KARL MOORE: This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am delighted to speak to Julian Birkinshaw, who is a senior professor at the London Business School - and he is married to a Canadian.
Good morning, Julian.
JB: Good morning.
KM: We grew up under the world of Michael Porter, [who developed]the "Five Forces" model [of assessing the competitive environment in which a business operates] The view of strategy seems to have changed in the last few years because we have even greater change. …What are your thoughts on the idea of strategic agility?
JB: Yes, as you say, Michael Porter's view of the world and the resource-based view of the world, [contained]a lot of standard kind of ways of thinking about strategy. Assume a certain level of project ability and control of your business environment. What we have seen over the last few years is an increasing volatility and increasing turbulence in the markets in which we are working and the technologies that we use and so forth.
Paradoxically, it turns out that the more complex the business world becomes, the simpler our strategies have to become in response. Why is that? It is because we cannot plan everything. What we have to do is essentially create some guiding themes and some guiding rules that give us a sense of direction, but we have to delegate much more power to the people in the front lines who are in the position to react to those opportunities as they emerge, rather than taking everything back to some sort of grand central strategy.
KM: Isn't that core competencies or is it a different set of rules that core competencies might give us?
JB: It's a bit more nuanced than that. Yes, there is a point of view that says, we have to understand what makes us special - our identity, our vision, our distinctive skills. But within that, the opportunities that you pursue in a particular country or a particular market sector are going to be very different and very specific to that set of instances.
You are asking people to take much more responsibility, … to say to themselves: I know what we are good at but there is an opportunity here which needs me to go a little bit further. It is a core competence view but it also requires a much greater level of flexibility and agility on the part of the people who are implementing the strategy.
KM: How do we not just go haywire taking different approaches all around the world? … How do we keep it all together?
JB: If we let that go to extremes, we end up with complete chaos. There is a delicate balance that requires people at the top to set a vision and a clear set of parameters and often a set of simple rules. Perhaps there should be a simple kind of heuristics or guidelines that say: When faced with a situation, these are the rules that you should follow. We are not telling you what to do but keep in the back of your mind that these are the things that we are good at and these are the things that have worked for us in the past. This is, therefore, what we should do in the future. If you take a company like Google, it is making a lot of money through advertisement-sponsored search. They are also dabbling in hundreds of other things and they have a few simple rules in terms of how they do that. They work with very small teams and they work on the basis that you should be able to test something very, very quickly. It should be something that is linked to their overall mission of organizing the world's information and making it accessible.
KM: Is it really the world changing that much? If you [compare it to the era of]World War II, our grandparents and the Vietnam War, which was a time of incredible change? Are we really in times of greater change than 20 years ago, Julian?
JB: It is a very fair question. What we can say undoubtedly is that there are certain parameters - if we look at bandwidth and you look at the proliferation of certain types of financial service offerings, and you look at population growth - certain parameters are having continued exponential growth. However, our grandparents could point to other parameters, which also had exponential growth. So you are absolutely right to push me on this.
When I think about it carefully, I say to myself, we have always lived in times of change. It is just that we tend to focus on those issues that are changing faster or those parameters that are changing faster than others. It does so happen that, particularly in the whole information/communication technology space, those parameters are indeed changing much faster than they were 20 or 30 years ago. Of course, large parts of the business world are trying to come to grips with how to make the most out of what is often called Web 2.0, the kind of interactive version of the Web. So if you are a chemicals company selling chemicals, I don't think this is the story that you should be listening to. If you are somewhere in the information/communication/technology sector … then this is a very valid story here. Agility matters, but so does absorption and, in fact, it's not just about "startups" always killing the big companies. There are assets that big companies have, so there are the dinosaurs that are slow moving, who also have certain assets and what you are trying to do is try to get a delicate balance between the two. …
KM: Is agility the most important thing that companies need?
JB: Agility is vital, no question, but it's also worth bearing in mind that the big companies, the Microsofts of this world as well as the Hewlett-Packards, are dinosaurs. When you look quite closely at what it takes to survive in turbulent markets, you need to be able to spot and seize opportunities quickly, but you also need some deep pockets. You need to have the resources that enable you to ride out a storm and strike when opportunities emerge.
So I will give you just one specific example. The Brazilian company called Brahma - you may not even have heard of them, they were the company that ultimately became Anheuser-Busch InBev. The thing that enabled them to go from being a nobody on the world stage to being a global player was that they spent 10 years building the resources that enabled them to buy out their big competitor in Brazil which was called Antarctica, then subsequently to buy into the brewery that owned Labatt's and that's what created the world's biggest beer company in the world. They sat and waited - active waiting - as my colleague calls it, and that is what enabled them to strike when the opportunities arose. For me, it is about agility but it is also about what we can call absorption, the ability to withstand shocks, and those two assets together is what makes for competitive success.
KM: This has been Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail.