Strategy

The hype surrounding “digital transformation” shows no signs of fading. For many, it is just a buzzword – another way of saying “digitization” or “digitalization”. However, that’s a mistake. These are, in fact, three separate concepts, and understanding how they differ is crucial to developing the skills needed to digitally transform an organization and identify the secrets to success. The checklist at the end of this text will help you do just that.

Although we hear the terms “digital transformation”, “digitization” and “digitalization” on a regular basis, attempts to actually put these concepts into practice tend to fail almost as often. That is because opinions on what these terms actually mean differ widely. Some see them as buzzwords – they sound good in a marketing strategy, but are tricky to define. Others think they all mean the same thing, but that’s a misconception that prevents many companies from successfully transforming their operations on a digital basis.

Digitize, digitalize or digitally transform?

Although these three concepts look similar and are closely related, they have distinct meanings. It can help to think of them as three separate stages:

Digitization
You could say that it all starts with digitization, perhaps the simplest of the three terms to define. Digitization is the process of converting analog information into a digital format. Photographs, paper documents, video tapes and cassette tapes can all be digitized to preserve or leverage their content. For example, scanning pictures and documents is an effective way to digitize the data they contain so it can be utilized in computer systems.
Digitalization
This is the second stage and is primarily about organizations (whether corporations, medium-sized enterprises or small businesses) using digital technologies in current workflows and existing business models. The aim is to create added value on an effective and efficient basis. New information technology is transforming processes in companies. For instance, training courses and meetings that would previously have taken place in person are now being held digitally using collaboration tools such as Teams. Established procedures such as order entry are also being digitalized thanks to new technologies. Another example would be customers using apps and online shops to place their orders instead of sending them in by mail, fax or email. At every level, digital formats and technologies simplify handling and save both time and money.
Digital transformation
The third stage is to complete the transformation by adopting new business strategies and approaches on an enterprise-wide basis. After all, digitalization can cast doubt not just on individual workflows, but also on entire business models. Companies can use new options such as cloud computing and big data technologies to gain access to new sales channels and digital services. Take, for example, platform companies, which offer goods, real estate and services digitally and have the potential to revolutionize entire sectors. Even startups, when they set themselves up as digital enterprises, can compete with the biggest players in their market. It’s all about revolutionizing business models and the customer experience.

Digitalization is a vehicle

While the definition of digitization is pretty concrete, the distinction between the other two stages is perhaps less clear. Digitalization is a powerful force that can trigger a new way of thinking and that encourages companies to question what has gone before. However, it is worth noting that digital development is not driven solely by internal factors – external circumstances, such as COVID-19, also have a part to play.

What’s more, it is important to remember that although digitalization enables the creation of digital business models, it is not one in its own right. If transformation is the destination, then digitalization and digital technologies are just the vehicle and every company has to find the best route and strategy for getting there.

Digital transformation – a continuous process

This is where “digital transformation” comes in. The phrase covers more than just the digitalization of products, workflows and business models. It is a global concept that factors in all aspects of a business – the customer experience, products, the market and the new economy. The authors of a European case study on digital transformation in industry defined it as follows: “We understand the digital transformation as the seamless, end-to-end connectivity of all areas of the economy, and as the way in which the various players adapt to the new conditions that prevail in the digital economy.” That means digital transformation is a continuous and disruptive process that extends far beyond the definition of digitalization. Digitalization is just one aspect of digital transformation, albeit an integral one.

Companies should adopt a more global outlook and not just rely on technology alone to digitize data and digitalize their operations as they are. If they can’t see the bigger picture, they risk ending up in a situation that was neatly summed up a number of years ago by trained electrical and telecommunications engineer and senior executive Thorsten Dirks:

“If you digitalize a crappy process, then you end up with a crappy digital process!”

Sometimes, this concept of transformation is taken even further – beyond the corporate context. In these cases, it is viewed in very general terms as a continuous process of change that is impacting wider society and the economy. It is also referred to as the digital revolution, in reference to the industrial revolution.

Five secrets for a successful digital transformation (competencies and prerequisites).

How the transformation actually works – five secrets to success

Digital transformation will succeed if products, workflows and business models are understood within the aforementioned context and actually put into practice in day-to-day business. To ensure the transformation works, certain skills are required and certain conditions need to be created – these are the secrets to success, and there are five factors that are crucial:

Capacity for change
The ability to innovate
Specialist expertise and methodological know-how
Cooperation
Data expertise

1. Capacity for change – a genuine opportunity

One of the key issues to clarify is how well the company in question embraces change. If you want to take digital transformation seriously, you need to look closely at the organization, initiate a structural and systemic process of change and ensure staff are on board at the same time. Is enough information being shared with employees? Most importantly – are they prepared for the forthcoming change?

