Adrian J. Slywotzky

Demand innovation: GM’s OnStar case

A new form of business innovation, a response to the current challenges to growth initiatives, is being pioneered by a handful of farsighted companies. These companies have shifted their approach from product innovation to demand innovation. Such new‐growth businesses focus on growing new value by discovering new forms of demand. For example, in the mid‐1990s, engineers within several GM business units realized that technological advances might enable the creation of a new business focused on the needs of drivers. The crucial factors in GM’s success have been its ability to look at customers’ driving needs from a fresh perspective and its decision to serve these needs through a business design that leverages GM’s unique hidden asset – its unequaled installed base of vehicles.

Are you enjoying globalization yet? The surprising implications for business

Purpose – Globalization is changing the nature of competition and value creation in ways more subtle and fundamental than simply cost. By incubating scores of new business models that can unseat established companies, globalization is creating opportunities for new value creation and highly profitable growth at the two ends of the value chain – new customer connections at one end and new models of innovation at the other. This article discusses globalization and the changing nature of competition and value creation.Design/methodology/approach – Provides a viewpoint of globalization and the changing nature of competition and value creation.Findings – For many companies, the most powerful moves will be to take advantage of university alliances and global talent sourcing. Every company today, large or small, has to draw the global map of the key talent pools for its business, whether that talent consists of software programmers, machinists, biotechnologists, materials scientists, cinematographers, financial ...

Exploring the strategic risk frontier

This article urges executives to expand their view of risk. Instead of just defending against bad risk events, leading companies define and anticipate the upside risks that, when well managed, can deliver the maximum rewards. The discipline of strategic risk management allows firms to raise their growth potential in addition to reducing their economic volatility. The author shows executives how to avoid the biggest risk of all – not taking the right growth risks for the business. Businesses today are exposed to greater risks across the board, ranging from political risks to product liability and environmental hazard risks. There also are a set of strategic risks that have become increasingly disruptive. These include not just the obvious high‐probability risks that a new ad campaign or new product launch will fail, but other less‐obvious risks as well in areas such as technology and customer needs. Failure to anticipate and manage this spectrum of strategic risks can expose a company to dramatic decreases in shareholder value and severe swings in stock prices. In today’s risk‐intense environment, firms must manage their economic and risk profiles more actively. The goal is not to eradicate risk, but to deliver the maximum reward for an acceptable level of risk. The author addresses some of the most important forms of strategic risk and the countermeasures that can be used to address them.

Stop competing yourself to death: strategic collaboration among rivals

Purpose – Vigorous competition among companies for customers, talent, and capital serves everyone well, for the most part. But competition can be harmful as well, when companies fight over things that hold little value to customers or that offer little potential for differentiation.Design/methodology/approach – The article discusses how thinking and changing the compete/collaborate ratio offers a way out that benefits all players. By joining forces to carry out common and largely undifferentiated functions or processes, companies can avoid redundant expenditures and capitalize on economies of scale and shared expertise. Strategic collaboration can take place at any stage of an industrys value chain. It can take many other forms, consistent with antitrust laws, including the sharing of back‐office functions, factory production, R&D efforts, marketing and distribution, and repair or return facilities.Findings – Even bitter rivals have sometimes joined forces to achieve common goals and solve common problem...

The dangers of product‐driven success: what’s the next growth act?

Investigates complacency by managers at successful organizations and how they seem to ignore warning signs of danger on the horizon. Stresses that these are the wrong reactions and recognizing the danger requires knowing what to look for, and lists three patterns, which allow for crises to afflict successful growth‐oriented companies. Extensive detail in four figures aids by way of explanation. Sums up that scepticism over growth crisis is a natural reaction for managers and investors in healthy companies, but there are benefits in the incorporation of this new way of thinking.

Becoming a digital business: ‐ it’s not about technology

Many senior executives equate “going digital” with specific phenomena such as the advent of the personal computer, the proliferation of e‐mail, the growth of enterprise resource planning systems, or the popularity of the Internet. But to think of digital business design as the sum total of the high‐tech innovations multiplying around us is a fatally incomplete view. The discipline of digital business design is about serving customers, creating unique value propositions, leveraging talent, achieving order‐of‐magnitude improvements in productivity, and increasing and protecting profits. Learn from the companies that have created great value propositions for customers and employees, achieved significant improvements in productivity, created a robust profit model, and protected both their profit streams and their customer relationships from being eroded by competitors.

Three keys to groundbreaking growth: a demand innovation strategy, nurturing practices, and a chief growth officer

In the years to come, traditional product‐centered strategies alone won’t create the kind of growth companies desire. An alternative platform for driving significant, sustained new growth is demand innovation (as opposed to product innovation). Demand innovation focuses on using one’s product position as a starting point from which to do new things for customers that solve their biggest problems and improve their overall performance. Embedded in the customer’s use of your product are all kinds of hassles and inefficiencies as they buy it, use it, store it, maintain it, finance it, and eventually dispose of it. This broader web of activity represents tremendous economic activity, often 10 to 20 times greater in total value than the product market itself. Understanding and participating in this customer “value chain” is the key to demand innovation. Making demand innovation profitable means improving both your customers’ economics and capturing value for your company. Here success is rooted in putting to use a set of powerful hidden assets that your company may already have. Five types of hidden assets are described with guidelines for how to master the new discipline of demand innovation. Five principles are offered to guide managers through the challenges that arise for developing new‐growth projects into major opportunities.

