Biz G2 - Cognitive Strategy ©
A Real-Time Interactive Strategic Process
Book Outline
By Edward D. Hess,
Distinguished Executive in Residence and
Adjunct Professor of Management, Goizueta Graduate School of Business
Emory University
Atlanta, Georgia
edward_hess@bus.emory.edu
Historically, the creation of a business strategy was:
- an annual planning process;
- tied to budget and capital allocation processes;
- conducted by corporate staff;
- utilizing industry analysis;
- that created 1-5-10 year plans;
- that were disseminated to managers for implementation.
It is the contention of this book that any corporation creating and implementing its strategy in that manner today will not be a winner in a constantly changing fast-paced competitive world.
We live today in a business world with few givens - two of them being that change will be constant and the velocity of change will accelerate. We live in a world of constant change, where the impacts of global capital markets, technology, deregulation will impact all businesses regardless of size and location. The ability to perceive, assimilate, and process the relevant macro and micro information queues ("Qs") necessary to respond quickly to customers and competitors will separate winners from losers. A key challenge for every business is to institutionalize the best practices of that process - i.e., how to create a true interactive learning culture.
"A winning strategy will require information about events and conditions outside the institution. The development of rigorous methods for gathering and analyzing outside information will increasingly become a major challenge for corporations", Peter Drucker, Forbes, (date).
This book attempts to advance the science of strategy by synthesizing the works of D'Aveni in Hypercompetition; Brown and Eisenhardt in Competing on the Edge; and DeGeus in The Living Company; and by incorporating the learnings of cognitive psychology - i.e., how you can train employees and executives to overcome bias, assumptions, and prejudices to perceive relevant stimuli which may challenge their current way of thinking.
Today, all businesses exists in a world characterized by:
- Global competition;
- Fuzzy industry boundaries;
- New entrants with little respect for, or fear of, established players or practices;
- Rapid technological disbursement of information leading to more transparency and shorter time periods of first mover advantages; and
- Information overload.
Executives are asking - How do I cope? How can I better control my destiny? How can I plan in such a turbulent fast-paced environment? How can I better detect or sense early warnings of change or disruption?
A new holistic concept of strategy is needed. The old ways do not work. Cognitive strategy is our attempt to advance a strategy conceptual model which helps answer those questions by creating an environment (culture) and framework (process) which increases the probability of perceiving, assimilating and acting on relevant Qs which are necessary for successful incremental change and growth. Cognitive strategy is an action-based concept intended to minimize cognitive obstacles to change.
What is cognitive strategy? First, cognitive strategy is a holistic concept. By that we mean strategy cannot be separated from leadership and culture. The three are integrally linked. They are inseparable. The essence of leadership is to establish a culture and value system which encourages and rewards openness, dissent, critique, experimentation, innovation, and a continual learning environment. You have to live your strategy daily.
A cognitive culture accepts ambiguity and is comfortable with change. Change is opportunity. A cognitive strategy is a continuous interactive process of information assimilation, analysis, and response to customers and competitors, actions and inactions. It is thousands of daily interactive feedback loops grounded and framed by overriding corporate values, which are the guideposts for decisions and actions in ambiguous situations.
You cannot separate strategy from leadership and culture. A strategic plan must be based in inviolate corporate values which leaders live daily. Strategy is the essence of leadership. Leadership is the essence of strategy.
Secondly, cognitive strategy accepts that industry analysis, scenario planning, hypercompetition analysis, value chain analysis, scorecard analysis, shareholder value analysis, and SWOT analysis are all valuable analytical tools which have a use and place in the process, but they are not strategy. They are only part of the process. They are necessary but not sufficient.
Thirdly, cognitive strategy is based on the best practices of cognitive psychology dealing with how people perceive, assimilate and process information which may challenge their biases, attitudes, and ingrained ways of thinking.
Lastly, cognitive strategy's end products are three fold:
- A game plan for each business unit, and each service and product which incorporates proactive tactics for each key existing and potential customer and each key existing and potential competitor. These game plans will be comprised of several action steps based on diversifying your risk, timing, and reward.
- A game-plan of how one can proactively change the competitive landscape; i.e., create a new value proposition - over time; and
- An early warning detection system, which increases your probability of perceiving changes in your relevant environment.
It is the thesis of this book that bad strategy results not from a lack of will, intelligence or hard work; but from bias, arrogance, an inability to discriminate relevant stimuli from noise; and a corporate culture which discourages openness, critique, dissent, experimentation and innovation.
Show us a corporate culture, which rewards: "scratch my back and I'll scratch yours" or "to get along - you have to go along" and we will show you a corporation that will be road-kill on the global competitive highway.
