 Welcome to today's Harvard Business Review webinar, How to Choose and Execute the Right Strategy. I'm Julie DeVall, Marketing and Communications Director for HBR. And I want to thank all of you for joining us today. And I want to thank Brightline Initiative for making this discussion possible. Executives are bombarded with best-selling ideas and best practices for achieving competitive advantage. But many of these ideas and practices contradict each other. Should you aim to be big or fast? Should you create a blue ocean, be adaptive, play to win, or forget about a sustainable competitive advantage altogether? In a business environment that is changing and becoming that is changing faster and becoming more uncertain and complex by the day, it's never been more important or more difficult to choose the right approach to strategy. Martin Reeves is with us today to discuss his research into designing and choosing the right strategy for your company. He will help you learn how to assess your business environment, choose the right approach, and determine when and how to execute for maximum impact. Martin Reeves leads the BCG Henderson Institute worldwide and is a member of the Strategy Practices Leadership Team as well as a senior member of the Health Care Practice. Martin is also a member of the BCG Henderson Institute's Innovation Sounding Board, which is dedicated to supporting, inspiring, and guiding upstream innovation at BCG. He has been a fellow since 2008. Martin's research topic focuses on the future of strategy. Strategy has historically relied on concepts of scale, efficiency, and first-order capabilities. However, traditional approaches are often undermined by unpredictability and dynamism in today's business environment. Therefore, companies must supplement traditional competitive advantage with dynamic adaptive capabilities and strategies, which is what Martin is exploring. Martin is the co-author of Your Strategy Needs a Strategy, which offers the Strategy Palette as a tool for enabling business leaders to tune their approach to strategy into their strategic environment. Martin, thank you so much for joining us today. Thank you very much, Julie. So what I'd like to talk about today is choosing and executing the right approach to strategy. And you'll see that actually one of the things that we're going to emphasize is the connectedness of strategy and execution. But first, a word about where the Your Strategy Needs a Strategy comes from. So I lead the Bistro Henderson Institute, and our mission is to essentially look at the ideas which forward-locking leaders will need to shape their next game. And there's nothing more important in that respect than strategy. And we talk this on because we hearing essentially confusion and stress around the role of the strategy department around the effectiveness of the annual planning process. So we decided to take a look at what works, what doesn't work, and why, and what you should use under what circumstances. And one of our challenges was that we were spawned for choice because there are actually about 120 strategy frameworks in common use. So another aim of this book is essentially to try and clarify how those different approaches fit together and which one should use under what circumstances. So let's start at the beginning. Business strategy is, of course, quite a young discipline, in contrast to military strategy, which is thousands of years old, a system of the first mentions of competitive strategy about the late 1950s, early 1960s. And early into the evolution of strategy, essentially strategy was equated with planning, with the idea that plans can be constructed from analysis of the marketplace and the capabilities of a company and that strategic positions can be created that endure in time. And here we have some quotes from one of the grandfathers of strategy, Michael Porter. And you can see that he stresses continuity. He stresses the idea of stable positions and he asserts that they should, if the strategy is constructed right, last a decade or more. Well, this was the very proposition that we increasingly called into question by our clients. So we decided to take a look at the literature. One advantage we had that the founding fathers of strategy didn't have is that we could look at massive amounts of data to actually test what worked. So we found in fact that there was quite a lot of skepticism of strategy coming from various quarters, which essentially gave us some hypotheses to test. So one of them was that strategy has been eclipsed by technology and of course, traditionally competitive strategy hasn't had a lot to say about technology. That strategy or the possibility of having a plan is killed by the speed or the velocity of the business world. Or there were some very popular books amongst practitioners that essentially asserted that execution was really where the made the difference between a great and a mediocre company and therefore our focus should be on execution, not on strategy. So probably the biggest question we had to answer is, is strategy actually still relevant? And so we analyzed, one of the sources of evidence for the book is that we analyzed about 135,000 companies over a 65 year period and asked questions like, what is the difference between the performance of successful companies and unsuccessful companies? So here you see the performance of the top quartile of all the US public companies compared to the bottom quartile of companies with respect to their operating profitability. And you can see that whatever constitutes strategy, whatever constitutes the basis for doing things in a different way, is actually becoming more important, not less important. So in other words, mirroring the polarizations that we're seeing in society and income that have been much commented on, actually there's a much less commented on phenomenon going on which is that actually there's increasing inequality between the highest performing companies and the lowest performing companies. So this tells us that strategy is important, it doesn't tell us what should constitute strategy. One of the key findings or one of the key questions that we looked at essentially is, what has changed that has made planning less effective and what constitutes a more effective approach in recent years? And the problem is of course that many things have changed since the early days of strategy, we have globalization, we have changes in geopolitics, we have technology, we have millennial values, we have connectivity, cheap computing power. So