*emerging*disruptive*market.*
*
Conclusion'
Disruption*creates*a*net*growth*for*the*economy*as*a*whole,*if*we*do*not*look*at*solely*the*established*
market*in*jeopardy.*Also,*new*customers*have*to*be*found*outside*of*the*established*market.*Disruptive*
innovation*serve*those*who*are*currently*non=consuming*but*want*to*move*upmarket*and*establish*
things*they*can't*with*available*products*or*services.*Disruptive*innovation*will*continue*to*attack*
established*markets*and*destroy*entrenched*businesses.*For*disruptive*businesses,*they*should*start*
small*and*not*be*forced*to*grow*quickly.*
*
Understanding'Context:'Organizational'Boundaries'

Flat'world,'Hard'Boundaries:'How'to'lead'across'them.'
Vertical*Boundaries*
! Separation*within*a*group*according*to*ranks*and*privileges.*Existing*hierarchy*of*top*down*
approach*is*being*transformed*in*today's*flat*world.*

Horizontal*Boundaries*

! Separation*of*group*according*to*areas*of*experience*and*expertise.**

Stakeholder*Boundaries*

! Shareholders,*board*of*directors,*vendors,*networks,*customers,*advocacy*groups,*government.*

Demographic*Boundaries*

! Gender,*Race,*Education*or*ideology.*

Geographic*boundaries*

! Physical*location,*phone,*email,*internet*connections.*
*
*

Boundary*Spanning**

Goal*of*aiming*nexus*effect,*where*groups*working*together*can*create*new*possibilities*and*achieve*
inspired*results*well*beyond*what*could*be*accomplished*alone.*

1) Buffering*
" Shielding*the*group*from*threats*or*outside*influence*to*develop*and*maintain*a*clear*team*
identity.**
" Boundary*spanning*leader*must*continue*as*a*buffer,*to*keep*the*group*together*to*not*lose*
their*purpose.*
2) Reflecting*
" Informing*one*group*about*another,*allow*groups*to*look*across*both*side*of*a*boundary.*
" E.g.*DriveTime*partner*its*employee*to*help*those*in*need*to*understand*low=income*customers,*
to*learn*more*about*customers*and*to*allow*the*community*to*understand*the*company.*
3) Connecting*
" Forge*relationships*by*putting*aside*group*identities*and*interact*with*each*other*as*individuals.*
" Create*attractor*space,*which*creates*a*joint*space*for*interaction*between*different*groups*of*
people.*
" GooglePlex,*e.g.*cafeteria*that*is*open*and*aims*to*capture*idea*as*it*boasts*a*giant*white*board.*
4) Mobilizing*
" Encourages*group*to*transcend*their*smaller*group*identities*and*create*a*new*and*larger*
identify*shared*by*all.*This*creates*an*intergroup*community*where*there*is*a*state*of*mutual*
belonging*and*ownership.*
" Narrating*stories*is*one*mean*of*mobilization*tactic.*When*Lenovo*purchased*IBM*global*
personal*computer*operation,*Lenovo*senior*leaders*crafted*a*narrative*of*how*Lenovo*
synthesize*the*best*of*both*East*and*West.*
5) Weaving*
" Weaving*meets*both*the*need*for*differentiation*but*also*it*is*integrative*since*it*forms*new*
collaboration*across*groups.*This*results*in*intergroup*independence*where*they*not*only*
enhance*their*own*effectiveness*but*also*creates*a*single*overall*direction*for*them*to*work*
together*towards.*
*
6) Transforming*
" State*of*renewal*when*groups*create*new*identities,*reworking*boundaries*between*groups.*
" It*is*the*integrated*totality*of*the*6*boundary*spanning*practice.*
" Once*achieved,*prior*problems*may*be*resolved*and*options*that*were*once*not*viable*becomes*
fully*realizable.*

Conclusion'

6*Boundary*spanning*practices*Buffering,*Reflecting,*Connecting,*Mobilizing,*Weaving,*Transforming*
achieves*the*Nexus*Effect.**

