Bringing Strategy Back. Jeffrey L. Sampler
their executives, or was being introduced and referred at the highest levels.
I understood, finally, when one senior executive told me: “Call me two weeks before you arrive. I promise we will meet sometime during your trip and I will also arrange other interviews for you in my company. But, at this point in time I cannot give you an exact meeting date – I just can't see that far ahead!” Sure enough, when I called a few weeks prior to my visit, I was able to fill my schedule completely.
At that moment I finally got it. Scheduling time with an Indian executive six months in advance was asking the impossible. Their world operates at a different “clock speed,” or rate of growth and change. At the time, shock waves were surging through their financial markets. Their tax rates and tariffs were changing. Government policy shifts were a regular occurrence. Their economy was undergoing rapid expansion. Considering the pace of growth in their sphere, I was asking these senior executives the equivalent of can we have lunch four years from next Tuesday?
That one stark realization set me on a research path that lasted over a decade. In addition to closely examining how dozens of top companies in high-growth markets were able to succeed amid turbulence, I also spent significant time in the company of a number of CEOs, senior executives, and heads of state in order to learn about their values and corporate customs. The research I conducted, often with colleagues, and the contacts I made allow me to present examples in this book that go well beyond the usual suspects.
More specifically, I collected stories and lessons from across India and Dubai. Why have I chosen to focus on these particular markets? The reason is simple: both countries at the time were experiencing massive growth and transformation. The planning challenges that exist in both places, then and now, are the effect of the corresponding growth and turbulence occurring on a regular basis. The level of development, the pace of change, and the ensuing unpredictability in the business environments made the nature of strategic planning there a test case for the rest of the world. All the growth that we have seen in India and Dubai, for example, occurred in just the last two decades. From an organizational perspective, they went from having a limited need for strategic planning to facing some of the most complex and fast-moving business environments in the world.
For instance, when India opened up its economy to foreign investment in the early 1990s, it witnessed a surge in consumer spending. This was partly a realization of the latent demand in the Indian market. Other factors, such as an influx of overseas money, had a noticeable impact. More basic changes were also under way in the Indian marketplace: changes in the pattern of consumption, a rising young population, consumerism, the globalization of their workforce, technological advances, and the rise of business process outsourcing (BPO). All of this made the Indian marketplace more dynamic.
The shifts that occurred between the early 1990s and the present day in India were across the board. The household per capita consumption expenditure increased 110 percent from 1994 to 2005.5 The share of nonfood items in household consumption increased from 37 to 49 percent in that time, while that of food items decreased from 63 to 51 percent.6 In the rural market, the share of nonfood items in the household consumption jumped from 34 to 45 percent, while in the urban market the share increased from 43 to a massive 57 percent.7 These changes reflected the maturing of the Indian economy in many ways. Not only were Indian consumers spending significantly more, but they were also spending increasingly more on nonfood items. These many changes presented major opportunities, as well as extreme challenges, for companies in India and elsewhere.
Zoom in on 2005, for instance, when the United States lifted textile quotas. The sheer pace of change that was unleashed left Indian textile companies with no precedent to look to in a situation that was completely new and fluid. Consider India's largest denim producer, Arvind Mills. Growth at Arvind that year was not up to expectations; then, denim prices suddenly crashed due to new investments leading to excess manufacturing capacities in the market. China became a force to reckon with as it offloaded almost 40 percent of the world's denim supply into the international marketplace. With rising input prices alongside falling revenues, and with the literal doubling of competition and no one to blame other than the external environment, the underlying assumptions for doing business suddenly needed a serious reexamination. As we will see, Arvind Mills8 owes its success after that to turning their every plan on its head and completely transforming itself in response to the requirements of the day.
Companies in places like India and Dubai that were caught ill prepared for such drastic changes – both economically and culturally – were left behind. Indian brands that were popular and rising before 1990 were suddenly bleeding market share. By the turn of the millennium many faded into oblivion. Risks of a dynamic marketplace include cost pressures, changing retail structure, competitive pressures, and human resource challenges.
Because strategy planning in India and Dubai needed to be modified under conditions of extremely rapid growth and dramatic transformation during this time, they present highly relevant case studies for Western organizations that need to learn the lessons of strategic change. DLF's Executive Director Saurabh Chawla explains that this anomaly is the reason why Indian companies are compelled to have strategic plans with much shorter time horizons compared to Western companies. “What would be a ten-year strategic plan in the United States would turn out to be a three-year plan in Indian context,” explains Chawla.9
My focus on India and Dubai examples are intentional and intended to be instructional. The reality is that the turbulence India, Dubai, and other high-growth regions faced then (and continue to face now) have since become a global contagion. Turbulence and turmoil, expansion and contraction, growth and decline: all of these in rapid succession are the norm everywhere. The takeaways from the examples in this book, and the corresponding framework for making strategy relevant, therefore, are broadly applicable in any market. In addition, the cases and prescriptive ideas presented come together hand in glove. The cases each demonstrate all the ideas in my framework, as opposed to proving one piece at a time. This suggests two key insights. First, the findings in this book are robust and shared across a variety of industries, companies of different sizes, and countries. Second, the ideas in the model are part of an integrated system – that is, if just one or two ideas are implemented the results will not be the same.
The overarching message of this book, above and beyond the stories and prescriptions, is that we need strategic planning today more than ever. It needs to be an ongoing and adaptive process. With executives fully occupied responding to seismic shifts, surprises, and bumps in the road, it is crucial to have tools to simplify the task. The challenge for organizations is to somehow develop the capability to absorb everyday bumps and shocks in order to maintain operating speed and adjust strategy as the global environment continues to change. Like many of the management innovations of our time, the way forward begins with a solution from a different domain. It is retooled and translated here for the management space. Bringing strategy back is no small matter, but as we will see throughout this book, it is both possible and necessary.
Chapter 1
Strategic Shock Absorbers
The fast, fluid approach that we need to soup up and accelerate strategic planning is not entirely unlike the performance features engineers have built into automobiles over time. In the case of cars, we have become so accustomed to certain crucial design elements that we nearly take them for granted. For example, if you ask someone: why do cars haves brakes? Most people will answer: to stop. If you ask a second question: why do cars have shock absorbers? Most people will respond: for a smoother ride. It turns out that both of these assumptions are wrong.
Cars have brakes so that we can drive faster. If the only way to stop is to plow into something or drag your feet like Fred Flintstone, then the default will be to drive very slowly. Similarly, cars have shock absorbers to enable speed. Before shocks, particularly in the early days, a car's frame would bend or break if it hit a bump at high speed. Thus, people had to drive slowly to avoid destroying the car. Shock absorbers enable cars to go fast and maintain their speed.
For
Dabur Company,
Ibid.
Ibid.
Jeffrey Sampler,
Sampler,