actually it was quite challenging to sort out these different threads of what the essential changes in the environment are that necessitate a new approach to strategy. We came down with a conclusion that basically one of the most important changes in the business environment was actually that the diversity of strategic environments was growing. So pretty much whatever macro variables you take to characterize a strategic environment and here you see a chart where each dot represents a company and you can see market cap volatility if you like the unpredictability of environments and the attractiveness of each environment, revenue growth in the 60s, the 80s and the 2000s and you can see that the footprint of the conditions of business has massively increased over time and we saw this pattern being replicated across a variety of variables. So the conclusion that we came to basically was that the question, we're asking the wrong question, that the question is not what approach to strategy is now relevant today but rather which approach should one use under which circumstances, in other words to adopt a contingent approach to strategy. So if you stare at this chart a little you'll see what I mean. Dots at the bottom of the chart where there is a high degree of predictability are gonna require a very different approach from dots at the top of the chart where you have a state of very high end predictability. Similarly, in a declining environment points to the left-hand side of the footprint of environmental conditions are gonna require a very different strategy to a very high growth, high rate of change environment. So the broad conclusion was that one approach to strategy does not fit all circumstances. So the next problem really was to say, what is the minimum number of questions that we can ask to discriminate between different approaches required in different environments? And here I'm gonna talk about the key tool in the book which is we call the strategy palette and before I go into it the basic idea of the palette is that we need a tool for discriminating between different types of strategic environment and different approaches to strategy and execution. So the three axes here are unpredictability, malleability and harshness. Or if I put it more simply the vertical axis represents the question, can I plan? And if I can plan, I should and if I can't, I'd be wasting my time. So clearly this is a very key determinant of the approach to strategy. The second axis, the horizontal axis is malleability. In other words, my ability to shape the environment rather than treating it as a given. And clearly if I can shape my own fate, I should but if I can't, I'd be wasting my time. And then the third axis harshness is basically about how the profitability and cash flow and growth of an environment reflects the harshness or the beneficence of the environment. And because if we're in a position where essentially the emphasis is on short-term survival that's one approach to strategy. Whereas if we have lots of growth options that's really quite a different situation. So this gives rise to five approaches to strategy. And in the literature, these have lots of different names but let me tick through those and say a few comments about each. So let's start off with the familiar. In environments that are stable and given and predictable, then we can employ a planning-based approach, a classical-based approach to strategy. Analyze, plan, execute would be the algorithm here. So the big news here is that in spite of some claims made by various authors, we definitely think that this space is not dead. It's just no longer a panacea. So a good example of where planning still is applicable is for example in confectionery. So we have a case study and an interview with the CEO of the Mars company, for example in the book in the chapter on classical strategy. And he says basically that chocolate grows with GDP, that the key brands are stable over many decades, basically stick with their childhood brands of chocolate and confectionery. And within a reasonable margin of error, one can in fact forecast. And therefore it's all about scale, economy, efficiency and execution disciplines. So Mars adopts a classical approach to strategy and its core business, one based upon analysis and planning. Of course, that doesn't mean that things are easy for Mars because their competitors are doing the same thing. So they have a number of innovations even within this classical form of strategy. For instance, one of their innovations is that they have very few people involved in the process and they submit themselves to the discipline of being able to explain their strategy to anyone in the company and everyone in the company within 20 minutes. So the reason they do that is that the strategy is not effective unless it's understood by all and executed. So even within this classical approach, innovation is certainly possible. Moving to increasingly exotic forms of strategy. So in the technology space as represented here by Tata Consulting Services, the world's second largest IT services company, they're in a doubly unpredictable business because not only is it hard to forecast which technologies companies will be employing, but actually each individual company will have a very high variance in whether it embraces the latest technologies or some traditional technologies. Therefore you have two sources of unpredictability, technologies themselves and how companies use them. And that leads Tata Consulting Services to conclude that actually they're better off not trying to plan but rather regarding their business as a portfolio of experiments. So every customer deployment is in a sense an experiment and that experiment yields an outcome and that outcome is either successful or unsuccessful. If it's successful, they try to codify the learnings and then scale them and apply them to other clients. So they do this process continuously. So this is really quite different from classical planning. It's more like an evolutionary process in biology and TCS has figured out a way of doing that. So we have a chapter in the book on the adaptive approach to strategy. Here in contrast to the classical approach where the algorithm is analyzed plan execute, the algorithm here would be vary or create variants, very select, select those things which work and then scale them and then continuously iterate in a loop on that process. The third canonical approach to strategy and execution is the visionary approach. And here this is the approach of