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Strategy Design Innovation

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HOW TO CREATE BUSINESS SUCCESS USING A SYSTEMATIC TOOLBOX

STRATEGY
DESIGN
INNOVATION

Robert G. Wittmann | Matthias P. Reuter | Michael Jünger | Norbert Alexy

TABLE OF CONTENT

INTRODUCTION

   1

Dynamics in the business world and the approach of the book

   2

Strategy Design Innovation – introducing the entire model

2.1

Strategy Design

2.2

Strategy Design Toolbox

2.3

Strategy Design Modelling

2.4

Strategy Design Innovation

   3

The Strategy Design Toolbox: asking entrepreneurial questions and creating answers

PERSPECTIVE 1

   3.1

Creating Orientation

3.1.1

What is our vision and our mission?

3.1.2

What are our values?

3.1.3

What is our promise to stakeholders?

3.1.4

What are our objectives?

PERSPECTIVE 2

   3.2

Understanding Developments

3.2.1

Which dynamics shape the environment?

3.2.2

What drives the rules of the game?

3.2.3

How do markets develop?

3.2.4

What are possible scenarios?

PERSPECTIVE 3

   3.3

Reflecting Positions

3.3.1

What is key to be a competitive player?

3.3.2

Which opportunities and threats are relevant?

3.3.3

Which strengths and weaknesses are relevant?

3.3.4

How can we improve our position?

PERSPECTIVE 4

   3.4

Designing Advantages

3.4.1

How do we satisfy customers?

3.4.2

How do we address market segments?

3.4.3

Which activities create our offer?

3.4.4

Which key resources do we need?

PERSPECTIVE 5

   3.5

Engaging People

3.5.1

How can we develop an innovative team?

3.5.2

How can we establish powerful partnerships?

3.5.3

How can we use the power of networks?

3.5.4

How can we manage promoters and opponents?

PERSPECTIVE 6

   3.6

Realizing Value

3.6.1

How can we develop the organization?

3.6.2

What is the roadmap for implementation?

3.6.3

How much money do we need?

3.6.4

How can we win investors?

PERSPECTIVE 7

   3.7

Navigating Success

3.7.1

How can we capture financial value?

3.7.2

How can we control our objectives?

3.7.3

How can we manage risks?

3.7.4

How can we learn and get out of thinking boxes?

   4

Strategy Design Modelling – creating powerful ideas for competitive advantage

4.1

Applying the pyramid approach

4.2

Using strategy design patterns

4.3

Proof of concept and field test

4.4

Further supporting principles

   5

Strategy Design – deriving consistent pictures at different stage gates

5.1

Stage 1: a first visionary approach – the Value Proposition Design (VPD)

5.2

Stage 2: a first holistic approach – the Business Model Canvas (BMC)

5.3

Stage 3: a sustainable approach – the Strategy Design Booklet

   6

Strategy Design Innovation – creating sustainable competitive advantages

6.1

Managing the innovation funnel

6.2

Running creativity loops along the innovation spiral

   7

Summary and outlook

References

About the authors

INTRODUCTION

DEAR READER,

Welcome to “Strategy Design Innovation“!

It looks like the title caught your attention and encouraged you to read on. Let us now try to justify this attention and to keep it high, without wasting time …

The author of this book and his co-authors will use this introduction for the following purposes:

1

explain the general situation and the authors’ intention,

2

outline our main objectives,

3

list the respective target groups,

4

introduce ourselves, briefly,

5

adress words of thanks to those who supported us,

6

describe the intended and expected benefits.

General situation and the authors’ intention

The world that surrounds us is characterized by impressive progress on the one hand, e.g. in the medical sector, in tele-communication, in digitalization or in mobility. On the other hand, considerable influences come from a dramatic increase in complexity and uncertainty, e.g. increasing number of political conflicts, escalation and polarization, progress of global warming and migration. In our perception this increasing complexity is a huge challenge to anyone who needs to create, analyze and develop business strategies, because they need to cope with all these changes in their environment. And, as we learned from Michael Porter: “Strategy is the act of aligning a company and its environment.” With this book, it is our intention to provide orientation and guidance to better achieve this goal, in rough times.

Main objectives of the book

What is in scope, what is out of scope? Our main objective is not to just present a comprehensive overview of today‘s strategic methodologies, tools and processes. Our main objective is rather to offer a flexible and effective system and tools that enable and help readers to design and innovate effective strategies.

This is what led us to the title “Strategy Design Innovation“. Key points are

— to offer a flexible and effective system and model in the shape of a workbook, based on the authors‘ ample experience of 500+ business cases and driven by a problem-solving attitude.

— to offer and describe a scalable system, applicable both to global corporations and to SMEs.

— to use selected established methods and tools from various sources, as well as methods and tools recently developed and combine them, adding new insights.

— to use established terms, wherever possible, to ensure fast and effective communication, understandable around the world.

— to use a structure allowing to read and proceed page by page, but also to jump from topic to topic, connecting insights.

