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PLANNING OR STRATEGIC MANAGEMENT?

In the age of Industry 4.0, all sectors are facing profound changes. Some of these changes are structural in nature, while others have to do with the various players involved each sector. Volatility, uncertainty, complexity, and ambiguity are the hallmarks of today’s environment. Consequently, we have been hearing more and more about the ever-increasing need for business transformation—a challenge that eclipses, both quantitatively and qualitatively, the change-management processes of the past.
How can we use business strategy to meet the need for profound organizational change? Are the traditional tools for formulating and implementing business strategies still valid? Yes, they are, although we must also use complementary approaches if we wish to achieve true strategic management. Rather than discussing a strategic plan in great detail and undertaking an in-depth preliminary study, we must focus on major lines of action based on up-to-date business models. Management responsibilities should be assigned with a degree of flexibility and plans should be revised and improved periodically. We must chart an appropriate strategic course based on a current business model that makes it possible to stay competitive in today’s context.

 

A strategic management model

In order to set an appropriate strategic course, management teams must work on four management maps corresponding, respectively, to vision, deployment, execution, and energy.

The first map, which defines our vision for the future, involves six key steps:

Identify the critical variables of the strategic environment and detect opportunities.
Evaluate the company’s current situation, as well as its business model and capacities, in order to detect potential adjustments that would enable the organization to take advantage of opportunities.
Identify the areas of value required by stakeholders and use them to guide sustainable value generation and corporate social responsibility.
Review and adjust the strategic framework.
Outline the necessary adjustments in the company’s business model and positioning.
Plan the transformation of the business model in order to put change initiatives into action in accordance with the established lines of strategy.
For each line of strategy, we must establish objectives, initiatives that set a new course (abandoning “business as usual”), and a strategic budget on the basis of three key areas: income, expenses, and the investments required for the strategic initiatives.

The second map focuses on deployment. It begins with a roadmap based on goal-setting, management indicators, and target values (in the areas of finance, strategic resources, customers and critical service processes), as well as action plans to make the strategic initiatives viable and put them into practice. The deployment of this roadmap involves the following steps:

Design a strategy map based on a roadmap that makes it possible to align and coordinate everyone who has responsibilities as well as appropriate metrics based on whatever viable information is available.
Following the roadmap, deploy a strategy that facilitates the implementation and monitoring process.
For each line of strategy, we must establish objectives, initiatives that set a new course, and a strategic budget.
The third map—execution—includes implementation and the measurement of the progress of the established strategy. The key processes on this map are as follows:

Review the organizational model to confirm that each initiative has a supervisor empowered to move it forward.
Coordinate transversal projects with the responsibilities set out in the organizational chart.
Measure the value contribution of the various centers of responsibility and projects.
Align supervisors and their teams with the strategic vision.
Align and coordinate the operating budget, which is usually drawn up on a monthly basis, with the first-year strategic budget approved in the plan.
Monitor and control the strategy using metrics having to do with objectives, budgets, and the completion of initiatives and plans.
Hold effective meetings to determine the causes of deviations and take corrective measures as necessary.
The fourth map, focused on energizing the organization and its people, is also essential. In this phase, the following steps must be carried out:

Develop the necessary talent to carry out the functions described in the plan.
Implement work processes that energize people and improve their occupational sustainability.
Encourage commitment by adapting management systems (including compensation and incentive systems) to align people with the plan.
Embed the values of the new culture in the behavior of the leaders as well as everyone else in the organization.
Improve effective leadership competencies and governance processes in the organization.
We must manage the future not with a plan, but with a management process based on a decision-making framework.
Towards value creation

By integrating and aligning the content of the four maps, we can guarantee the implementation of this decision-making framework, which is essential to ensuring sustainable value creation in any organization.

Three key issues must be taken into account. First, strategic management is a must. Today’s organizations face rapidly evolving environments. We must therefore manage the future not with a plan, but with a management process based on a decision-making framework and guided by principles that allow a flexible, agile response to changes.

Second, this framework is based on the coordination of a series of tools and methodologies for envisioning, deploying, executing, and energizing, all with the aim of creating an agile decision-making process.

Finally, we mustn’t forget the pillars of strategic management. The management team must distribute its work hours among the seven pillars that support this process:

Reflection and rigorous analysis of the environment and the company’s situation.
Creativity to envision the necessary changes in the business model.
Capacity to plan and deploy objectives and initiatives.
Organizational flexibility to align and empower people.
Decision-making capacity to make corrections and adjustments.
Mental and executive flexibility to enable a diverse range of cultural profiles to coexist in a single decision-making and execution environment.
Framework of values to guarantee the sustainability of the project.
The management team plays a fundamental role in integrating the four maps and boosting results in the short and long run, while at the same time generating a virtuous cycle based on improvement momentum.

 

© IE Insights.
ABOUT THE AUTHOR
GONZALO REAL
ASSOCIATE PROFESSOR OF STRATEGY AND MANAGEMENT CONTROL AT IE BUSINESS SCHOOL
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  Artificial Intelligence: A Competitive Capacity
JANUARY 21, 2020
ARTIFICIAL INTELLIGENCE: A COMPETITIVE CAPACITY
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COMPETITIVENESS & GROWTH | SMART SOCIETY | STRATEGY | TECHNOLOGYSHOW SUMMARY
Outside of scientific circles, artificial intelligence still generates a certain degree of fear. However, where some see the empire of the machines, others see a republic of opportunities—the fourth industrial revolution as a chance to better address social and business needs.
Is artificial intelligence (AI) a friend or foe? Even today, this debate remains highly polarized among non-scientists. AI’s critics can be somewhat alarmist, while its advocates see enormous potential to achieve competitive advances that would otherwise be out of reach.

There are two main types of AI. The first is artificial general intelligence (AGI), also known as “strong” AI. This is the kind that conjures up negative connotations for some people: self-aware technology with a will of its own and priorities not dictated by humans. The second type is artificial narrow intelligence (ANI), or “weak” AI. Nowadays, all intelligent computational technologies designed for well-defined purposes use ANI.

Both types of AI entail risks derived from poor management on the part of humans. Nevertheless, AI has clear benefits: smart algorithms are capable of processing previously unimaginable quantities of data, and machine learning allows predictions that are far more accurate than those generated by traditional models.

Therefore, AI is anything but a threat. It is actually a competitive capacity based on algorithms—integrated mathematical models capable of providing specific answers while also learning from their interactions, thereby increasing the accuracy of their predictions.

Smart algorithms are capable of processing previously unimaginable quantities of data.
The next wave

AI development has come in multiple waves. The first wave was all about the Internet: providing customer service via the web and mobile devices, developing better interfaces, and gaining a better understanding of user preferences.

The second wave involved using AI to make better decisions, understand consumers, focus marketing actions, and reduce costs and workloads through smart automation.

The third wave brought capacities related to voice, image, and video recognition. These technologies made it possible to extract previously untapped information and convert it into useful data for the creation of new systems and applications.

The next wave—autonomous AI—will bring automated mobility capable of detecting and responding to the environment. Examples include self-driving vehicles, robotics, and production automation.

This smart technology poses a fundamental shift, since it changes how we create value.
The fourth industrial revolution

This smart technology is part of a great transformation that has been called the “fourth industrial revolution,” which differs from its predecessors in certain key ways. The first three industrial revolutions were characterized by a massive displacement of labor: many jobs disappeared, while new work capacities led to the creation of others. The introduction of automated teller machines (ATMs), for example, led to the automation of this function and the streamlining of related jobs. Nevertheless, the number of bank employees actually increased to cover new functions made feasible by this technological advance.

In the case of AI, the revolution is profoundly different. Jobs are no longer directly transformed; instead, new jobs have to be created. This is where it is essential to see an opportunity. As the World Economic Forum has acknowledged, the current revolution is affecting physical, digital, and biological systems in ways that previous revolutions did not.

In addition, this smart technology poses a fundamental shift, since it changes how we create value. Returning to the previous example, whereas ATMs automated processes but did not alter the basic nature of banking, today’s blockchain technology is clearly transforming how value is stored and deep learning is revolutionizing our ability to make predictions. These technologies are taking efficiency to a new level.

The great challenge is to democratize the development and application of this technology, which is currently concentrated in the hands of a privileged few.
Artificial intelligence in practice

From a social perspective, it is important to note that AI is applicable to a wide range of fields where people have problems in need of solutions.