entrepreneurs. It's the approach to use in situations where the market does not yet exist. It is therefore shapeable by the first mover. And you may ask, what is new about this form of strategy? In one sense, nothing is new. This is what entrepreneurs have been doing for centuries, creating a vision and then realizing that vision and then scaling the resulting business model. What is new, however, is that when I began my career in consulting 1989, I was basically most of the time advising large companies on how to compete with other large companies that were fairly similar to themselves and we had these titanic decade long battles between the number one and number two in an industry. Now more commonly I find myself advising a large company against a disruption caused by a small upstart company, an entrepreneur leveraging some new technology or business model. So what's new here is that large companies too need to be able to create new spaces and disrupt themselves by creating new businesses before they are disrupted by upstart visionaries. So we have a chapter based around the innovative consumer genetic testing service company 23andMe to illustrate the approach to execution and strategy in the visionary space. Coming on to the fourth approach, we have what we call the shaping approach which is an incredibly powerful approach. It's the approach of platforms and ecosystems, some of the most stunning examples of success in business we see today. If we think about Amazon or Alibaba or Red Hat, all of these companies essentially are cultivating an ecosystem leveraging the capabilities and assets of other companies to bring about a reshaping of an industry. So it contains elements of both malleability because they are the orchestrating ecosystem but also elements of unpredictability because they don't actually control or own all of the assets and these are basically strategies of platform strategies of co-evolution. So the algorithm here is one of creating influence of cultivating an ecosystem and of co-evolving with that ecosystem and the trick, of course, is to have a platform that somebody wants to join. There has to be mutual benefit in the economics of the ecosystem. The last approach to strategy, some people may not think of as a strategy at all but literally hundreds of companies, hundreds of large companies are currently embracing this approach to strategy which is strategic renewal. They are avoiding redundancy or obsolescence by fixing an obsolescent business model and what we found about this approach to strategy is that one is incredibly common because of the rate of change in the environment. Secondly, although it may be familiar, most companies have been through this several times. Actually the rate of failure is very high about 75% of companies that set out to renew or restructure or delay actually fail to restore their profitability to sector median returns in the short and the medium term. And what we found here was that the biggest cause of failure was a failure to pivot between the early stages of a renewal process where cost reduction and cash flow restore were the key and then pivoting to growth and value creation in the immediate term. That failure to pivot was the discriminator between successful and unsuccessful companies. So that's the strategy palette. Again, the idea is know which environment you are in, know what the basis of competition is and then choose the right approach to strategy accordingly and with it comes a distinctive approach to execution. Let me explain this a couple of other ways to help the point and sink home. So you can think about this, another way of thinking about this is different approaches to strategy on different timescales. So clearly one needs to fix things that are broken from the past. One needs to restructure obsolescent business models or to fix loss making a business unit. So this is the renewal strategy. A failure to do this will essentially starve the company of cash and short term financial viability. In the present one needs to run the cash cow business or the core business with a lot of, generally with a lot of classical discipline because this is the business that is paying for the future. And in most large companies, it's this trio of adaptive shaping and visionary strategies which is actually underrepresented and which is the hardest for big companies to get their minds around. But let me say a couple of things about it. A, it's very different from a classical approach and B, this is the approach to create the future growth options. So actually leveraging the, let's say embracing the contradiction between the analytical discipline of a classical strategy and the more creative strategies of adapting, shaping and visionary which you might call ambidexterity, the ability to do both is actually key to success for a large company. So in other words, what we're not saying is that the average large company should pick one of these approaches to strategy but rather to pick the right approach for each part of the business. I'm not sure whether you can see the diagrams inside each of the boxes here on this diagram, but what I'm trying to illustrate here is that not only is each of these approaches a different approach to strategy but it's a different approach to execution. So let's contrast classical with adaptive, for example. The classical approach begins with analysis of a market environment with creating a plan and with executing that plan which is usually stable over a period of time of one year or five years or whatever the planning horizon might be. An adaptive approach in contrast has the execution algorithm of experiment or create variation, selecting those variations which are successful and then scaling up those successful variations. So let's just think for a second how different these two approaches are. If we ask ourselves what is the plan? Well, in the classical approach there will be a binder called the strategic plan and it will be one thing for a business unit or a company. In the adaptive approach there may not actually be a written plan. There may be a general direction but the plan is constantly changing. In fact, the plan is a emerges from a population of experiments and is constantly changing as in the case of TCS. Let's ask another question to just illustrate the difference between these two approaches. If we ask which comes first, the plan, the strategy or the execution, then you may say in the classical approach of course the plan comes first because only when we have the strategy can we execute. But actually