— to strive for continuous improvement and development both of this workbook (from edition to edition), using all kinds of sources, including feedback from our readers.

Target groups of the book

Here are seven questions you can use to check whether this book will offer value to you and to your personal management challenges:

— Are you striving to create orientation for your entrepreneurial team?

— Do you see a need to understand the developments of volatility, uncertainty, complexity and ambiguity in your business environment?

— Are you challenged by innovative competitors threatening your strategic position?

— Do you feel the need to create tangible advantages for your customers in order to win the competitive game?

— Are you trying to do your best to engage people inside and outside your company?

— Are you searching for a smart way of implementing your business concepts?

— Do you intend to set up a targeted navigation system for your journey toward success?

In terms of ‘groups of people with common interests’, we primarily think of the following ones:

— Entrepreneurs: people who need to innovate their businesses, in a challenging environment

— Intrapreneurs: executives and managers who are responsible for developing their business units with a clear strategic fit, in a global environment

— Consultants: experts who support managers on their way towards success

— Founders and start-up-teams: people who drive innovation and launch new businesses

— Investors: enablers who need to analyze the potential for value creation of a specific strategy design

— Students, graduates, practitioners and MBAs: people who are preparing for their future roles in business

GENERALLY SPEAKING:

people who are interested in designing and innovating business strategies.

About the authors

The author‘s and co-authors‘ mission and interest over the past 20 years concentrated on the question of how to create, analyze and develop innovative and successful business strategies, in all kinds of organizations, from small to large and global, both profit and nonprofit organizations.

Our mission and interest in short: how to create successful business by practising “Strategy Design Innovation“, as we call it in this book.

Which areas do we come from?

— from various responsibilities: strategic and operational business, teaching at universities and business academies, consulting, designing and running workshops, start-up coaching etc.

— from different roles: entrepreneurs, intrapreneurs, university professors in the field of Business Administration, managers and lecturers in global corporate academies, independent consultants etc.

If you want to know more about the author and co-authors, please, take a look at the profiles, at the end of this book.

Words of thanks to those who supported us

We would like to express our gratitude and say a special word of thanks to all those who have contributed to the development of “Strategy Design Innovation“: most of all to our customers as well as their partners and employees (workshop participants) with whom we had the pleasure to work on more than 500 cases over the last 20 years. Second, to our colleagues who have always been available for a fruitful exchange of ideas and a discussion of the strategic issues. And – last but not least – to our students who were among the first to get to know these concepts, to work with them, challenge them and provide feedback.

Finally, we are grateful to those who decided not only to study our Strategy Design Innovation model and Strategy Design Toolbox, but also to implement it in their real-life business environment, where they practise and share it with their colleagues, partners and customers.

Intended and expected benefits of this book

Since the main objective is to offer a flexible and effective system and model that enables and helps readers to practise Strategy Design Innovation, the main benefits we provide will be:

— You will acquire (and/or enhance) the ability to design and innovate (business) strategies along with the process of Strategy Design Innovation

— You will learn to do so by following a guided procedure, in combination with a toolbox called Strategy Design Toolbox

— You will apply business model patterns and test the results in the agile process of Strategy Design Modelling

— These approaches will give you security, reliability and flexibility, in your Strategy Design Projects.

Our practical experience shows that there is unfortunately no guarantee that a Strategy Design will be successful, but there is a very high probability to get things right, if you follow this path, because

— You will have done the maximum to systematically include whoever and whatever it takes to design and innovate your strategy.

— You will have done this based on a model that did fulfil expectations in so many cases and circumstances.

— You will have done the maximum to systematically avoid traps and errors.

Please, come, apply and see for yourself!

Robert G. Wittmann

Matthias P. Reuter

Author and designer

Michael Jünger

 

Norbert Alexy

Augsburg, October 2019

Co-creators

Chapter 1

DYNAMICS IN THE BUSINESS WORLD AND THE APPROACH OF THE BOOK

     

Executives are facing considerable new challenges in a so-called VUCA world, where volatility, uncertainty, complexity and ambiguity set the future pace of competition. In such an environment executives need to understand how to make use of short-lived opportunities, quickly and decisively. The acronym VUCA was originally introduced by the U.S. Army War College to describe the dynamics and the strategic impact of today‘s multilateral world. The elements of VUCA pinpoint the strategic significance of foresight and insight, as well as the insight into the behavior of stakeholders, groups and individuals, outside and inside organizations. The following elements represent the context in which organizations in the field of business view their current and future state:

— V > Volatility: addresses the nature of change and the dynamics of those forces and catalysts causing the change. As a consequence external change may be faster than the organization‘s ability to respond.

— U > Uncertainty: describes the lack of predictability and the prospects for sudden surprise. Here the leadership challenge is the requirement to develop a sense of awareness and the ability to anticipate and interpret issues and events effectively.

— C > Complexity: indicates the variety of forces influencing an organization and its ability to survive. Multiplex issues and missing understanding of cause-and-effect chains may lead to confusion. Leaders may be lacking the time to reflect and think through these complexities. They end up acting too quickly or getting stuck in analytic paralysis. And, consequently, they may be acting too late.

