Douglas Bernhardt
25 August 2008
analysis
Johannesburg — THE tragic irony of so many of today's failed business strategies, in SA and abroad, is that they never really stood a chance of success to begin with. And how could they?
While executives everywhere rush to imprison themselves in their climate-controlled offices and meeting rooms, all the while handcuffed to their Blackberries or cellphones, powerful, tsunami-like forces are shaping and reshaping virtually every aspect of the global competitive landscape. No country, no industry, no organisation is immune to the disruptions. The so-called subprime crisis alone seems to have shattered any real trust we once placed in the world's financial systems, and the knock-on effects of accelerating prices of oil and other commodities, including basic foodstuffs, adds to uncertainties with which all of us, including the most seasoned of managers, now grapple.
I recently asked a class of MBA students how many of the companies they work for believe that their competitive environments are essentially unchanged from only one year earlier: not one hand was raised. Nevertheless we confront a paradox. While no modern managers would suggest that their environment is unaffected by a world characterised by a seemingly continuous stream of environment discontinuities, they are unlikely to have changed they way in which they think about, formulate and implement global -- or any other -- strategy.
First, what is a "failed" business strategy? We define it as one which, whether as a result of flaws in concept, bad or inadequate intelligence, or ineffective execution (in practice usually a combination of all three of these factors), fails to enable the firm to achieve its main strategic objectives.
Consider the topic of "strategies for global businesses". In this regard hard evidence suggests SA, and South African firms in particular, face some serious future challenges. For example, the latest World Competitiveness Scorecard produced by IMD, a leading European business school, ranks SA 53rd, while the Geneva-based World Economic Forum's Global Competitiveness Report for 2007-2008 ranks this country number 44. While these indices, as business academic Pankaj Ghemawat observes, tend to "focus on the unilateral attributes of countries" rather than "as nodes embedded in a (global) network", they do serve to remind us that a country as richly endowed in human and natural resources as SA clearly should reassess its national economic policies and strategies and take radical corrective actions.
More to the point, South African firms must significantly improve their reach and relative performance if they wish to be counted among major world players . Being left behind in the global race for economic prosperity should not be an option.
Today, for example, not one South African firm features in Fortune magazine's Global 500. Although companies such as Old Mutual, Anglo American and SABMiller are included in the rankings, and despite their South African hearts and heritage, they are London-based.
Perhaps the biggest hurdle for business leaders to overcome is how they think about and develop future strategies. Perhaps the most telling conclusion of America's 9/11 Commission, which investigated "facts and circumstances of the terrorist attacks of September 11, 2001", was that "the most important failure [of the US administration and intelligence community] was one of imagination".
Similarly, it is a lack of imagination of even the brightest executives that typically leads to failed strategy. The core problem? The cognitive biases, or unchallenged assumptions that define many executives' perspectives of their businesses, their industries and markets, and themselves. These biases manifest themselves in overconfidence, a preference for the status quo, "group think", the herding instinct, "politicised" analysis, and more.
Consider: how often have you or the leadership of your firm failed to recognise, prioritise, then mobilise on what professors Michael Watkins and Max Bazerman of Harvard Business School call "predictable surprises"?
What business strategists and executives need is not a new set of "how to" templates for global strategy creation -- factors such as drivers, regulatory issues, country risk analysis, and modes of market entry are taken into account when assessing how and where to extend our businesses in what Ghemawat describes as our semiglobalised world. Rather, a revolution in strategic thinking is required -- one that clears the way for innovation leading to superior returns on invested capital and effort.
Douglas Bernhardt is a visiting lecturer in competitive intelligence at Wits Business School and the University of Stellenbosch Business School.
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