in the case of adaptive strategy it is the trial and error, the initiative taking at a working level. In other words, the execution which comes first and the strategy emerges from a stream of execution experiments. So really these are very fundamentally different approaches to strategy and execution. Now, if large companies want to use the strategy palette, want to apply the right approach to strategy in the right circumstances and we can show that that is a very beneficial things to do, companies that do that are more successful in the medium term. Then there are a couple of obstacles that they bump into. In fact, there are three capabilities that they need to develop, they bump into. So I'd like to say a few words about each of those. The first one is what you might call adaptive capability, the ability to undertake disciplined experimentation. Another one is the what I call shaping capability which is the ability to actually create new spaces and to shape the external environment. And the third one is the ability to adopt different approaches to strategy at the same time in different parts of the company, ambidexterity. So in terms of adaptive capability, this is not about randomness or lack of discipline. The discipline to run a portfolio of business model experiments requires every bit as much discipline as a classical execution, just a different type of discipline. It requires the discipline to understand the environment specifically enough to be able to target experiments. It needs the capability to be able to run a managed portfolio of bets. It requires the capability to run a stage gate process so that the unsuccessful bets are closed down and the resources are constantly recirculated to other experiments. It requires the organization to stay very close to the customer because it's the interface with the customer that the experiments and the learnings actually take place. It requires the ability to both profoundly decentralized because the initiative taking is decentralized but also to scale knowledge and share knowledge of successful experiments across the corporation. So both integrated and decentralized. It requires a culture that actually tolerates failure in individual cases and values speed of accuracy since the strategy emerges through continuous innovation. So in the words that I've used to describe it, you can imagine that that is quite challenging for the average large company that typically runs according to a hierarchy a set of SOPs, a prescribed planning cycle and so on and where initiative taking may not be sufficiently rewarded. But nevertheless, the example of Tata consulting services and other examples in the book show that it's necessary in some situations and entirely possible. Let me say a few words about the second capability which is typically bottleneck for large corporations, the ability to shape the environment. One might think logically that the largest companies with the most educated resources with the most political influence with the best financial positions with the scale to buffer change are in the best position to shape the environment. But of course we all know that that in practice is not the case. It's the mavericks on the edge of an industry that have no choice but to challenge the status quo that actually in the vast majority of cases end up reshaping industries. So how do we have large companies achieve their fully deployed potential influence and get on top of this capability of shaping the environment? Well, one way is to really start thinking to change the unit of analysis to start thinking about mutualistic ecosystems and not just the company versus its customers or the environment. One needs to think hard about mutual benefit for those purposes. One needs to think about innovation not only in terms of products but in terms of services and platforms. One needs to think about what it takes to be an orchestrator. The key question for anyone running an ecosystem is why would anyone want to join my club? And there has to be some benefit in terms of a brand or risk mitigation or systems cost or cost of accessing customers or the ecosystem doesn't make sense. One needs to be comfortable with if one is running an ecosystem with not controlling all variables because the complexity would make that impossible. And in any case, it would undermine the idea of a co-evolving system, a system where everything is constantly in motion. So often when large companies try to actually run their businesses as ecosystems, they mistakenly try to control all of the variables. So the irony is that many of the companies that are successfully run platform businesses have what you might call a slightly non-managerial culture. In other words, they know when to trust a marketplace mechanism and when to trust a managerial mechanism and they tend to keep managerial mechanisms away from marketplaces because marketplaces are self-organizing. So that's a little bit about the shaping capability. So let me say next about this third capability that's very important. So here we see different performance horizons and you see the blue circle here is represents current performance. So what most companies measure most of the time is their current productivity or their current financial results. So, and they measure those using backward-looking objective financial accounting measures. And of course, performance is very important because today's performance pays for tomorrow's growth. And then we have the green circle on the right which you might call vitality which is, excuse me, the ability to generate future growth options through innovation. And companies tend not to have very good metrics for this but we recently actually since the publication of the book a couple of weeks ago published a new index together with Fortune called the Fortune of Future 50. And the idea was that in contrast to most indices which are or rankings which are based upon either reputation or financial performance, we try to create a ranking that was based on future performance potential one that was based upon the ability to generate the future growth or innovation. So relate this back to the that trio of three styles in relation to the future in the strategy palette the adaptive approach, the shaping approach and the visionary approach. So coming to ambidexterity then what ambidexterity means is can you do both of those things at the same time? Can you run and reinvent the company at the same time? And interestingly, when we looked at how many companies can do that how many companies can