Cognitive strategy's fundamental underlying assumption is that there is no strategic plan that can be adopted today which will work for the long-term. A corporation can only adopt a framework of actions which must b e continuously reevaluated, monitored, and incrementally changed in response to environmental, customer, and competitor actions and inactions. That framework must be grounded in inviolate corporate values - limits on actions - which are the overriding daily guideposts.
In summary, cognitive strategy is:
- a holistic concept of corporate leadership, culture and strategic direction;
- which is based on fundamental corporate values which are the sacrosanct guides for daily employee behavior;
- which results in a diversified interactive, reactive and proactive, evolving, incremental tactical plan for each product and service, taking into account key existing and potential customers and key existing and potential competitors; with
- an institutionalized early warning detection system and review process;
- that is implemented through your rewards system.
Book Outline
Chapter 1: Best Practices - Principals of Cognitive Psychology
- How do people best perceive and process information?
- How do you increase the probability of perceiving information that conflicts with your views?
- How do you overcome bias, attitudes and preconceived opinions?
- How do you think "out of the box"?
- How do you encourage creative and innovative thinking?
Chapter 2: Future Scapes
- The creation of stories to script 3 different views of the future created by participants with a diversity of backgrounds and experiences.
- An inclusive process with key customers and customer facing line personnel - to conceptualize what the future could look like for key customers.
- Based on principles of Royal Dutch Shell scenario planning. "Scenario planning is based on the premise that we perceive something as meaningful if it fits meaningfully with a memory that we have made of an anticipated future". Ariel De Geus, The Living Company.
- Under each scenario, you must analyze who your customers and competitors will be, and what are their needs and likely actions. Your customers may be different in each scenario.
Chapter 3: Game Pictures - War Room
- Utilizing value chain analysis and hypercompetitive analysis, you will learn how to chart your Business relative to your key and potential key competitors.
- Mapping the industry games - actions and reactions of the players.
- Using financial metrics, you will chart your financial measurements versus your competitors.
- Mapping your and your competitors value added processes, and segmenting them into chunks for focus, improvement, attach, or outsourcing.
- The creation of maps for utilization in monthly review sessions. The basis for pattern recognition.
- Discussion of how to create a "War Room".
Chapter 4: Play Books
- Outlines the strategic intent and goals of each business unit, product and service.
- These plans are customer focused and competitor acknowledged;
- These plans will take into account the three likely Future Scape scenarios and seek to set forth an incremental plan to be re-evaluated monthly which maximizes success with respect to all future scenarios.
- Plan must be specific, easy to understand and communicate, but be diversified with a balance of short-term and long-term
- goals.
Chapter 5: Early Warning Detection System
- Based on your Playbook, Future Scapes, and Game Pictures, what are the critical measures to evaluate progress? What are the critical underlying assumptions that must be monitored for elements of change? What are the micro-environmental factors what will hurt you the most? What acts can the competition take to harm you significantly? What customer moves should you watch for?
- The goal is to compile a comprehensive list of Qs to watch for which may be indicative of change, disruption, customer changes or competitor attacks.
- What information sources will be monitored daily for Qs?
- How will this information be compiled, assimilated and dispersed throughout the organization? Q alerts: Codes green, yellow, and red.
- How can you institutionalize this process?
- How will you monitor customers?
- How will you monitor competitors?
- What patterns are we looking for?
Chapter 6: Focus on the 7 Cs
- Change - Metrics to chart and measure change
- Culture -
What do we strive for? What Maslovian needs do we fulfill?
"People aspire to identify with organizations that they can respect and to perform work that contributes value in a way they can understand."
Sullivan and Harper, Hope is Not a Method
- Communication - You cannot do it enough.
- Compensation - reward the right behavior.
- Customers - You and your customers are one.
- Competitors - Your best teachers.
- Complacency - Your real enemy.
Chapter 7: The Creation of a Cognitive Strategy Tool Kit
- Future Scapes
- Game Pictures
- Playbook
- Early Warning Detection System
- Implementation:
Culture
Communication
Compensation
Chapter 8: Meeting Agenda for Monthly "POW-WOWS" to Review, Critique, Collaborate
- Game Picture updates
- What has happened?
- What has not happened?
- Why?
- What should we do?
- What are we missing?
- How would we attack ourselves?
- How do we increase the number of detectors - receptive employees?
- Customer reports
- Competitor reports
Chapter 9: The 7 Jobs of a Cognitive Strategic Leader
- Lead the Strategy Process
- Be a role model - live the corporate culture
- Develop a strong and diverse management team
- Challenge your people daily - Focused Intensity
- Don't lose touch with the marketplace - know thy customers intimately
- Never stop learning
- Know When to Move On
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Copyright © 2003
