Adaptive Strategies Blog

I just finished reading an article from the July-August issue of Harvard Business Review that I found  frightening and thought provoking. The article is about Global Competitiveness — but the sub-title is what caught my eye — WHY AMERICA CAN’T MAKE A KINDLE. Although the Kindle was designed in California, the important components are made in China, Taiwan, and South Korea and the entire unit is assembled in China. Consider the major components:

• The battery comes from China  — When America outsourced laptop computers to Asia we gave up on battery technology
• The display comes from Taiwan — We no longer have the expertise because we gave up flat panel LCD manufacturing to Asia.
• The wireless card is made in Korea — the Korean mobile phone industry is more advanced than ours, so the latest advances in wireless technolgy come from there.
• The injection-molded case comes from China — We don’t have much of this capability left inasmuch as we have outsourced most toys, consumer electronics, and computers to Asia.

We have focused on the short-term and “shareholder value” for the past fifteen years or so. But we have neglected to consider the long term sustainability of our manufacturing base. We have deluded ourselves into thinking that we can be a service economy (What !? Selling sub-prime mortgages to one another?) and that only we have “imagination” for the next great thing. I think that both of these assumptions are frightfully weak.

Frankly, I don’t know what to suggest except to say that all of us need to worry about our knowledge base and our collective willingness to mortgage our future for “every day low prices.” That said, there are NO short-term solutions. We need to rebuild our expertise so that we have the competitive advantage here at home to make some of the things we want to buy.

What do you think? Am I being a crabby old man and too narrow-minded or am I right to be worried about our future?

My friend Kay Plantes (see www.Plantescompany.com/blog) and I are working on a new workshop focused on understanding and using business models as a way to grow your business. One of the aspects of any business model is the underlying Profit Model and how it is used to drive strategy. Consider the following:

• Harley Davidson: do they sell a bike or a life style?
• Healthcare: They profit when people are sick. What if they profitted from healthy people?
• Twitter: I know what they do, but what are they selling?
• Panasonic Factory Automation: What if they sold “productivity” instead of equipment?
• Higher Education: They are built on “hours consumed.” What if they billed according to “knowledge in-use?”

Kay and I are interested in your “profit conundrums.” Please add to our list.

Creative destruction is the term that the economist Joseph Schumpter gave to the reality of industry mutation and innovation. These changes simultaneously provide opportunities and destroy opportunities and, consequently, some companies are destroyed and others are created. And although we can easily see the effects after the fact, the real challenge is to change in time to avoid the destruction or take advantage of the opportunities.

If we knew how fast an industry was going to change it would be easy to adapt in time — but that’s the real problem. Change seems to have accelerated in the past few years and many leaders and their organizations are taking too long to adapt. Some are waiting for “normal” conditions to reappear. Others want more data to be sure of the changes. Unfortunately, both parties are waiting in vain. All we know for sure is that the future will be different.

Take a hard look at your company or your career and the answer the hard question — “What will you HAVE to change if you are going to adapt to the evolving reality?” Then answer the even harder question — “Can you move fast enough?”

One of the basic steps behind having a prepared mind is spending time thinking about the future. That is unless you want to wait for the future to come and smack you in the face — then you get to simply react to a future that others have created. So, assuming you want some say in how your future will evolve, you need to spend a bit of time in “proactive reflection.” Here are six things you might try.

1. Think about the larger system because the answer to the question “Why?” is found there. Why do you have to improve quality? Look to the changes being made in your industry. Why do you have to worry about innovation? Look to the expectations of your customers? Dont look in; look out. How is the larger system changing and how will it affect you?
2. Think about your business model because all of us have customers (internal or external) who have expectations of us. Our total offering consists of the services we provide, the relationship we have with them, the way we communicate with them, and the promises we make.  How are your customers changing and what will you have to change to keep them satisfied?
3. Think about the speed of industry evolution and get ready to adapt your strategy. Move too fast and you may have a fad on your hands. (Think about the dot-com bubble of 1999) Move too slowly and you will become irrelevant. (Do we still need Sears?) Most industries are evolving faster. Are you keeping up?
4. Think across the spectrum of time. Can you (do you) learn from the past? (Does human nature change?) Do you look at current technologies and say “They won’t affect me.” (Did the original “car phones” worry the telephone companies?) Do you ever sit back and daydream about the future of your industry? You should.
5. Think about the things you can influence or change. You can be a victim of the system or you can try and influence for the betterment of the system. This past presidential campaign saw the power of lots of people trying to influence the future of this country. Wouldn’t it be cool if you were interested enough in the success of your business to try and influence it?
6. Think critically. Everyone can express an opinion. Precious few can back up their opinions with good thinking. Will today’s assumptions play out in the future? What are the intended and unintended consequences of today’s actions on the future of your organization? Who will be your customers in ten years? Are you communicating with them now or do you expect them magically find you in ten years?

What tools, tricks, and techniques do you use to think about the future? Please reply — curious minds want to know.

I conduct workshops focused on critical and strategic thinking and my definition of “strategic thinking” is pretty simple — think well about the future. And to get people to consider the future I ask them about their mental radar screen. Visualize a radar screen and consider three zones.

In the middle of your radar screen is your Reaction Zone. This is the mix of all the usual stuff (mostly out of your control) that consumes your day (like meetings, e-mail, customer complaints, etc.) It’s the stuff that hits you and you and to which you have to react. In today’s economy, a lot of people are spending all of their time in the Reaction Zone thinking about current problems.

Go out a bit further on your mental radar screen and you come to the Adaptation Zone. What you see here (if you look) is stuff that you had better do something about before it becomes a problem.  It’s usually pretty clear and you have some time, so don’t waste it. For example, as the economy turns around (as it always has) how will you sell to a more “discriminating” buyer? Or how will you appeal to the Y-generation and their heightened social consciousness?

Finally, look at the edge of the radar screen and look into the Anticipation Zone. What are the clues you see that portend a new future for you or your organization? This stuff is NOT clear and requires a bit a squinting to see a possible new future. Think about a hospital and the Anticipation Zone. What does personal medical records + Internet + reduced insurance benefits equal? I see both the incentive and the capability to “shop for value” becoming BIG. What do you see?

OK, here’s the bottom line. We have to look at the whole radar screen often. We have to react AND adapt AND anticipate if we are to succeed. This goes for businesses and for individuals.

What’s on your radar screen and what are you doing about it? Most importantly, do you pay attention to the edge?