run and reinvent the business with advantage at the same time. We found that it was about 3% that by coincidence is about the same proportion of the human population that can actually write fluently with both hands hence we called it ambidexterity. It's rare, it's hard because it involves a contradiction but some companies can do it and it's worth between six to eight percentage points of total shareholder return in the long term and clearly logically it's necessary for longevity and long term survival. A few words about ambidexterity. So we asked ourselves how can companies in practice conquer this tough problem of ambidexterity the ability to run and reinvent the business at the same time. And by the way this was a very common theme in all of the CO interviews that we did for the book the desirability of doing this not everybody used the word ambidexterity one CEO that we spoke to called it mixed messages but essentially they mean the same thing the ability to run and reinvent the business at the same time. And what we found was that we didn't find a single company that had enough ambidextrous talent such that all teams individually could run and reinvent the business but what we found was that some of the companies we spoke to had different organizational fixes for this lack of ambidextrous talent this insufficiency of ambidextrous talent. And we actually found four approaches that they used to produce ambidexterity and one of them is quite a common philosophy maybe the most common one which is separation illustrated by the green here in other words they separate the old way of doing things from the new way of doing things and this goes right back to Lockheed Martin and the idea of the skunk works where years ago Lockheed Martin tried to produce an advanced jet fighter in the same facility as a commodity bomber and the idea was separate them to different buildings with different cultures, different operating procedures and that's one approach to ambidexterity unfortunately it doesn't always work because it's sometimes the case that the new and the old are interconnected or the new becomes old very quickly so that a separation approach would constantly need to be sort of merged and then separated and then separated. So in these cases we see another approach is what we call the switching approach where you actually have multi-skill teams essentially have accountants and poets in the same teams so that you can actually do creative work and also disciplined classical work in the same teams and this mixed-skill team actually changes its emphasis as the product life cycle of the product proceeds and a good example of that is the glass manufacturer, Corny. A third philosophy which for some reason most of the examples we could find are actually with Chinese companies is what you might call an internal ecosystem whereby you have many many different business units and higher the world's largest white goods company is an example they have around 2,000 micro-business units and each unit is able to choose its own approach to strategy and execution and the management of the role of the corporate is to create a marketplace for these companies to transact with each other and buy services from each other so this permits tremendous diversity and sort of an emergent structure in an internal ecosystem still quite rare there are only a handful of companies I can find that are doing this but this is a third approach and the fourth approach which is now quite common is the external ecosystem whereby you actually have a number of collaborating companies there could be hundreds of companies which actually constitute your supply of R&D or your supply of hardware or your supply of software and you're tapping into their different approaches to strategy and execution and you basically orchestrate that ecosystem so we have many examples of this Apple is a classical one and in fact there's a very interesting memo which is the internal diagnosis of Nokia as to how they were beaten by a company that could ever make a smartphone before and the conclusion of this memo which is now freely publicly available is essentially that it's the wrong question Apple did not beat Nokia Apple and a self-organizing ecosystem two ecosystems in fact a hardware and a software ecosystem beat the monolith of Nokia in the smartphone market in four and a half years by being able to adopt different approaches in each supplier different approaches to strategy and execution so those are four different approaches to ambidexterity lastly let me say a few words about leadership and then also what happened beyond the book so we didn't set out to write a book on leadership but inevitably we bumped into the question how do you lead an ambidextrous company if your company is choosing the right approach to strategy and execution in each business and if you've mastered the capabilities to do that and you've even mastered ambidexterity you can reinvent the business in one part of the business and run the business in another part of the business you need to lead somebody needs to lead that very complex organization and so this leads to the question how can you be an ambidextrous leader and across a series of interviews with CEOs that we did for the book we distilled these eight signature behaviors of an ambidextrous leader and let me just pull out one or two because they're described in detail in the book so one very important one is what we call the antenna function namely that large companies and we can measure this tend to become very very introverted they become cut off from the environment because most of their attention goes to internal coordination and most of their beliefs essentially are self-perpetuating internal beliefs in order to adapt to a changing environment one needs to be very externally focused and it's really the leader that is either the direct antenna or ensures that the large company resists this gravity of introversion and actually keeps his attention externally oriented number five let me make a few comments on that so the CEOs that we interviewed all stress that sensible organizations employing smart people tend to migrate in the right direction over time so it's not that there are hundreds of companies out there that are not fearing disruption and not trying to do some of the things I'm talking about it's just that they're unable to do so promptly and cleanly so this is what the CEOs that we work with describe as the accelerator role which is taking the natural intelligence organizations about their self-awareness