How'a'firm's'capabilities'affect'boundary'decisions'

Transaction*cost*economics*

Market*Governance*
" Used*when*firms*interact*with*other*firms*across*a*market*relying*only*on*market=determined*prices*
to*manage*an*exchange.*
" E.g.*electronic*firms*purchasing*standardized*electrical*component*from*distributors.*

Intermediate*Governance*
" When*complex*contracts*and*strategic*alliances*are*involved**
" E.g.*Retail*firms*obtain*products*by*negotiating*long*term*supply*contracts*with*suppliers.**

Hierarchical*Governance*
" Developing*own*capabilities*or*acquiring*firms*with*the*desired*capabilities.*
" Manufacturing*firm*using*hierarchical*governance*when*it*owns*and*operates*a*factory*supplying*
the*products*it*sells.*

Conditions*that*affect*whether*capabilities*should*be*keep*within*or*outside*of*the*firm.*

1) Cost*of*governance*mechanism*
2) Threat*and*cost*of*opportunism*

Opportunism*is*a*situation*whereby*parties*to*an*exchange*takes*an*unfair*advantage.*More*elaborate*
forms*of*governance*can*reduce*the*threat*of*opportunism.*Higher*governance=*higher*cost.*
Challenges*in*creating*capabilities*
" Ability*to*create*capabilities*in*cost=effective*way*may*not*exist*due*to*the*current*conditions*
" Capability*can*be*socially*complex*(Corporate*Culture,*reputation,*trustworthiness)*
" Actions*needed*to*create*a*capability*may*not*be*known*(Trade*Secret,*Invisible*Assets)*

Constraints*on*acquiring*capabilities*
" Legal*Constraints:*Anti=competition*laws*
" Lowered*value*of*capability*acquired,*once*acquired,*value*of*the*capability*may*fall.*
" Strategic*flexibility*and*uncertainty.*Costly*to*reverse*an*acquisition**
" Unwanted*baggage.*Desired*capability*may*spread*across*multiple*individuals,*divisions*and*groups.*
Hard*to*separate*desired*and*undesirable.*

Learning'from'Experience'

Analytics'3.0:'HBR'

Analytics*3.0*
" Combination*of*Analytics*1.0*and*2.0*
" Predictive*and*prescriptive*
" Fastest*processing*
" Integrate*millions*of*data*points*on*network*performance*
" Meant*to*help*specialized*teams*
" Purpose*is*to*embed*analytics*at*the*frontline*of*operations*and*decisions*and*create*valuable*
products/services*
*
How*have*firms*used*data*analytics?*
E.g.*DBS*Bank*
Customers*are*inconvenienced*when*bank*employees*reload*cash*into*ATMS*and*reloading*process*was*
inefficient.*Using*big*data*analytics,*SAS*analytics*was*able*to*generate*an*optimized*schedule*that*
achieved*minimum*cash=outs*and*trips**
*
*
*
*
 BENEFITS*OF*BIG*DATA* DETRIMENTS*OF*BIG*DATA*
Greater*Visibility* Intrusion*of*Privacy*
Improved*relationships* May*not*be*affordable*
Better*decision*making* Predictive*but*not*100%*accurate*
Identify*potential*areas*of*opportunity* *
Increased*productivity*and*efficiency* *
*
How*can*firms*maximize*their*usage*of*Big*Data*Analytics?*
1) Take*all*information*available*into*consideration*
2) Data*management*is*crucial*
3) Cross=disciplinary*data*team*:*Data*Scientists*to*analyze*data*
4) Chief*analytics*officers*to*supervise*use*of*analytical*capabilities*
5) Adopt*Prescriptive*analysis*that*use*models*to*precise*behaviors*and*best*actions*
*
Understanding'Organizations'as'Learning'Systems'
Single*loop*learning*vs.*Double*looped*learning*