— A > Ambiguity: addresses the haziness of reality and the resulting potential for misreads and confusion. Leaders may not understand the significance of a trend or an event and may respond in an ineffective way.

Johansen (2012) points out that in an uncertain world there is urgent need for a future paradigm of leadership, turning the original VUCA idea on its head:

— The threats of volatility can be countered by a clear vision causing a light-house effect for the navigation in turbulent times.

— Uncertainty can be countered by a deep and solid understanding of the developments in the business environment using the ability to listen, to look, to perceive and to understand what makes the environment tick.

— Complexity can be countered by clarity and the ability to think in networks and systemic cause-and-effect patterns.

— Ambiguity can be countered by agility, the ability to communicate, to share paradigms for better understanding, to exploit short-lived opportunities. It is crucial to keep pace with the respective market speed.

Abidi and Joshi (2015) draw the conclusion that there is a need for resilient leadership skills, comprising engagement themes in planning, knowledge management, impact models, recovery systems and perception systems for behavioural and systemic failure detection.

McGrath (2013) shows that some of the traditional paradigms of strategic business development no longer continue to exist. A set of future paradigms has to be developed to keep the strategy moving as fast as the VUCA world requires. In these future-oriented paradigms the understanding of competitive advantages has to recognize that advantages are not sustainable, but transient, on rather short notice. Because of this need for agility the approaches of strategy and innovation – formerly separate disciplines – now have to be interlinked. The understanding of market attractiveness and the relevant competition are shifting from the traditional industry focus to competitive “arenas”. This is where the real threats and opportunities happen between industries, caused by functional substitution rather than by product substitution and by competitive business models. The rules of the game are becoming more important than compelling product offers.

Table 1.1 lists the changing paradigms for leadership. It shows that the future paradigms from the VUCA world have considerable influence on the way companies have to manage strategy and innovation in their competitive arenas. The approach of Strategy Design Innovation is inspired by these future paradigms.

Table 1.1 Volatility, uncertainty, complexity and ambiguity create a VUCA world – changing the paradigms for leadership. ▼

Aspect of Strategy Design

Traditional paradigm

Future paradigm

Idea of competitive advantage

Presumption of relative stability in industry competition → competitive advantages can be sustainable

Uncertainty, volatility, complexity and ambiguity lead to transient competitive advantages

Relation between strategy and innovation

Two separate disciplines: finding favorable positions in a well defined industry by strategy and creating new business by innovation

Combining strategy and innovation into one discipline in order to keep pace with the speed of markets

Emphasis on strategy

Focus on analyzing industries and achieving sustainable competitive advantage

Focus on transient competitive advantages by exploiting short lived opportunities with speed and decisiveness

Competition

Competition within the industry and its forces matters most

Competition in arenas of market segments, offers and geographical location, as well as between industries

Customer advantages

Advantages created by product economics

Advantages created by customer oriented solutions and lock-in approaches

Further reading:

Abidi, S. / Joshi, M.: The VUCA company, How Indian Companies have faced Volatility, Uncertainty, Complexity & Ambiguity, Mumbay 2015. Hax, A. / Wilde, D.: The Delta Project: Discovering New Sources of Profitability in a Networked Economy, New York 2011.

McGrath, R.G.: The end of competitive advantage: how to keep your strategy moving as fast as your business, Boston 2013.

Johansen. B.: Leaders Make the Future: Ten New Leadership Skills for an Uncertain World, San Francisco 2012.

Chapter 2

STRATEGY DESIGN INNOVATION – INTRODUCING THE ENTIRE MODEL

INTRODUCTION TO CHAPTER 2

In chapter 2 we will introduce the entire model of Strategy Design Innovation providing the basic definitions of

— Strategy Design,

— the Strategy Design Toolbox,

— Strategy Design Modelling and

— Strategy Design Innovation.

2.1 Strategy Design

Here is the definition of Strategy Design:

A STRATEGY DESIGN IS

1. a consistent set of measures

2. aligning a company and its environment,

3. with the overriding goal of creating value for all stakeholders

4. in a balanced way.

❶ ‘Set’ means more than just one measure and ‘consistent’ means that all measures must be aligned in a common strategic direction.

➋ ‘aligning a company and its environment’ according to Michael Porter‘s (1986) definition of strategy.

➌ It is our conviction that the purpose of any strategy must be: to create value for all stakeholders.

➍ The term ‘balanced’ applies to points 1, 2 and 3. It means that the different parts should be held m a relatively acceptable equilibrium.

We use the word ‘Design’ to underline that the process of creating a strategy is based on the methodology of Design Thinking.

The concept of Strategy Design replaces the traditional concept of a Business Plan or a Business Strategy.

2.2 Strategy Design Toolbox

Here is the definition of the Strategy Design Toolbox

The Strategy Design Toolbox is a framework

— of seven perspectives

— with four methods each

— allowing to ask strategic questions and to find answers.

Table 2.1 The Strategy Design Toolbox and its two platforms. ▼