[Calculated risk. Illustration by Andrea Ucini for Certo magazine]
Before digital became a pervasive part of our lives, companies looked to the strategy introduced by Michael Porter to sustain long-term competitive profitability. Porter's 1979 five forces theory of competitive advantage# shaped a generation of leaders.
Digital technology upset those assumptions. Speed of change opened the door to agility practices. It also created the “adapt or die” imperative. Responding to adaptive challenges is still important, but not in the tech industry ways.
Ironically, the disembodiment of work and divorce from physical locations of recent months, revealed a new opportunity in the real world. There's a physical revolution going on, and it will change how people live, learn, and work.
Countries, regions, and cities will vie for a slice of economic prosperity brought in the form of taxes. That's not from corporations, but from people based where they choose to live.
Where and how to play
In Playing to Win, A. G. Lafley explains the importance of deciding where and how to play in order to win in business. An autobiographical side note is useful to understand the difference between deciding among options and making choices with longer-term impact.
“In my now forty-plus years in business, I have found that most leaders do not like to make choices. They'd rather keep their options open. Choices force their hands, pin them down, and generate an uncomfortable degree of personal risk. I also found that few leaders can truly define winning. They generally speak of short-term financial measures or a simple share of a narrowly defined market.
In effect, by thinking about options instead of choices and failing to define winning robustly, these leaders choose to play but not to win. They wind up settling for average industry results at best.”
The company's former Chairman of the Board, President and CEO details how Procter & Gamble picked markets and developed products based on competence, strength and a robust investment in understanding people's needs and wants. These are still the prerequisites for winning.
At the heart of the network P&G built, there’s consumer understanding, brand building, innovation, go-to-market capabilities, and scale. But you don't need to be P&G, or to have the same research and development budget to be strategic.
Understanding people, innovating, and building brands and capabilities make a lot of sense when you're a global company playing in the consumer space. They also make sense when you're a small company trying to prosper in a global market.
What's important about where to play and how to win is remarkably similar from company to company:
- Your industry—which segments are attractive? This is where your company can start differentiating. The temptation is to try to be all things to all people. That's a mistake.
- Customers—what do they value? Many companies skimp on research in this area. Other mistake.
- Relative position—how does your company fare in the jobs-to-be-done competitive set? What are your capabilities and cost structure? Do you factor in time and energy as an opportunity cost? What's not there that could be important?
- Competition—what will competitors do once you've chosen a course of action?
Strategy is about finding a smart playing field and the choices you make to drive what you'll do to win in that field. How depends on each context. But moving faster will not save the day if you lack preparation. You'll need to think both deeply and broadly about those choices.
A large slice of the context has potentially changed for good—where employees live.
A changing playing field
In March 2018, the World Bank issued a call to action urging several large regions to prepare for internal climate migration.# By 2050, Sub-Saharan Africa, South Asia and Latin America could see more than 140 million people move within their countries’ borders, it found.
Projecting out from the current 64 million forced migrants in the world fleeing wars, hunger, persecution, the UN forecast between 25 million and 1 billion environmental migrants by 2050.# These are serious displacement numbers.
A few cities in the U.S. are preparing for climatic and demographic changes. Ann Harbor, Michigan is including these variables into its Capital Improvements Plan (CIP), planning upgrades to its water treatment plant and other critical infrastructure.# Access to water and agricultural land, and moderate weather are solid pre-requisites.#
South Working is a movement in Italy that aims to reduce the economic, social and territorial gap between North and South. By facilitating a more equitable redistribution of the workforce, remote work can help the country rebalance.# But its not just about working from anywhere, it's about working smart.
Politecnico in Milan defines smart working, “A new managerial philosophy based on giving people back flexibility and autonomy in the choice of spaces, times and tools to be used in the face of greater responsibility for results.” Greater autonomy and the ability to demonstrate results through individual work are important components.#
Before the pandemic, many companies were dragging their feet on digital transformation. Backed into a corner by safety and health concerns, most confronted their limiting thinking. Because by-and-large it worked pretty smoothly for most knowledge workers.
This was most evident in companies and regions of the world most adamant about in-person, in-office. A recent study by Forum PA in Italy, found that 93 percent of public workers would prefer to continue with smart working.# People found they could get more done with less hassle.
Once people experience what is possible, it becomes critical to rethink what is desirable. Technology may not have faded into the background just yet, but it has given us this experience of being able to keep working. It happened globally and swiftly.
Italy's timid steps became a giant leap forward worth capitalizing on. Many people discovered they preferred to live closer to their families and friends who they'd left in search of work up North. People left New York City, San Francisco, and other large cities in the U.S. Whether temporarily or for good depends on context.
Working out who and what
Take another look at the strategic importance of where and how to play of A.G. Lafley. Add to it the idea that humanity has just experienced en masse how the nature of our work has changed.