Single*Looped*Learning*

" Keep*by*the*rules*and*keep*trying*
" Effective*for*knowledge*skill*leadership*

Double*Looped*Learning*

" Breaking*rules*to*ensure*same*problem*does*not*surface*again*
" Reflect*on*actions/consequences,*assimilating*learning*to*a*deeper*level*

*
7*learning*orientation*

1. Knowledge*source*(Internal*knowledge*aka*innovation*vs.*external*knowledge*aka*
adaptation/imitation)*
2. Product=process*focus*(Getting*the*product*out*in*the*market*vs.*the*steps*in*the*process*of*
getting*them*out)*
3. Documentation*mode*(How*is*knowledge*documented,*individual*knowledge*or*collective*
knowledge)*
4. Dissemination*mode*(Formal*prescribed*organization*wide*sharing*method*or*informal*sharing*
through*role*modeling*and*casual*daily*interactions.)*
5. Learning*focus*(Incremental*learning*aka*single*looped*learning*vs.*transformative*learning*aka*
double*looped*learning)*
6. Value=Chain*focus*(Emphasis*on*learning*investments*in*engineering*vs.*sales/services*activities)*
7. Skill*development*focus*(*Individual*skills*vs.*team*skills*focus)*

10*Facilitating*factors*

1. Scanning*imperative*(Awareness*of*external*environment,*knowing*the*market*competitors*
better)*
2. Performance*gap*(Learn*how*the*actual*and*desired*state*of*performance*differ)*
3. Concern*for*measurement*(Defining*key*factors*when*venturing*into*new*areas)*
4. Experimental*mindset*(Failures*are*but*learning*experiences,*tolerable)*
5. Climate*of*openness*(Accessibility*of*information,*debates*and*conflicts*acceptable)*
6. Continuous*education*(Support*for*employee*growth*and*development*thru*education)*
7. Operational*variety*(Variety*of*methods,*procedures*and*systems,*encourage*systems*thinking)*
8. Multiple*advocates*(*New*methods*and*ideas*advanced*by*employees*regardless*of*position)*
9. Involved*leadership*(Leaders*frequently*interact*with*all*individuals*of*all*lvls.)*
10. Systems*perspective*(Interdependence*on*organizational*units)*
*

Conclusion'
To*enhance*learning*in*an*organization,*
1) Embracing*existing*style*and*improve*its*effectiveness*
2) Change*the*learning*orientation*

Strategies*to*improve*an*organization*learning*capability*
1) Improving*learning*orientation*
2) Improve*facilitating*factors*
3) Change*both*learning*orientation*and*facilitating*factors.*

'
*
Building'Future'Capability:'Scenarios'

A'tool'for'strategic'thinking:'Sloan'Management'Review'

Scenario*Planning*

" Disciplined*method*for*imagining*possible*futures*about*a*range*of*issues*
" Allows*for*more*than*one*contingency*unlike*contingency*planning*
" Allows*for*more*than*one*variable*unlike*sensitivity*analysis*
" Less*complex,*allow*human*input*and*accounts*for*more*than*one*uncertainty*unlike*computer*
simulations.*