Pattern thinking:: a strategic shortcut

This article describes the application of pattern thinking to strategy. Patterns provide a powerful discipline to see order beneath the surface chaos. Pattern thinking can help entrepreneurs, managers, investors, and key talent to anticipate the likely direction of changes even before they happen. It reveals the economic meaning of these changes and provides the tools to capitalize on them. The authors report on groundbreaking research into over 200 companies in 40 industries, and they cite several examples of companies which have profited from analyzing their opportunities according to the profit pattern matrix.

Strategy and Organization Consulting

This article is about the convergence of strategy and organizational consulting. Originally these two specialties were combined under the label of general management consulting. Then the process of specialization fragmented the practices. To some degree, the organizational design area has sought to reintegrate strategy and organization. Today, there is a movement to develop intellectual property and deliver integrated services. The article speculates on who might be the winners in this new development. Consulting in Strategy and Organization began as a single practice area, General Management. Since its beginning it has fragmented into many specialties. Today there are pressures to put these specialties back together again in the service of the general manager. This article confronts the issues of whether the specialties should and can be combined into integrated consulting offerings for general management. The article begins with a description of the development of the practice areas. The development of the practices reflects the advancement of the underlying knowledge base. Such progress highlights the three parallel streams of knowledge that have influenced the consulting practice. These are the evolution of management practice, the theory and research created in business schools and the knowledge coming from the consulting practice itself. At different times each of these has been the leading edge. The article finishes with a discussion of today’s issues, challenges and responses that characterize the two practice areas. Specifically, the forces toward the reintegration will be featured along with the reactions by consultants and their development of sources of intellectual property. The Development of Strategy and Organization Practices The two practice areas began as one called General Management. Then as the practice of management became more complex and the knowledge base increased, General Management fragmented into Strategy, Strategic Planning and several different organizational practice areas. The continual appearance of new management challenges and the resulting increase in Strategy & Organization Consulting complexity have been the forces driving both the expansion and the fragmentation of the consulting areas. The practice of management was the original leader as a source of consulting knowledge. During the 1920s and 30s, consulting firms were staffed with experienced practitioners who transitioned into consulting. Management books were written by thoughtful practitioners like Henri Fayol of France and Chester Barnard in the United States. The businesses of the time were simple by today’s standards. They followed single business strategies and managed through functional organization structures. They executed single business strategies of vertical integration and geographic expansion and consolidation. Very often the bankers who financed the strategies also delivered the consulting on strategy and organization structure. The consulting firms, like McKinsey, were focused on solving the problems of top management. They developed an integrated approach to top management problems. The approach was written in McKinsey’s General Survey Outline which was required reading for all consultants. “The Outline forces a strategic approach in that it calls for considering the industry outlook and the company’s competitive position before considering anything specific to the organization. It also forces an orderly approach by requiring examination of the elements of managing, in an undeviating sequence: goals, strategy, policy, organization structure, facilities, procedures and personnel – in that order.”1 This situation changed after World War II. Companies began to grow and follow strategies of diversification. These strategies required new organization structures. The companies struggled to transition from single business, functional organizations to diversified multi-divisional profit centers. It was a situation tailor made for consulting firms. Through projects they began to acquire the knowledge of diversification strategies and to understand the working of the multi-divisional structure. The strategy and organization consulting firms grew their business and their knowledge base as one firm after another transitioned to a multibusiness company. First, the American firms and then the European and Japanese firms implemented the diversification strategy, many of them with the help of consultants. The intellectual leadership shifted at this time to the business schools. There were at least three important streams of work. One was the strategy and organization stream. This stream was initially led by Peter Drucker. His Concept of the Corporation was a seminal work and has been followed by a never-ending sequence of books on management. Alfred Chandler wrote Strategy and Structure which documented the evolution to the diversification strategy and multi-divisional structure. Igor Ansoff, a practitioner turned academic, contributed one of the first books on strategy, Corporate Strategy. And finally, Michael Porter took the leadership with a series of books stretching into the 1990s. 1 Bhide, 1992, p. 13.

The reinvention and sale of J.C. Penney’s Direct Marketing Services unit

This case chronicles the changing of a corporate unit’s business model, organizational model, and mindset. The reinvention process started in early 1999 when Mercer Management Consulting received a call from Bob Romasco, who had recently assumed the role as CEO of J.C. Penney’s Direct Marketing Services (DMS) unit. After completing a review of the company, he realized the need for a new vision and business design. Mercer worked closely with Romasco and his team over a two‐year period to transform many aspects of the business from its strategic direction to the implementation of sophisticated direct marketing techniques. Throughout, it was clear that a successful transformation would require more than the right vision and strategy; it also required changing the general mindset of the staff.