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New year: Companies need to adapt and face facts

Corporate

By Costas Markides, professor of strategy and entrepreneurship at LBS.

January 5, 2014 2:37 by



Traditional strategy is dead. Welcome to the social era.

The technologies and innovations of the social era (such as the internet, social media, crowd funding, crowd sourcing) have introduced radical changes to the way we do business. In 2014, companies around the world will be confronting a number of new challenges, including the following:

From hierarchy to network: Companies will have to face the new reality that they do not (and cannot) do everything within their existing hierarchy. Increasingly, they will have to turn to ‘outsiders’ (non-employees) to help them design or produce their products.  Given the rate of technology evolution and rapid convergence of multiple technologies, no company can assume all aspects of development, discovery or manufacturing within itself or even in one single location, while meeting the challenges of cost, time to market and functionality. In the current global scenario, various aspects of the company, including design, manufacturing and distribution are possible in different geographies. Companies will have to learn how to manage, control and motivate people in a distributed network, rather than a hierarchy.

From centralised to decentralised change: New technologies allow us to engage in totally different change processes within our organisations.  Rather than the traditional top-down process driven by one heroic individual, we can now have a bottoms-up, decentralised process, driven by hundreds of individuals.  In such a process, rather than push change through, the change agent ought to put a system in place that pulls multiple change agents into the fray.

From closed to open innovation: Gone are the days when a company had to discover everything internally. Now, ideas can literally come from anybody, anytime, anywhere. We have lots of companies that are putting this principle into practise and organisations need to totally re-think what kind of structures, cultures and people are needed to achieve open innovation.

From autocratic to democratic strategy: Increasingly, companies can and do use everybody in the organisation to help them develop their strategy. In this sense, strategy is becoming ‘democratic’. However, there are costs and problems with this and companies need to think how best to implement such a practise.

From rules to values and shared purpose: New technologies have changed the business landscape completely – business is now faster, more transparent and more competitive. At the same time, our employees’ (and customers’) norms and attitudes have changed, so they are now fundamentally different from thirty years ago. Given the new type of employee and customer that we are facing, two key issues facing companies are: How do I manage, control and motivate the Generation Y employee? How do I offer customised solutions to customers at a reasonable price?



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