For a transformation to be successful, it is vital to create interest in the new arrangement and nurture the right kind of mindset among staff. For everything to work out, the entire company needs to be set to the task. Various roles and aspects can function as positive “drivers” in this – the management team, the corporate culture, the employees themselves, and the organization’s innovative capacity and agility.

For your checklist: How to encourage curiosity and a readiness to change

How do we respond to changes and what do we need to do better?
To what extent can organization and corporate culture help us in this respect?
Which measures and applications can we use to help our staff more when it comes to the capacity for change?
What part can corporate communications play in this?

2. Innovative capacity – identifying and adopting new approaches

Digital transformation means change – stepping into a brand-new digital landscape. That’s why it is important to be focused when driving forward innovation and to know which direction changes need to take and how to achieve them. This calls for creativity, plenty of ideas and also the courage to adopt a visionary approach and imagine totally new things before they are put into practice. It also takes perseverance, since the task at hand is all about breaking up and redefining old workflows, outdated structures and obsolete digital infrastructures in the organization. As if on an expedition, enterprises sometimes need to enter new territory. Moreover, new approaches may require innovative methods, technologies and strategies that have not been tried out before. This again underscores just how important it is that companies can embrace the spirit of innovation when trying to transform their organization digitally.

For your checklist: How your company can promote a passion for innovation

What role does innovation play when it comes to setting up internal procedures and how agile are we in our response to changes in the market?
How innovative are our strategies and corporate culture and what can we improve?
Which agile and new methods and technologies might help drive innovative capacity in the company?
How keen are our staff on innovation? Do they have the information and skills required?

3. Specialist expertise and methodological know-how – rapid know-how transfer is essential

Digitalization transforms products, workflows and business models. From the perspective of staff, who get new tasks and roles as a result, this development poses a real challenge. They are the players in day-to-day procedures and the users of the new, digital technologies. This means they need to be integrated into an ongoing learning process, since companies need to constantly adapt to changing market conditions.

This makes specialist expertise and methodological know-how all the more important. Staff should be in a position where they can rapidly assimilate specialist knowledge. To do that, they need access to the right methods and tools and they must know how to use them. This is where the management team comes in – it must make the right material and technologies available to its workforce.

For your checklist: How to take learning to a whole new level

What new specialist expertise and methodological know-how do we need in the company?
What specialist expertise and methodological know-how do our staff have already?
How can we give staff precisely the training they need so we can build up the specialist expertise and methodological know-how we need in the company?
Which digital applications, methods, technologies, content or platforms will help us achieve that best?

4. Cooperation – networking with partners

When embarking on a difficult journey, it’s best not to travel alone. The same applies to digital transformation. That’s why it is important to understand your organization’s strengths and expertise while at the same time recognizing your limits and knowing when it’s a good idea to seek outside support. There are always experts that a company can turn to at any time – and doing so saves time and money. In the ideal scenario, a partnership can be the thing that tips the balance in your favor and helps you edge ahead of the competition.

For your checklist: How to benefit from a partnership

Which skills and capabilities do we have and which do we need to acquire?
In which specific areas do we need outside support and is it worth establishing a longer-term partnership?
Which type of partnership is suitable and what should the partner provide?

5. Data expertise – finding and reading the right sources

Digital transformation never stops. Companies must continuously re-evaluate themselves, keep an eye on the market and constantly realign themselves to meet demands and needs that have arisen. To do that, they need data – and the right sort. This needs to be collected, analyzed and then correctly interpreted. Different companies in different sectors have different priorities when it comes to data. They might use information from production to make operations run more smoothly on a digital basis, or use customer data to develop or improve products digitally.

For your checklist: How to make the most of your data

What type of information is strategically important for implementing our projects?
What type of data can we already harvest and what insights can we gain from it?
How can gaps in information or content be closed?
Which evaluation processes have we already established and how can we make good use of data for digital development?

To summarize, digitization is a method that uses technology to convert analog information into a digital format, while digitalization is a vehicle that uses technology to make digital transformation possible. When correctly understood and implemented, digital technologies can help companies make crucial progress and get in shape for the future – particularly as part of a strategic transformation. This also requires a change in mindset. It is only when a company has achieved this that it will be well prepared on a long-term basis for a successful future.

Source: insights.tt-s.com

In today’s ever-changing business landscape, the term “strategy” has evolved into a versatile concept, and its importance in the context of Mergers and Acquisitions (M&A) cannot be overstated. This article examines the different sides of strategy, from its historical origins to its pivotal role in shaping successful M&A endeavors. By delving into both historical and contemporary examples and offering actionable insights, we aim to elevate our understanding of strategy to an unparalleled level.