about what they need to do and just making it happen faster and more cleanly and more substantively than would otherwise be the case and then we have number eight which is the disruptor so it's sort of logically obvious that one of the few ways of avoiding being disrupted is to actually disrupt there's some circumstances where you can protect yourself against disruption but really when somebody has employed a technology to come up with a new business model which is superior to the incumbent model your choice is essentially a choice of timing namely do you wait for disruption or do you preemptively disrupt and put yourself in a position of control and one thing that our evidence shows large companies are phenomenally bad at is preemptively disrupting themselves so this really can only come from the leadership the ambidextrous leadership because this really goes against the grain of the conservatism of a large company let me go quickly over this one because I'd like to wrap up and give some time to questions so another skill of the adaptive leader was number seven which is leading not with instructions and of course unless you're in a class environment or a renewal environment you can't really have instructions because you're dealing with unpredictable environments and leading with questions and here on the slide you can see the very different sort of questions that CEOs will ask in each of these different strategic environments and there's a big emphasis in the book on what are those questions what are the right questions to ask and what circumstances and how do you lead with questions but I'm going to have to skip over that in the interest of time so let me wrap up with a few words on what has happened since the book so we are not academics we are practitioners so all of this was done with the hope that it would be embraced and help our clients so we've we did a number of things that I want to touch on so if you go on at the Android store the iTunes store you'll see that there's a game called your strategy needs a strategy one word and the game is if you like a practical accompaniment accompaniment to the book we designed it because we found that intellectual understanding of the ideas that we're talking about here is not sufficient to implement them to build the muscle memory so we built actually a video game to give managers the feel for what is it like to actually implement an adaptive strategy and what we've found in fact is that it's a really good way of learning the intuitions of each of these different styles in fact there's a whole bunch of other assets many of which are publicly available that you could also look at which would help a company to implement these things there's obviously the book there's a TED talk there's an HBR article there is the app I just referred to the iPad game in other words there is an e-course available we're working with a number of business schools to actually make this either a large part or a small part of their strategy course we're about to release a competition variant on the game app we've tested it thoroughly internally so we can now run massive parallel strategy competitions which are a really good way of giving a large group of people before you set out on a strategy change exercise the intuitions and the vocabulary to be thinking about these things and finally let me tell you about the future so what we're doing next is what we've found is that as I referred to earlier individuals are not ambidextrous when you have them play the game they actually show a very strong preference for a particular style of strategy now the good news is that everybody learns in every style over time that people display very strong tendencies and in our interviews we found that choosing the right person for the right job was a real dilemma facing CS and HR departments who do you put in charge of the new disruptive experiment what do you look for so we're teaming up with an AI and cognitive testing company called Pymetrics a startup coming out of MIT and what we're doing is we're using the game data and some neuroscience tests to actually create strategic personality types and we've already piloted this we haven't released it as a product yet but we will be doing so shortly to create these personality if you like archetypes or more strictly let's say neuroscience types so then you can actually tell after doing a short test or a period of gameplay which manager would be best off to lead an ecosystem strategy which manager would be best off leading a renewal strategy and we found it considerably more accurate than say Myers-Briggs or some of the other tools that are often used for this purpose so in summary you know what would be the implications of some of this for companies what we're saying is choose the right approach to strategy in the right environment we're saying learn how to deploy different styles in different parts we're saying become an ambidextrous an ambidextrous leader and we're saying build the capabilities that would enable you to do that and this last slide is just really some practical imperatives that come out of about how to do those things so that brings me to time let me pause there and maybe take any questions or comments that people have that's great Martin lots of questions coming in great presentation the first one and this is a question I have as well when you're starting out and defining and implementing a strategy what time period should people be thinking with the world moving so fast is it realistic to consider a 3 year plan 5 year plan or does it depend on the type of strategy you're going after I think the simple simple reply would be number one look at all time scales so that three slice diagram I gave you I think that's one simple way of looking at this do fix the things that are obsolescent in your business the broken business models because otherwise they will hemorrhage cash and attention do think about overperforming in the core business in the present and do think about future growth options now how fast should you do that I think you should have matched the clock speed of your environment so I think it's very important to look at the rate of change of business models of the environment to make sure that you're matched with that and the trick I think is not to focus on your nearest competitors because other big companies like you may actually have a clock speed which is too slow so look to the Mavericks on the edge of your industry for the rate of change I think the other thing I'd say is that the emphasis is on