Competing on the EdgeCompeting on the Edge

Strategy as Structured ChaosStrategy as Structured Chaos

Change is pervasiveChange is pervasive react quicklyreact quickly anticipate when possibleanticipate when possible lead change where appropriatelead change where appropriate competing on the edge is...competing on the edge is...

– unpredictableunpredictable– often uncontrolledoften uncontrolled– often inefficientoften inefficient– best practice when change is pervasivebest practice when change is pervasive

Theory and ResearchTheory and Research

ResearchResearch– in-depth research with 12 global in-depth research with 12 global

businessesbusinesses– interviews with 100+ managersinterviews with 100+ managers

Theories Theories – complex adaptive systemscomplex adaptive systems– evolutionary changeevolutionary change– origins of timeorigins of time

Edge of ChaosEdge of Chaos

intermediate state between order intermediate state between order and chaosand chaos

organizations do not settle into a organizations do not settle into a stable equilibrium but never quite stable equilibrium but never quite fall apartfall apart

zone where all types of systems--zone where all types of systems--biological, physical, economic, biological, physical, economic, social--are most vibrant and flexiblesocial--are most vibrant and flexible

Laws of competing on the Laws of competing on the edgeedge

10 rules that articulate key 10 rules that articulate key assumptions and best practices assumptions and best practices aboutabout– strategystrategy– organizationorganization– leadershipleadership

StrategyStrategy

Rule 1: Advantage is TemporaryRule 1: Advantage is Temporary– continuously generate new sources of continuously generate new sources of

advantageadvantage– change as opportunity, not threatchange as opportunity, not threat

Rule 2: Strategy is Diverse, Rule 2: Strategy is Diverse, Emergent, ComplicatedEmergent, Complicated– diverse collection of moves, loosely diverse collection of moves, loosely

linked in a semi-coherent directionlinked in a semi-coherent direction– let strategy emergelet strategy emerge– play a broad array of options and play a broad array of options and

expect to shift strategy over timeexpect to shift strategy over time

Rule 3: Reinvention is the goalRule 3: Reinvention is the goal– seek new ways to create value, rather seek new ways to create value, rather

than focus on efficiencythan focus on efficiency– focus on innovative products and focus on innovative products and

processesprocesses– profitable fortresses are rareprofitable fortresses are rare

I can’t say that we had a I can’t say that we had a really smart strategy going really smart strategy going forward. We had a strategy forward. We had a strategy and when it didn’t work, we and when it didn’t work, we went back and regrouped went back and regrouped until we finally hit on until we finally hit on something.something.

--Phil Knight, CEO, --Phil Knight, CEO, NikeNike

OrganizationOrganization

Rule 4: Live in the PresentRule 4: Live in the Present– maximize minimum structuremaximize minimum structure– minimal necessary structureminimal necessary structure

well-understood priorities and well-understood priorities and responsibilitiesresponsibilities

a few strict rulesa few strict rules a few key operating variables are monitored a few key operating variables are monitored

very carefullyvery carefully just enough structure to keep things from just enough structure to keep things from

flying apartflying apart

Rule 5: Stretch Out the PastRule 5: Stretch Out the Past– exploit derivative productsexploit derivative products– extend offerings to new market extend offerings to new market

segmentssegments– refresh existing businesses with refresh existing businesses with

learnings from new ventureslearnings from new ventures– but guard against being locked into but guard against being locked into

outdated competitive modelsoutdated competitive models

Rule 6: Reach into the FutureRule 6: Reach into the Future– manage a longer time horizonmanage a longer time horizon– launch more experimental products and launch more experimental products and

servicesservices– create more alliances geared toward create more alliances geared toward

nascent markets and emerging nascent markets and emerging technologiestechnologies

– employ more futuristsemploy more futurists– revisit the future oftenrevisit the future often

Rule 7: Time Pace ChangeRule 7: Time Pace Change– set a rhythm and tempo around set a rhythm and tempo around

number of new products and services offered number of new products and services offered per yearper year

refreshment of brandsrefreshment of brands building manufacturing capacitybuilding manufacturing capacity

– try to match tempo to change to rhythm try to match tempo to change to rhythm of marketof market

– choreograph transitions in products, choreograph transitions in products, acquisitions, etc.acquisitions, etc.

It was all in the rhythm. Have It was all in the rhythm. Have you ever seen Michael Jordan you ever seen Michael Jordan play when he is on a rhythm play when he is on a rhythm run? It was exactly like that.run? It was exactly like that.

--billionaire businessman --billionaire businessman commenting on his commenting on his

successsuccess

LeadershipLeadership

Rule 8: Grow the StrategyRule 8: Grow the Strategy– grow the business like a prairie, not grow the business like a prairie, not

assemble it like a toasterassemble it like a toaster– dismantle megastructuresdismantle megastructures– pay attention to the order in which pay attention to the order in which

strategy is grownstrategy is grown begin with current businesses, then incorporate begin with current businesses, then incorporate

the past and work in future opportunitiesthe past and work in future opportunities never start with the future but rather with the never start with the future but rather with the

basics of todaybasics of today

Rule 9: Drive Strategy from the Rule 9: Drive Strategy from the Business LevelBusiness Level– strategy cannot be driven top-down--strategy cannot be driven top-down--

the pace of change is too fast for the pace of change is too fast for trickle-downtrickle-down

– success comes from skilled, fast and success comes from skilled, fast and agile moves at the business levelagile moves at the business level

Rule 10: Repatch Businesses to Rule 10: Repatch Businesses to Markets and Articulate the WholeMarkets and Articulate the Whole– continuously realign businesses with continuously realign businesses with

emerging opportunitiesemerging opportunities– senior managers articulate and senior managers articulate and

occasionally shape emergent strategyoccasionally shape emergent strategy

I thought it best to shut up and I thought it best to shut up and listen.listen.

----CEO commenting on CEO commenting on strategy strategy

meeting with meeting with key business leaderskey business leaders