From War Rooms to Boardrooms

To truly grasp the essence of strategy, it’s essential to trace its lineage from ancient warfare to the modern business world. The Greek term “strategos” was synonymous with the art of war, characterized by meticulous planning, resource allocation, and decisive action. Even as the concept of strategy has transitioned from the battlefield to boardrooms, the core principles remain profoundly relevant.

Historically, the concept of strategy is not confined to a specific era or culture. It is adaptable and universal. The ability to adapt, outmaneuver competitors, and seize opportunities forms a common thread in both military campaigns and corporate competitions.

Corporate Strategy vs. M&A Strategy

In the realm of business strategy, two distinct yet interrelated concepts play a pivotal role: Corporate Strategy and M&A Strategy. These two facets are integral to an organization’s growth and evolution, each with its unique focus and purpose.

Corporate Strategy: Setting the Stage

Corporate Strategy is the foundational pillar upon which an organization’s overarching goals are established. It encompasses the grand vision of a company and defines its path for future growth and prosperity. Initially, most companies begin with a generic growth strategy, aiming to expand their market presence and increase their revenue. However, as a company matures, it often finds the need to diversify its approach and explore new avenues for growth.

In this phase, a shift occurs from the conventional strategy of generic growth to a more nuanced and sophisticated approach. This evolution may be triggered by various factors such as market saturation, changing consumer preferences, or emerging disruptive technologies. The corporate strategy then takes on a more refined shape, focusing on diversification, operational efficiency, or other specialized goals.

M&A Strategy: Aligning with Desired Outcomes

In the realm of M&A Strategy, the core emphasis is on identifying and achieving specific outcomes that align with the evolved corporate strategy. This stage involves strategic decision-making regarding market expansion, diversification, operational efficiency, or other targeted goals. M&A Strategy serves as the bridge between the broad corporate strategy and the tactical actions required to make it a reality.

Setting Well-Defined Goals: The Cornerstone

In the context of Corporate Strategy, the foundation is built upon well-defined goals that provide direction and purpose. These goals serve as the guiding light, illuminating the path toward strategic success. Companies aspire to shift from generic growth objectives to more focused and specialized goals, which are aligned with their evolving corporate strategy.

For instance, consider Amazon’s acquisition of Whole Foods. of Whole Foods. This strategic move exemplified the company’s goal to enhance its market presence and distribution capabilities, reflecting a shift from generic growth towards a more targeted objective.

Making Strategic Choices: The Heart of M&A

In the M&A realm, strategy thrives on the choices made to achieve the desired outcomes. These choices revolve around target selection, negotiation tactics, and integration approaches. M&A Strategy is the vehicle that translates corporate goals into actionable plans. It involves assessing potential targets, evaluating the synergy they offer, and selecting those that best align with the company’s evolving corporate strategy.

Take, for example, Disney’s acquisition of 21st Century Fox. This strategic choice was made to gain a competitive edge in content production and streaming services, reflecting Disney’s decision to diversify and enhance its content portfolio.

Executing with Precision: Bringing Strategy to Life

No strategy is complete without effective execution. In M&A, the focus shifts to implementing the chosen strategies. It involves the integration of acquired entities, successful negotiation of terms, and ensuring a seamless transition. Effective execution is paramount to achieving the desired outcomes set by the corporate and M&A strategies.

An excellent illustration of effective execution is the integration of Pixar into Disney’s animation division. This showcases the importance of well-executed actions in realizing strategic goals, aligning with Disney’s goal of becoming a dominant player in the animation and content industry.

Contextualizing Strategy in Mergers and Acquisitions

Corporate Strategy lays the groundwork for a company’s overarching goals, while M&A Strategy is the tactical approach that aligns with these goals, aiming to bring them to fruition. These two facets work in harmony, ensuring that an organization adapts and evolves in a dynamic business environment.

M&A strategy is a nuanced and complex discipline. It involves acquiring or merging with another company to achieve strategic objectives like growth, diversification, or cost reduction. The strategic fit between the acquirer and the target company is a critical aspect of M&A strategy.

The concept of strategic fit in M&A mirrors the alignment of military forces on the battlefield. In M&A, it means ensuring that the target company aligns with the acquirer’s overall strategic vision.

Example: Microsoft’s acquisition of Linkedin aimed to harness the platform’s professional network and align it with Microsoft’s suite of productivity tools, creating a synergy that enhanced both companies’ strategic positions.

Valuation in M&A is akin to assessing the lay of the land before entering the battlefield. Overpaying for an acquisition can have dire consequences. Thorough valuation ensures the price paid for the target company is justified.

Example: Verizon’s acquisition of AOL required a meticulous valuation process to ensure the purchase price aligned with the assets and potential synergies.

Effective integration of acquired entities is the equivalent of consolidating territories after victory. An integration plan should cover aspects like merging IT systems, streamlining operations, and eliminating redundancies.