speed and necessarily so because things are happening faster we can actually measure how fast it's on average across all public companies it's twice as fast but it's considerably faster in technology than in some other industries but don't think about the slow because the average age at death of a public company has come down from something like 30, sorry 70 years to about 34 years in recent years and so there are some very important slow processes too that need to be taken into account for example the cultivation of talent is a slow process actually building marketplaces is a relatively slow it's a multi-year process so you really need to focus on all time scales a lot of people are chiming in about culture is one of the biggest barriers to embarking on a new strategy do you have any advice there for how to lead a cultural change right well culture is really important and I have to illustrate this with a question how would you supposing you wanted to do an adaptive strategy and you put in place the processes you hide the right people you decentralised innovation you had portfolio discipline and the question is if you wanted to kill that instantly in the simplest possible way how would you do so and the answer of course is to punish failure if you visibly punish failure and create fear there will be no experimentation so I think this illustrates the importance of culture we didn't have time to go too deeply into that but each of these styles has a culture associated with it now that gives rise to a problem which is if you're trying to master ambidexterity can you really have different cultures in different parts of the company well under separation you can and if you're using an external ecosystem you can you can employ some extremely conservative companies you can employ some very entrepreneurial companies you can do that but if you're trying to actually have an ambidextrous culture then you really and some companies are really trying to do that then you really need to legitimise embracing contradiction embracing dynamism so that the organisation really does understand that in the core business we need to overperform and we need to take risk in the peripheral businesses and although this is an apparent contradiction this is what we do so there's an amusing anecdote in the book actually about one CEO that says somebody says to the CEO you're giving me mixed messages one minute you're telling me to be very disciplined with every penny and then actually telling me to be risky and creative you know I'm confused by the mixed messages and the CEO's response is that's what I'm paying you for to actually create a culture of mixed messages that's what leaders do now it's called ambidextrous leadership so it's a it is indeed a very very critical area so sort of related somebody had a question around dual strategy and if there's an example of a company where one part of the business was executing against a classical approach where another part of the business was focusing on the adaptive approach absolutely so we give the example in the book of PepsiCo since it's public I can talk about it so PepsiCo's the PepsiCo CEO's response to strategy is sorry response to ambidexterity is to have competing teams inside each business so in other words take one of their business units run the business team and there'll be a reinvented business team and there she is trying to keep the teams fighting to preserve the contradiction because out of the contradiction will come the balance between performance of the current business and it being replaced by something better so in each of Pepsi's businesses you have this contradiction another example would be the classical example of Lockheed Martin another example I can't give the name of the company that would be a major telecom that has a very multi decade NPVs for their fixed line telecoms business runs their mobile business in a different way and then runs their over the top services businesses in a very sort of Silicon Valley like way and they use the separation philosophy to do so so this is I think a necessity for almost every large business that I looked at I mean changes faster in some businesses than others but this run reinvent tension is now I think present in every business great somebody was asking about the relation the differences and similarities between testing and executing can you say a little more how I go ahead well let me let me maybe let me maybe guess so I guess you're referring to the the tension between deductive approaches and empirical approaches do you think that's the sense of the question Julie I think so yes yeah so so I think a so this varies very much between the different approaches to strategies so the a classical approach is one that's biases towards analysis and and deduction and you know decomposition of a plan into its components and those things don't change very much over time whereas an adaptive strategy biases very much towards trial and error in other words the assumption is not that if you analyze a lot of data it will tell you exactly what to do and that thing that you need to do will will not change over time the biases towards references the there's this term minimum viable product in other words get into the market with roughly the right thing you know see what happens and then move very quickly to fix it and fix it and fix it again so it's what the software industry talks about you know version 1.1 version 1.2 so the bias towards action not perfection and towards speed rather than accuracy so this really this is one of those dimensions that differs very much between the different approaches to strategy in fact there's a table in the book that actually in the first chapter that distinguishes between all of these different facets of a company that hinge upon the approach to strategy adopted so the approach to innovation changes the approach to execution changes the approach to culture changes the approach to measurement changes the tradeoff between accuracy and speed changes so that's where the power and also the challenge of the approach comes in to change all those things coherently and that is ultimately why we call the book how to choose and execute the right approach it's actually about strategy and execution and their coherence not just about strategy here's a really good question I imagine a lot of big companies face this but what are some suggestions for ambidextrous leaders that are trying to navigate internal resistance and fatigue so maybe they're not as fast to getting up to speed and on board with