Yes, we still need physical presence to produce and make things, to service needs. We still need safety for many industries that are limping along while trying to reinvent themselves. But increasingly, we've discovered that we can do many important things from somewhere else. Our policies and agreements have not kept up with what is possible.
The change had already happened. It was many years in the making, now it's here. Some city mayors want their commuters back—in Milan# as in New York City, London, and other large metropolitan areas—an entire economy was built on the assumptions that hundreds and thousands of people would move, or shift daily.
What happens when companies shrink or eliminate central offices? When people don't go out to eat or for coffee, stay in hotels, buy expensive air fares for business, etc. It's really hard to predict whether those activities will come back in full force.
But what we could see is a call for greater standardization of the new ways of working. Would we lean into or resist the same-ification of experience? Robin Hanson says,
Places that resist integration and standardization will suffer, and that is likely to especially include the richest and poorest places. But for the rest, market integration will ensure more equal wages and prices for products and services.
As usual, this will help those whom the prior fragmentation hurt, and hurt those whom the prior fragmentation helped. And everyone will gain from new economies of scale and scope.
The boom in personal habits and skills better suited to this world—introversion, self-discipline and motivation, writing, communicating—suit people who've been preparing for this world for 10-15 years. It helps if you've learned to operate in this new paradigm from your early education.
I'm seeing more remote job ads. But what I'm not seeing, yet, is a shift in recruiting mindset. Companies are by and large still seeking to hire the same mixes of old-style work habits and skills that were valuable in prior contexts of offices, high rises, work suits, parking garages, freeways, and cars.
Collaboration is a new competitive advantage
Greg Satell has been calling out how value has moved to the center of networks. Strategic advantage is already going to those who can aggregate and coordinate specialized skills.
Lorenzo Sistino says when starting something new it's essential to find and choose the right collaborators.# Sistino is ex top manager at FCA and CEO of MiaCar, an online marketplace to buy local new or used cars ready for delivery, with clear and transparent pricing.
Luca d’Alessandro concurs that you need to find complementary skills and converge on philosophy of work. D'Alessandro, PhD PoliMi and MIT, is CEO of Phononic Vibes,# a company founded on the research and philosophy of two cultures and geographies. Its new patented technology uses a circular economy approach to provide greater insulation from vibration and noise control.
Eliana Leo says collaborators are fundamental. Competence and past experience are important. Trying out a collaboration through a project is the best way to figure out compatibility. Leo is associate professor of pharmaceutical technology at the University of Modena and Reggio Emilia# and co-founder of PerFormS, an innovative startup focused on cosmetic and inflammation nanotechnology.
A former GM and manager at a large multinational auto company, a product startup founder and a professor and researcher are examples of the mix of skills and experience companies like P&G and IBM have embraced for more than a decade.
Smart working is a paradigm shift. It requires a revision of the leadership model and the organization, strengthening collaboration and encouraging a new view of working space. Office becomes any place that favors creativity and encourages relationships.
Many multi-generational family businesses in Italy have long created research labs that rival the sophistication of those of multinationals. People can be anywhere, a central hub for synthesizing discovery and innovation is useful.
Strategic impact of smart working
You should not have to be a consultant to have less rigid work hours. Smart companies are already making it easier to do non-work tasks during usual work times. Integrating life back into work promotes endurance and staves off burnout.
Several executives and specialists who've been working this way say it's about quality of life. Extend this concept to working from anywhere, and you can see how we could rebuild communities around the world.
I'm not so sure the firms in this new world are larger, or that things will work quite as Robin Hanson says.# I'm inclined to think more in terms of ecosystems of value. More network than chain. More combination of in-person and remote than either one at the exclusion of the other. Smaller, networked teams collaborating across geographies.
Imagination and creativity don't have scheduled hours. They happen mostly in the pauses. In the same way that opportunity resides in the gap between what you know and what you don't, distributed work forces could enrich the idea pool.
Once you zero in on the value to move the strategic needle, you should identify the bottleneck or what keeps you from executing well. When everyone shared a physical office space, having to coordinate across corporate silos or getting multiple layers of approvals were a big problem that cost companies dearly. It happened years before anyone worked from home.
Delays between contract signing and project start or too many projects kicking off at the same time were endemic issues of agency life. This before life moved elsewhere. You can use simple rules to avert or minimize those issues.
The industries that are limping along in this new paradigm are ripe for reinvention. There are likely new product and service ideas most business leaders thought wouldn't work that are doable with smart working. Initially, it may not seem to matter. By the time you notice the shift, it will be too late to catch up.
Like data analysis, disruption is all about hindsight. Agility and speed were the gods in that environment. Preparing to challenge conventional wisdom is another game altogether. In a world of incremental improvements to eke a millisecond advantage, sustained advantage will be due to strategic impact.
And you don't get that from doing more of what used to work. Broadening and deepening connections is a smart bet, as is acquiring new skills, and noticing meaningful opportunities.
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