From a business perspective, in order to get the most out of these smart technologies, organizations must consider various aspects in order to determine real needs. The first step is to clearly define an objective, rather than trying to tackle an excessively broad range of goals.

Second, weigh the risk: if you consider all the implications, you might find that process automation or digitalization is the most effective way to achieve the desired result.

Another key point has to do with data, the most important asset of the 21st century. It is preferable to focus on small quantities, since quality is more important than volume. Finally, any organization that wants to initiate this sort of process must analyze what it needs to do in order to transform internally.

The great challenge is to democratize the development and application of this technology, which is currently concentrated in the hands of a privileged few, while at the same time nurturing a new connection between people and AI. Can the next wave make this dream a reality?

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To Train More Workers, Companies Turn To Virtual Reality

By Beth Pinsker

NEW YORK (Reuters) - The future of employee training involves no embarrassing role-playing in front of new colleagues or boring web modules which take an hour each to click through.

For the next wave in workplace learning, get ready to strap on a pair of virtual reality goggles. In ten minutes, the lesson is indelibly locked in your brain.

It is not exactly magic, it is not exactly science, but it is working well enough for companies as far-flung as Walmart, Fidelity Investments, and Accenture.

"This is what pilots have been doing for 50 years. You fly the plane without flying the plane," said Derek Belch, founder and chief executive of Strivr, a virtual reality-based immersive-training provider based in Menlo Park, California.

"We can give that to any employee of any type."




LEARNING IN ACTION

At Walmart, the two-year-old program hinges on using the 360-degree video experience of virtual reality to let employees see situations from different perspectives.

Now, VR headsets are in more than 4,500 stores, and some 800,000 associates have gone through training with them, said Andy Trainor, vice president of U.S. learning for Walmart.

The setup is not very glamorous or high-tech at the Walmart Academy in an industrial corner of Northern New Jersey. Headsets can be found in a small, sparse conference room at the end of a warren of corridors in the store room.

Once you put one on, though, you are in a zen-like middle world. A few turns on a spinning office chair, and you lose all sense of the room around you.

To teach what are known as "soft skills," which involve qualities like communication, teamwork and leadership, Walmart's empathy module begins from the perspective of the cashier. You see a busy checkout lane and customers lining up.

But then the perspective shifts, and you are suddenly the customer. You move through the back stories of why those particular people are upset:

A father who is with his young son is short of money to buy baby medicine.

A man is late to see his daughter's performance in a show because his car broke down, and he needs to buy jumper cables.

A woman is flustered buying things her father needs because he just landed in the hospital.

"Cashiers can get very robotic and autonomous," Trainor said. "Every single customer has a story, and there’s a reason they’re in the mood they are in."

The message the company is hoping to pass along: You can help make the customer's day better instead of worse.




BEHIND THE TECH

A lot goes into crafting the scenarios to address the biggest pain points companies face. There are scripts and storyboards, and most work with third-party content creators, like Strivr, or Talespin, based in Culver City, California.

Many companies are currently using Oculus hardware, from Facebook, which comes in a few different varieties, some of which are more hands-free than others.

VR technology is advancing toward systems where you can measure biofeedback and voice responses, and also track hand and eye movements, said Isabel Tewes, who leads the virtual reality enterprise ecosystem for Facebook.

Fidelity Investments, the Boston-based money management firm, uses many of these functions to get young call-center agents to understand their mostly older, retired clientele, said Adam Schouela, vice president of emerging technologies.

The simulation is complex. After you hang up on a trial call, you switch perspective to become the customer and see the impact of the transaction. In one instance, a customer asks for a check, but you have to ask the right questions to figure out that an electronic transfer would help the person more.

Farmers Insurance uses similar training for agents to practice difficult conversations with an avatar. Their pilot program should reach 500 representatives within the first quarter of 2020.

"It’s tied to confidence building," said Jessica DeCanio, head of claims training for Farmers. "We want agents to be as confident as possible when they go into a home. The more opportunities to accelerate, the better."

Measuring soft skills is not easy, but most companies find that the return on investment in virtual reality comes in the time saved and in employees who perform better.

"You have the ability to do it wrong," Schouela said. "It’s one of those extra elements that technology gives you. It almost feels real."


(Editing by Lauren Young and Bernadette Baum)