a strategy and yeah well that I think is one of the one of the classic obstacles to doing all of what we've been talking about it's the you know how to make the elephant dance and I guess the hints you know the whole books that have been written on that subject but the hints that we picked up from our research I mean one of them is that that is indeed one of the critical roles of leadership that was the disrupter role in the eight roles I think another one is is acceleration just to constantly try to compress the timelines and make what will happen naturally happen faster with less disruptive cost to the company I think another one is to remove obstacles so not as part of the book but separately from the book we recently carried out some research on successful transformations and we found that leadership change actually improves statistically improves the odds of success in in transformation. Transformation is renewal in our framework so it's just one of the five but I would expect that it would apply more generally sometimes you have to sometimes the active resistance or just the mental of inertia of the members of the leadership team that have been successful under one regime is the obstacle to the next so that's where the CEO has to have courage to swap out the team is necessary another one is simplifying the problem you know I don't think there's any company in the world that could do there could be ambidextrous in all aspects in all in all parts of the business simultaneously but the good news is you don't really need to do that so if you look at any particular business it usually crunches down to something much simpler it usually in my experience crunches down to a three-part problem you know one part is you know what is what is surplus to requirements or needs fixing that's your renewal agenda you know how do you run the how do you overperform in the core business which is usually the familiar part of the equation and then how do you create sufficiently a sufficient number of sufficiently large bets in the in those trio of creative strategy styles that I talked about so actually if you look at it that way you've you've simplified many possibilities down to sort of three slices the simplification I think is part of the recipe too great there's a question coming in it's sort of forward thinking he's wondering if you've seen this being played out and how people are hiring leaders and executives I mean especially with the personality part of your presentation do you see this becoming part of onboarding and applicant selection well our partner Pymetrics that's their main business actually to apply neuroscience which is different from psychology neuroscience doesn't measure your perceptions of yourself it actually measures your behaviors so that they have some games whereby you measure your reaction speed or propensity to be distracted and this sort of thing it's actual behavior so they have a series of neuroscience games and they also have some artificial intelligence that actually matches behaviors to likelihood of success in different job families so they have a whole business based around this doing precisely that and their vision of the future would be that indeed that's the way that we'll be hiring people moving into the future Martin you have some experience in healthcare do you see this how do you see this playing out in healthcare companies and businesses well I think highly regulated businesses and very technically complicated businesses like healthcare often think that they are different and it is true that highly regulated businesses often change more slowly because you just have less freedom for maneuver but I'd say I see our framework was based upon evidence across all industries and I think we see this being quite universal and a good example of that is the example I gave of the visionary company 23andMe 23andMe is this innovation whereby you take e-commerce technology and you put it together with genetic testing and you put it in a sort of a two-sided business model whereby the tests are administered very cheaply it's just a saliva sample and it costs $100 I think and then you have the value of the anonymized data that results from that which has another market so probably going back five years I imagine that the beliefs of the industry were that this would be illegal immoral technically impossible and economically infeasible and there have been some regulatory issues around the business but nevertheless even in a very regulated and complicated business with high barriers to entry like healthcare we are seeing this sort of disruptive innovation so the short answer would be it applies every bit as much maybe just on a slightly slower time scale to some other businesses I think we have time for one more question so under the leadership capabilities somebody has a question around the role of the team coach so the idea of the team coach role is that you're never going to have enough ambidextrous capabilities it's never going to be the case that you have a huge population of entrepreneurs and the population of planners and all of those other things that you need in an ideal circumstance so I talked about the organizational work around for that but there are the coach role refers to the if you like to the training work around so you can at least make sure that you have for instance what the Japanese call a horizontal fast track so in other words you can give people early in their careers an experience of each of these approaches to strategy by rotating them through different parts of the business and make them somewhat ambidextrous you can also make sure that people are selected for mission critical roles the right people are selected as we've just been discussing and you can also make sure that teams are operating effectively if you're using that switching approach that I suggested in other words they're able to work with strategic personality profiles that are different from their own so if you have teams that are mixed sort of disciplined implementers and creative experimenters that actually you can do teaming exercises to make sure that that works rather than falls apart so there's a lot that there's a lot of ways in which the HR function becomes actually very strategic if you implement the model we've been talking about today great Martin this has been a great presentation but I'm afraid we're out of time I want to thank all of you for joining us and thank Brightline Initiative for making this discussion possible this concludes our presentation have a great day