7*Steps*in*Scenario*planning*

1) Define*the*scope*
" Timeframe,*Scope*e.g.*what*kind*of*market,*which*year*
2) Identify*Stakeholders*
" Identify*who*have*vested*interests*with*the*issue*at*hand,*identify*how*powerful*they*are*and*
what*role*they*play*in*the*issue*
3) Identify*Trends*
" PEST*analysis.*Understand*the*trend*and*how*it*affects*the*company*
4) Identify*Uncertainties*
" How*these*uncertainties*affect*the*issue?*How*significantly*does*it*affect*the*issue*
5) Craft*initial*scenario*
" Craft*extreme*scenarios*(Best*case*and*Worse*case)*
6) Check*for*consistency*and*plausibility*
" Are*the*trends*consistent*with*time*frame?*
" How*will*stakeholders*react*in*the*scenario?*
7) Craft*learning*scenario*
" Craft*scenarios*where*research*can*be*done*
" Which*scenario*tends*to*which*trend*more?*
8) Identify*research*needs*
" Provide*context*to*the*trends*and*uncertainties.*
" Which*areas*of*research*is*more*important?*Which*stakeholder*to*focus*on?*
*
9) Craft*qualitative*models*
" Formalize*certain*interactions*via*quantitative*model**
" Shell*developed*a*model*that*keeps*oil*prices,*inflation,*GNP*growth,*taxes,*oil*inventories*in*
plausible*balance.*
*
10) Decision*
" Are*these*scenarios*what*is*needed*to*push*the*organization*forward,*to*spur*creativity*or*allow*
them*to*appreciate*the*up*and*down*risk*in*different*strategies?*
" Retrace*step*1=8*if*necessary*
" Relevance*of*scenarios*and*consistency.*Does*it*apply*to*users*of*the*scenario?*(Senior*
executives*etc.)*Do*they*describe*generically*different*future*rather*than*variations*of*the*same*
one?*
" Each*scenario*should*be*an*equilibrium*that*exist*for*quite*a*while.*It*does*a*company*no*good*
to*prepare*for*a*possible*future*that*is*short=lived.**

Limitations*of*Scenario*Planning*
" Human*Bias*to*pay*attention*to*only*evidence*that*supports*prediction*
" Magnitude*of*scenarios*to*deal*with*and*the*accuracy*is*low*in*determining*which*scenario*is*more*
likely*to*occur*
" Dependent*on*accuracy*of*gathered*data*
" Wrong*strategies*may*be*implemented*due*to*human*error*
*
Strategy'as'Options'on'the'Future:'Sloan'Management'Review'
Companies*can*focus*on*executing*a*single*strategy*at*any*point*in*time,*but*they*must*build*and*
maintain*a*portfolio*of*strategic*options.*Investment*in*developing*new*capabilities*and*learning*about*
new*potential*markets*are*some*examples*of*strategic*options.*

Steps*to*establishing*a*portfolio*of*future*options*
1) Uncover*the*Hidden*constraint*
" Lack*of*capabilities*and*knowledge.*Companies*need*to*detect*these*issues*so*they*can*change*
their*strategy*rapidly*if*a*need*arise.*
 " Advantage*of*uncovering*hidden*constraint*includes*being*able*to*outperform*competitors*who*
yet*to*make*the*investment,*close*competition*gap*with*rivals*who*are*equipped*with*essential*
knowledge*and*capabilities.*
" Constraint*by*market*knowledge*(Prisoner=*Capable*but*unaware)*E.g.*AT&T*US*market*
dominance*but*unable*to*extend*it*out*of*US.**
" Constraint*by*capabilities*(Trader=*Aware*but*incapable)*E.g.*InchCape*being*a*professional*
distributor*market*and*sellers*of*its*"Principals"*who*eventually*did*not*require*it*service*once*
sufficient*market*knowledge*is*obtained.*
*
2) Establish*Processes*
" Expansion*of*company*knowledge*about*potential*markets*and*customer*behavior.*Can*be*done*
through*data*analytics,*partnering*customers,*learning*from*maverick*competitors*
" Development*of*new*capabilities*through*importing*knowledge,*research*and*development,*
experimentation*
*
3) Optimize*portfolio*of*strategic*options*
" Scenario*planning*to*optimize*the*strategic*options.*Choose*which*options*are*best*suited*for*
the*future*scenario*
" Consider*these*three*points:*Cost*of*creating*and*maintaining*the*option,*Estimated*probability*
the*option*will*be*exercised,*Probability*that*this*option*will*spawn*future*options*even*if*
unexercised.*
" Crucial*to*understand*the*difference*between*the*cost*of*creating*and*cost*of*exercising*the*
option*(Building*a*factory*vs.*Using*the*factory*for*production)*
*
4) Combine*Planning*and*opportunism*
" Companies*should*plan*for*proactive*creation*of*strategic*options*
" Ride*on*market*trends*to*exercise*options.*Exercise*those*that*accelerate*progress*towards*long*
term*goals.*