Example: The successful integration of Pixar into Disney’s animation division showcases the importance of a well-executed integration plan.

Cultural Integration: Combining organizations with distinct cultures can be complex, affecting employee morale. Effective cultural integration is crucial.

Regulatory Hurdles: Navigating complex regulatory environments, especially in cross-border deals, is a significant challenge. Compliance and legal considerations must be addressed.

Financial Risks: Overleveraging or underestimating financial risks can lead to instability. Careful financial planning and due diligence are vital.

Communication and Stakeholder Management: Effective communication with employees, stakeholders, and customers is key to maintain trust and confidence throughout the M&A process.

Source: maa-institute.org

In the post-pandemic M&A landscape of economic uncertainty and geopolitical tension, strategic M&A planning is fundamental for organizations to adapt to the new normal and shift their focus from mere financial gains to tactical objectives, like market expansion and access to new technology.

The article explores the basics of mergers and acquisitions strategy, provides merger and acquisition strategy examples, and explains how to mitigate M&A risks, including ESG and cultural alignment.

What is an M&A strategy?

Mergers and acquisitions strategy or M&A strategy is a company’s approach and method for combining or acquiring other businesses to achieve certain goals, such as expanding market share, accessing new technologies, or diversifying product offerings.

To understand M&A strategies, it’s important to distinguish between two buyer types: financial and strategic buyers.

Financial buyers

Financial buyers engage in M&A transactions with the goal of financial return. These are professional investors, often from private equity firms, who stick to the following process:

Acquisition. They choose target companies, identifying and purchasing the best financial option.
Performance enhancement. They work to enhance the target company’s performance by implementing measures to reduce costs, improve cash flow, and boost profit margins. The primary objective is to enhance returns on invested capital.
Exit strategy. They sell the acquired company or list it on the stock market with an initial public offering. For insights on how to pitch a stock during the exit phase, refer to our article.

Strategic buyers

Strategic buyers are companies that regard M&A as a logical extension of their broader growth strategy. In strategic mergers and acquisitions, one company buys another to pursue specific strategic aims, such as:

Synergy realization. When starting the M&A processes, companies often focus on cost synergies. However, studies demonstrate that a failure to consider revenue synergies from the start of M&A may slow the realization of value by a year or more. To prevent it, companies involved should develop cross-functional teams to create realistic plans for achieving goals.
Market expansion. The most visible sign of a company’s growth is market presence, often quantified through metrics like market share, customer loyalty, and brand recognition. When Microsoft purchased LinkedIn for $26.2 billion, it entered the professional networking and social media space, broadening its market access beyond traditional software and technology.
Access to new technologies and intellectual property. Without innovation, businesses are left behind. That’s what happened to hundreds of large companies, including Kodak, which was so focused on the success of photography film that it missed the digital revolution. That’s why pursuing technology-driven M&A opportunities is a must, especially for tech companies and the pharmaceutical industry. It allows you to get the technology quickly without the need to develop it and helps avoid royalty payments on patented technologies.

Strategic planning in M&A

When the objective of an M&A lacks clarity and a well-defined strategic rationale, the deal falls apart. Take, for instance, the merger between America Online and Time Warner, which was valued at a stunning $350 billion in 2000. Despite initial expectations for success, the new entity failed. The inability to see the future of the internet, understand the landscape of the media industry, and identify cultural misalignments led to the collapse of a merged company.

That’s why, before starting the M&A process, careful strategic planning is essential. It involves outlining the objectives and actions necessary for a successful transaction. Consider the following:

Clear objectives. Define the strategic objectives driving the M&A, whether it’s entering a new market, acquiring technologies, or realizing cost savings through economies of scale. For example, when acquiring LinkedIn, Microsoft formulated its goal as “to grow the professional networking site and integrate it with Microsoft’s enterprise software,” indicating market expansion as their key strategic objective.
Thorough due diligence. Prepare to conduct comprehensive due diligence on the target company, evaluating its financials, operations, IP, and legal aspects. Seek advice from professional services firms that can help identify potential risks or opportunities associated with the target firm. Also, leverage tools such as virtual data rooms to ensure secure and efficient information exchange.
Employee retention. According to EY research, 47% of employees leave after a transaction. The number grows to 75% within three years. To minimize the human capital loss, both the target and acquiring firm are recommended to nominate the 2% of critical talent in each business area and prepare retention packages for them. It’s also essential to develop a comprehensive M&A communication plan to provide employees with a clear vision for the company’s future.
M&A regulatory compliance. During M&A, both target and acquiring companies become subject to regulatory scrutiny and legal considerations from bodies like antitrust authorities or competition commissions. The aim is to assess the transaction’s potential impact on market and price competition to prevent monopoly and ensure compliance with relevant regulations. To mitigate legal complexities, seek advice from legal experts specializing in M&A.

Types of M&A strategies

Companies may employ various M&A strategies, depending on the objectives they want to achieve.

Category	Most suitable for	Key objectives	M&A strategy cases
1Horizontal mergers	Two businesses that operate in the same industry and share the same product lines and markets (direct competitors)	To eliminate competition, reduce costs, and achieve economies of scale by combining similar operations	Disney’s acquisition of Pixar united two entertainment industry giants, aiming to consolidate resources and eliminate competition
2Vertical mergers	Companies at different stages of the supply chain	To improve supply chain efficiency, reduce operating costs, and enhance control over the production process	Vertical integration of Tesla with SolarCity united electric vehicles and solar energy, enhancing efficiency and creating comprehensive sustainable energy solution
3Market extension M&A	Companies selling the same products in different markets	To expand market reach and increase customer base	Procter & Gamble’s acquisition of Gillette brought together two consumer goods giants. This market-extension merger allowed P&G to expand its market presence globally
4Product extension M&A	Companies offering complementary products or services in the same market	To diversify product or service offerings and cross-sell to existing customers	Google expanded its services and entered the online video-sharing space through the product-extension merger with YouTube
5Conglomerate mergers	Two companies with unrelated business activities	To increase market share and diversify businesses	Amazon’s acquisition of Whole Foods is an example of a conglomerate merger. It united an e-commerce business with a grocery chain, diversifying its business portfolio and expanding its presence in the retail industry
6Cross-border acquisition	Companies aiming for global expansion and international market access	To expand into new markets internationally	Visa’s acquisition of UK-based fintech Currencycloud allowed Visa to strengthen its position in the global payments industry and improve its services for international transactions

It may happen that after carefully analyzing a deal, the buy-side or sell-side decides that merger and acquisition strategies don’t present the best choice for the company’s organic growth. In this case, it may consider other options, such as an alliance, joint venture, or franchise.

An alliance is a collaborative partnership between two or more companies that involves the sharing of resources and expertise. In joint ventures, two or more businesses come together to undertake a specific project. Franchises grant the right to operate using an established business model.

Some companies might also opt for a divestiture strategy that involves divesting some acquired assets or business units to grow and increase market value.

The human factor: Cultural mergers in strategy

A strategic merger between the German-based Daimler-Benz and American-based Chrysler serves as an excellent example of how a significant cultural gap can lead to the failure of corporate consolidation. The clash in management styles, communication practices, and decision-making processes resulted in operational challenges and hindered the expected synergies and revenue growth.

That’s why cultural alignment in mergers should never be underestimated. When companies combine, it’s not only about the financial and operational aspects. The human factor plays a crucial role and should be considered during post-merger integration and included in the M&A integration plan.

Here are the best practices for successful post-merger change management and cultural integration:

Early cultural due diligence. Conduct thorough cultural due diligence early in the M&A process. Understand the values, beliefs, and practices of both organizations to identify potential areas of misalignment.
A cultural integration plan. Develop a plan with initiatives that can help culturally integrate the companies. For example, create cross-cultural training sessions and invite experts to discuss cultural nuances, potential challenges, and strategies to navigate them.
Leadership alignment. Schedule regular senior management meetings where leaders from a target and an acquiring company can express their expectations and concerns for the integrated organization.
Feedback sessions. Organize regular feedback sessions where employees can express their thoughts, concerns, and suggestions regarding the integration.

Risk mitigation in M&A strategy

Effective risk assessment is key to successful deals. Let’s explore how identifying and managing risks paves the way for smooth and prosperous transactions.

Key risks to know	Description	Risk mitigation tactics
1Challenging economic times	It’s believed that M&A activity decreases in an economic downturn. However, a PwC analysis found that companies pursuing deals during economic uncertainty saw higher shareholder returns than industry peers	1. Stay adaptive and confident even in uncertain economic times. This helps identify and capitalize on emerging business models, as in past recessions 2. Diversify funding sources, focusing on maintaining access to capital and considering both public and private funding options
2Risk of target overvaluation	According to McKinsey, 25% of deals are overestimated by at least 25% in planned cost synergies, potentially leading to a 5% to 10% valuation error	1. Conduct a thorough and objective evaluation, assessing the target’s past performance and future potential. Use methods like discounted cash flow or precedent transaction analysis 2. Hire external financial advisors to offer an unbiased perspective
3Poor due diligence	Inadequate due diligence can lead to poor valuation, unexpected litigation, or tax issues, while thorough due diligence allows the buyer to adjust expectations, devise effective negotiation tactics, and reduce the risk of legal or financial challenges	1. Start due diligence early, ideally after the signing of a Letter of Intent (LOI) 2. Assign specialists with business, legal, and financial expertise and industry knowledge to conduct due diligence

ESG considerations

Due to a rising awareness of the significance of sustainability and ethical practices in business, the ESG impact on M&A shouldn’t be overlooked. In fact, almost 70% of respondents surveyed by Deloitte consider ESG strategically important in M&A.