'

'

'
Conclusion'

We*cannot*predict*variables*such*as*market*growth,*prices*or*exchange*rates*due*to*the*VUCA*world*
today.*Strategic*planning*deploys*exactly*these*inputs*that*we*cannot*accurately*predict*while*discarding*
the*new*capabilities*and*knowledge*of*new*market*that*gives*companies*the*option*to*respond*to*broad*
long*term*trends.*

Framework'for'Future'thinking'

Why'HardBnosed'executives'should'care'about'management'theoryB'Clayton'
Christensen'

Management*theory*
! Collection*of*ideas*which*set*forth*the*general*rules*on*how*to*manage*a*business*
! Construction*of*theory*consists*of*three*stages*
1. Description*of*phenomenon*
2. Classifying*aspects*of*phenomena*into*categories*
3. Formulate*hypothesis*of*what*causes*the*phenomenon*to*happen*and*why*
! Build*a*theory*based*on*causation*factor*rather*than*correlation.**
! Initially,*it*would*be*easier*to*build*a*theory*based*upon*correlation*to*establish*what*is*the*
causation*factor*through*refining*the*theory.*
! Managers*need*to*beware*building*a*theory*based*on*correlation*while*thinking*they*can*increase*
productiveness*of*theories*through*studying*correlation.*

Correlation*Vs.*Causation*
! Correlation*refers*to*the*relationship*between*things*that*happen*or*change*together*
! Causation*refers*to*act*or*process*of*causing*something*to*happen*

What*makes*a*good*theory?*
! Circumstance*contingent*
! Answer*what*causes*and*why,*and*in*what*cases*or*scenarios*should*things*not*change.*

*
Trinity*between*circumstance,*actions*and*results*
! A*perfect*theory*is*where*we*are*able*to*keep*a*specific*course*of*action,*apply*it*to*a*multitude*of*
circumstance*and*yet*still*yield*the*same*positive*outcome.*
! Categorization*schemes*should*not*overthrow*established*thinking,*but*rather*should*bring*new*
insights*as*to*how*we*should*act*and*think*in*different*circumstances.*
! Porter*theory*of*comparative*advantage:*Porter*does*not*disprove*the*existing*theory*of*how*
countries*build*comparative*advantage*based*on*natural*resources*but*rather*it*offers*a*new*insight*
whereby*a*country*can*build*comparative*advantage*through*establishing*technological*clusters*
such*as*in*the*case*of*Singapore.*

How'Successful'Leaders'think:'HBR'
Roger*Martin*identified*integrative*thinking*as*a*key*trait*that*business*leaders*possess.*

Integrative*thinking*refers*to*the*ability*to*hold*two*opposing*ideas*at*the*same*time,*while*coming*up*
with*a*new*solution*that*contains*elements*of*the*opposing*ideas*but*is*superior*to*both.*

Bob*Young*(Co=founder*of*Red*Hat*Inc)*
! Faced*the*dilemma*of*adopting*the*propriety*software*model*adopted*by*major*software*companies*
or*the*free*software*models*that*small*companies*adopt.*
! By*adopting*integrative*thinking,*he*chose*to*make*the*product*available*for*free*download*over*the*
internet*but*structure*the*business*model*around*a*subscription*based*customer*support*to*entice*
corporate*clients*and*generate*consistent*revenue.*
! Integrative*thinking*helps*discover*value*within*both*opposing*view*and*integrate*them*into*a*new*
model.*

4*Stages*of*integrative*thinking* DAEA
1. Determining*salience*
" Determine*relevant*factors*that*will*need*to*be*consider*during*decision=making*process.*
" More*salient*factor*could*increase*complexity*of*problem*and*solution*but*the*best*solutions*are*
born*out*of*complexity*
2. Analyzing*causality*
" Understand*the*complex*relationship*between*factors*and*how*these*relations*affect*outcome*
3. Envisioning*design*architecture*
 " Integrative*thinker*will*perceive*all*salient*factor,*complex*relations*and*interactions*among*
them*as*one*whole*problem*
4. Achieving*resolution*
" Achieve*a*solution*that*resolves*the*tension*between*two*opposing*models.*Repeat*first*three*
steps*till*an*optimal*solution*is*discovered*

Conclusion'
Integrative*thinking*allows*managers*to*incorporate*the*best*out*of*two*opposing*ideas*and*it*promotes*
creative*resolution*within*the*company.*However,*integrative*thinking*can*be*a*tedious*process*and*hard*
to*cultivate*within*a*corporate*culture.*Education*among*senior*leaders*to*first*take*up*integrative*
thinking*could*be*essential,*thereby*changing*up*the*organization's*leadership,*culture*and*values.*

'

Leading'and'Managing'on'the'Edge'

Competing'on'the'Edge:'HBR'

Change*is*ubiquitous.*Nucor*rose*to*the*top*of*the*steel*industry*through*disruptive*innovation.*

Managing*Change*

! Reacting:*Reacting*to*changes*in*the*market*environment,*how*market*players*move*
! Anticipating:*Anticipating*emerging*market,*emergence*of*conflicting*technology*
! Leading:*Forcing*others*to*adapt*by*taking*the*first*move*

E.g.*Intel*blend*all*three*level*of*managing*change.*Intel*responded*to*the*rise*of*network*computers*by*
establishing*an*Internet*division.*Intel*anticipated*change*as*they*saw*the*importance*of*graphics*and*
multimedia*market,*launching*anticipatory*alliances*with*cable*and*movie*companies.*Intel*pave*the*way*
for*the*market*and*forced*AMD*and*Adobe*to*catch*up*to*Intel's*beat.*

Competing*on*the*edge*

! Assumes*that*industries*are*rapidly*changing,*hence*the*central*strategic*challenge*is*managing*
change.*
! All*about*surprise.**
! Uncontrolled,*strategy*making*centered*at*business*unit,*not*corporate*headquarters*
! May*not*be*efficient*in*the*short*term*but*it*is*about*using*change*to*reinvent*business*by*
discovering*opportunities*for*growth*and*letting*profit*follow.*
! About*being*early,*anticipating*and*leading*change.*
! Rhythm*of*moves*over*time,*repeated*relentless*change*that*becomes*endemic*to*the*firm.*
! About*creating*a*robust*and*diverse*strategy,*making*a*variety*of*moves*where*some*are*good*and*
others*are*failures.*

How*can*companies*achieve*it?*

1. Edge*of*Chaos:*Being*partially*structured*but*not*too*rigid*that*no*change*can*occur.*Understanding*
what*is*essential*to*structure*and*what*should*not*be*structured.*
*
2. Edge*of*Time:*Change*require*thinking*simultaneously*across*multiple*time*horizon.*Relying*on*past*
experience,*staying*focused*on*execution*and*looking*ahead*to*the*future*
*
3. Time=pacing:*Change*triggered*by*passage*of*time*rather*than*occurrence*of*events.*Establishing*an*
internal*rhythm*that*drives*momentum*for*change.*

Quest*for*Resilience:*HBR*

Resilience*gap:*World*is*becoming*turbulent*faster*than*organizations*are*becoming*resilient*

Resilience*aim*to*ultimately*achieve*zero*trauma.**

Zero*Trauma*

! Conquering*Denial:**
o Be*there*to*see*change*firsthand**
o Be*wary*of*those*with*vested*interest*
o Anticipating*Strategy*decay*using*diagnostic*question.*
! Valuing*Variety*
o Being*resilient*is*having*the*ability*to*create*new*multiple*options*as*alternatives*to*dying*
strategies*
o Hedging*bets**
o Gather,*sort*through*strategic*options*and*test*promising*ones*through*low=cost,*well*
designed*experiment.*
! Embracing*Paradox*
o Increase*resilience*by*reducing*politics*through*liberating*resources.*
o Broadening*portfolio,*diverting*resources*can*only*be*achieved*with*capital*and*talent.*
! Liberating*Resources*
o Balance*between**Resilience*and*optimization*
o Making*resilience*automatic,*getting*organization*used*to*perpetual*renewals.*