However, they also admitted that it’s not always clear how to incorporate ESG factors into M&A strategies. For example, 43% said they include ESG in M&A discussions just occasionally, and 39% lack clearly defined metrics for evaluating ESG.

To respond effectively to the growing importance of ESG in M&A strategies, let’s explore the three key ways ESG is reshaping M&A:

ESG presents new value-creation opportunities. In 2021, private investors saw remarkable returns, with $86 billion generated from 80 exits in climate tech, clean tech, and impact investing. Studies also indicate that better ESG performance aligns with higher annual returns, leading to a compounded effect of 20% to 45% over 5 to 10 years.
ESG reveals new risks. These risks include climate-related threats to assets and challenges from the global move away from fossil fuels. These risks raise questions that companies and investors can address in advance, like the vulnerability of assets to rising sea levels and extreme weather events, the cost of compliance with future regulations, and the impact of new climate tech innovations on markets and supply chains.
ESG impacts can be quantified. Many organizations struggle to translate ESG issues into financial terms, but this can be addressed with the help of advisory services. For example, in one case described by Deloitte, a potential deal to acquire an energy provider was abandoned due to greenwashing in revenue reporting. That was because achieving the target’s stated 80% revenue from renewable fuels would have required a $300 million investment.

Key takeaways

M&A strategy involves a company’s methods for combining with or acquiring other businesses to achieve specific goals like cost and revenue synergies, market expansion, or access to new technologies.

Mergers and acquisitions business strategy types include horizontal, vertical, market-extension, product-extension, conglomerate, and cross-border acquisition strategies.

Strategic planning is vital for successful M&A, emphasizing clear objectives, thorough due diligence, employee retention strategies, and compliance with regulatory requirements.

To achieve cultural alignment, which is so important in M&A, consider early cultural due diligence, a comprehensive cultural integration plan, leadership alignment strategies, and regular feedback sessions.

The most common risks companies should address in M&A are uncertainties in economic times, target overvaluation, and poor due diligence.

Source: mnacommunity.com

Strategy activation in public organizations is crucial for turning strategic goals into actionable initiatives that deliver measurable outcomes.

Alignment with Public Policy and Regulations
Public organizations operate within a framework of laws, regulations, and policies. Strategy activation must align with governmental priorities, legislative mandates, and public sector values. This ensures that initiatives not only meet organizational goals but also contribute to broader societal objectives.
Stakeholder Engagement is Key
Public organizations often serve diverse stakeholders, including citizens, elected officials, and other government bodies. Engaging these stakeholders early and continuously throughout the strategy activation process is essential to ensure buy-in, address concerns, and adapt strategies to meet the needs of different groups.
Resource Allocation and Constraints
Unlike private organizations, public entities often face tighter budgetary constraints and rigid funding structures. Effective strategy activation requires realistic resource planning, optimizing limited resources, and prioritizing initiatives to align with available funding and workforce capacity.
Accountability and Transparency
Public organizations are held to higher standards of accountability and transparency. Strategy activation must incorporate mechanisms for regular reporting, performance tracking, and public communication. This ensures that progress is visible and that the organization is accountable for delivering on its strategic goals.
Change Management and Cultural Adaptation
Implementing a strategy in the public sector often requires significant organizational change. Public organizations may face resistance due to deeply embedded processes, workforce structures, and cultures. Effective change management, including training, communication, and leadership support, is vital to ensure that the organization can adapt and fully activate the strategy.

Each of these elements plays a critical role in ensuring that strategy moves beyond planning and into effective execution in the public sector context.

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Having foresight is key to developing a winning corporate strategy. But between sifting through a sea of data, navigating unpredictable events like the pandemic, and keeping up with the pace of technological innovation, knowing what to keep an eye out for can be challenging.

According to Gartner, the average corporate strategist spends 26% of their team’s time and around $200,000 of the annual budget investigating emerging trends. With the increased spending on corporate strategy expertise (up 51% YoY on Graphite), we wanted to know the trends shaping the future of this core functional skill.

To get to the bottom of this question, we engaged our network of experts on the ground floor in developing and executing corporate strategies for their clients on Graphite. Here are the five trends we unearthed.

1. Growth Strategy Will Take on a Whole New Meaning

For years, the role of corporate strategy was centered on where to play and how to win. But as the pace of disruption accelerates, it’s no longer enough to just focus on those areas. To succeed in today’s environment, corporate strategists must focus on speed and capabilities.

Yet focusing on speed and capabilities must also be done with caution. Rather than focusing on growth at all costs, the focus will be on making smarter, harder investment decisions that will lead to sustainable growth and a risk-averse portfolio.

A key component to accomplishing this will be finding new ways to differentiate the business from the competition. This will be done in several ways, either by M&A or building those capabilities within the business. Data and analytics, digital customer engagement, and the ability to create digital business models will factor greatly into strategic plans.

And while M&A growth will be more conservative when compared to 2021, it will still serve as a viable growth strategy as it relates to building out new business capabilities. In this regard, the use of data and technology as part of the transaction process and the ability to execute and move quickly will be vital for any M&A-led growth strategy.

2. Data and Market Research Will Play a Pivotal Role

Given the uncertainty of new and upcoming coronavirus variants, the economy, and geopolitical tensions, businesses are increasingly relying on data and market research to gain a competitive advantage.

Fueling this demand for information is the need to quickly synthesize patterns and trends to enable faster decision-making across the entire organization. From an operational perspective, data is essential in driving supply chain efficiencies. Visibility into inventory, distribution, and production goes a long way in protecting a company’s bottom line.

Likewise, the use of consumer data to inform go-to-market strategies enables companies to better position themselves when entering a new market or launching a new product or service. As digitization and the need to gain new capabilities increase, more emphasis will be placed on market research and data to ensure these initiatives succeed.

3. Building a Resilient Workforce amid Economic Uncertainty

Growing a team during uncertain economic times remains the main concern for CEOs this year. Leaders face a trifecta of challenges: a slowing economy, decreased profitability, and a tight labor market. Building a team that’s agile and resilient can future-proof the business. But where to start?

One way hiring managers are widening their talent pool is by leveraging a skill-based hiring model. By hiring for the right skill, companies can build a hyper-focused and more flexible workforce.

Another approach companies are exploring is on-demand talent acquisition platforms. This hiring model enables companies to build agile and flexible teams on demand— helping them pivot and innovate at a much faster pace than with traditional talent acquisition models.

Beyond filling an immediate need, businesses can upskill their workforce with the help of independent talent. Likewise, they can layer this hiring model on top of their existing talent strategy to build an agile operating model where talent can be deployed quickly to the highest priority work — ensuring strategic work gets done on time.

4. Developing More Flexible, Agile, and Adaptable Supply Chains

Supply chain issues will remain a hot-button area for businesses across industries for the foreseeable future. We’ve touched on this throughout this blog, as trends, like most things, are interconnected and influence and impact one another.

As businesses strive to optimize supply chain operations to satisfy consumer demand, they are using all the tools at their disposal. That means investing in data to facilitate the acquisition and implementation of automation, AI, and machine learning technologies to conduct M&As in adjacent sectors to remove barriers to resources.

To truly move beyond a reactive state, leaders will need to start focusing on producing the next disruption rather than waiting for it. As a result, companies will be relying more heavily on data and market research to compete effectively, not just with adjacent businesses, but with uncontrollable factors such as climate change as well.

This is especially true at a time when visibility, tracing, and sustainability are becoming central themes for supply chain leaders. As a result, ESG projects, although not a top priority at the start of the year, will continue to increase in the future.

5. Continued Acceleration of Digitization

Digitization has been an ongoing trend, but the pandemic put it into overdrive. Companies that did not have technology as a priority had to quickly pivot and reevaluate their stance on the tech and tools they use.

Today, the implementation of technology has permeated the entire business ecosystem. Companies are increasingly leaning into AI and machine learning to optimize supply chains, increase productivity, improve customer experiences, and enhance cybersecurity.

Business leaders show no signs of slowing down either. Global spending on technology is expected to rise by 2.4% this year. Despite an economic slowdown and cost-cutting efforts, companies remain firm in their commitment to digital initiatives by increasing their investments.

However, productivity and efficiency aren’t the only reasons behind the demand. Businesses are also analyzing how AI and machine learning can be used as a value driver rather than a cost factor.

John-David Lovelock, Gartner’s research vice president, says that IT spending remains recession-proof. He further states, “while inflation is devastating consumer markets, contributing to layoffs at B2C companies, enterprises continue to increase spending on digital business initiatives despite the world economic slowdown.”

It’s All about Staying Ahead of the Trends and Capturing Future Value Today

Corporate strategists today are dealing with multiple unknowns and must be able to pivot at a moment’s notice. Besides continuously developing holistic strategies that maximize the benefits of businesses’ investments and initiatives, they’re also expected to accomplish more with less.

In 2018, the average corporate strategy team consisted of five members. But with the shifts in today’s labor market, it’s likely that the sizes of these teams have either remained or changed, given the increased demand for this core functional skill.