How*to*Thrive*in*Turbulent*Markets:*HBR*

Agility*is*about*spotting*and*exploiting*changes*in*the*market.**

Organizational*agility*is*the*company's*ability*to*consistently*identify*and*capture*business*opportunities*
more*quickly*than*its*rivals.*

3*forms*of*organizational*agility*

! Operational*Agility:*Company's*capacity,*within*a*focused*business*model*to*find*and*seize*
opportunities*to*improve*operations*and*processes.*Cost*reductions,*quality*improvements,*
refinements*to*distribution*processes.*E.g.*of*success*Toyota,*FedEx.**
*
! Portfolio*Agility:*Ability*to*quickly*and*effectively*shift*resources*out*of*less*promising*units*into*
more*attractive*opportunities.*Samsung*Electronics.*A*diverse*portfolio*of*independent*unit*and*
central*corporate*control*over*talent*and*cash*is*essential*
*
! Strategic*Agility:*Identify*and*seize*game=changing*opportunity*when*they*arise.*Strong*balance*
sheet,*large*war*chest*to*finance*big*bet*is*necessary.*E.g.*Emirate*purchased*A380*in*bulk*after*911*
attacks*when*prices*are*cheaper.*

Absorption*is*about*creating*buffers*against*environmental*changes.*

E.g.*Microsoft*made*use*of*its*absorption*capabilities*to*outlast*its*rivals*in*Nintendo*and*Sony*in*the*
gaming*console*industry*and*won*the*war*of*attrition.*Brand*loyalty*and*other*absorption*capabilities*
allowed*Microsoft*to*wear*down*its*gaming*rivals.*

How*to*create*buffers*
1. Low*fixed*costs:*to*weather*range*of*changes*due*to*market*changes*in*input*prices,*demands*or*
price*wars.*
2. War*chest*of*cash:*to*deploy*against*unexpected*opportunities*and*threats*
3. Diversified*cash*flows:*withstand*downturns*in*specific*units.*
4. Vast*size:*enable*downsizing*during*crisis*
5. Tangible*resources:*E.g.*raw*material*deposits*and*real*estate*that*can*generate*future*profits*
6. Intangible*resources:*Branding,*expertise,*technologies*
7. Customer*lock=in:*High*switching*cost*e.g.*Apple*
8. Excess*Staff:*to*be*shed*in*hard*times.*

Opening'up'the'boundaries'of'the'firm''

P&G*pushed*the*practice*of*strategic*choice=making*into*new*territories.*P&G*created*two*new*products,*
a*garbage*bag*that*defies*puncture*and*food*wrap*that*creates*a*perfect*seal.*

P&G*did*not*enter*the*market*directly,*they*did*not*want*to*go*head*=to=head*with*Clorox's*Glad.*They*
instead*chose*to*break*the*boundaries*between*firms*and*licensed*out*their*technology,*launching*them*
under*Clorox.*P&G*gained*10%*of*Glad's*total*business*with*preset*terms*and*this*collaboration*showed*
that*u*can*build*a*successful*leading*brand*business*in*a*non=competitive*space.*

Looking*beyond*the*4*walls*

Firms*with*greatest*capacities*to*win*usually*have*relationships*and*strategic*choices*extended*out*to*
stakeholders,*business*partners*and*supplier*or*even*competitors*under*the*right*circumstances*

Co=designing*strategy*with*partners*to*create*and*reinforce*approach*and*generate*an*array*of*different*
configuration*for*the*partnership*

Firms*tend*to*set*themselves*in*a*specific*mindset,*culture*that*they*do*not*have*a*choice,*making*it*
impossible*to*plan.*VUCA*isn't*an*excuse*for*tossing*out*strategy*and*winging*it*but*rather,*the*more*
VUCA*the*world*is,*the*more*the*rules*of*strategy*hold.**