One way to navigate the trends shaping corporate strategy’s future is to lean on independent experts to add capacity and horsepower to your teams. Adding expertise to your strategies can enhance the effectiveness of your projects while fast-tracking new projects and initiatives.

Want a look at how companies are using on-demand talent acquisition to power their corporate strategy teams? Read this blog on four ways companies are leveraging independent corporate strategy teams to learn how.

Source graphite.com

The success of an organization depends on its strategy. The higher-level strategic planning and the ability of the company to implement its strategy determine how well the organization performs and remains successful in the long run in today’s fast-paced and competitive business environment. Strategy implementation is crucial because you must execute a strategy well to achieve your company’s objectives and goals, and you will miss opportunities and lose revenue.

In contrast, if you can execute your strategy well, your company can gain a significant competitive advantage. It will allow you to achieve your goals and remain ahead of the competition for a long time. As a result, companies are increasingly looking for ways to improve their strategic implementation and enhance their ability to execute their plans better.

Rising Usage of AI

Artificial Intelligence (AI) is among those emerging technologies that have gained focus in the business world in recent years. AI has gradually chipped away the inefficiencies in various aspects of operations and enhanced customer experience. Companies have been exploring and identifying numerous ways to use AI to drive growth and improve business outcomes.

One area where the use of AI is gaining momentum is strategy implementation. AI technologies enable companies to understand and leverage data better, gain valuable insights and optimize their strategy implementation. It leads to better decision-making and resource allocation and brings improved business outcomes. In this article, we will explore how companies use AI for strategy implementation to gain a competitive edge.

Manage the top line: your strategy, your people, and your products, and the bottom line will follow
Bill Gates

What is a Strategy?

Strategy is a blueprint and a high-level plan created by the management for achieving the long-term goals of an organization.

A business strategy is based on a detailed assessment of the following.

The current situation in the company
Strengths and weaknesses of the organization
New opportunities and threats
Current market conditions
Developments in the industry you operate in
Competitors and competing products
Risks that you may need to manage

Creating a strategy involves making decisions based on these factors, creating a roadmap for operations, and formulating an action plan to achieve the objectives. The business strategy governs the goals, targets, activities, outcomes, and resource allocation for various processes and operations of the organization, such as the following.

Market segmentation
Product development
Product positioning
Pricing
Sales
Marketing
And more

Strategy implementation involves creating ownership of the business strategy amongst employees, achieving strategic alignment across the organization, and fine-tuning processes and systems to deliver desired outcomes per the strategic plan.

When executed right, a business strategy will create desired outcomes at all levels, which will snowball into organizational growth, success, and fulfillment of the organizational objectives. It creates a sustainable, long-term competitive advantage for the organization.

How does AI help with strategy implementation?

Artificial Intelligence (AI) is a replication or a simulation of intelligence required to perform human tasks that involve perception and cognition. AI-powered machines perform tasks that require human intelligence, such as data analysis, visual perception, image processing, facial recognition, speech recognition, decision-making, translation, etc. These AI systems are constantly learning. They can update themselves, improve functionality, and adapt to new situations and environments.

In the business scenario, integrating AI in various aspects of the business enhances your ability to execute your strategy more effectively. Following are some of the ways AI helps in executing business strategy.

1. Automation of repetitive tasks

AI helps companies automate repetitive tasks, such as inventory management, which humans previously carried out thoroughly. For instance, AI helps in warehouse management and automation of procurement by managing purchase orders, maintaining the vendor database, sending purchase orders to concerned vendors at the right time, etc. Through this automation, the warehouse management system ensures the availability of crucial components, materials, and products just in time when you require them. It helps companies manage demand and supply better. AI is used similarly in various operations to reduce labor costs and increase productivity and efficiency.

2. Data analytics and insights

AI helps companies gain comprehensive insights by analyzing vast amounts of data to identify patterns and trends. For instance, AI can constantly track the number of leads generated through every marketing channel and compare them with the amount you spend in those channels for your marketing efforts. It helps you allocate resources better for different marketing efforts and get more out of reduced spending.

3. Predictive modelling

AI can help businesses build predictive models to anticipate future outcomes and trends. For example, you can predict product demand based on patterns identified from historical sales data and customer behavior. For instance, if the holiday season is nearing, AI can help you analyze and predict the surge of demand and make critical business decisions, such as setting higher production targets, running extra shifts, having a specific amount of products in stock, adjusting pricing, designing marketing campaigns and offers to attract customers, etc.

4. Personalization

AI helps companies personalize the customer experience. For instance, it provides product suggestions based on customer preferences. It enables personalization in other areas, such as emailers that can be customized and personalized with content based on certain predefined conditions. For instance, companies have abandoned cart reminders automatically sent to customers who add products to the cart but leave the site/app before making a purchase. Through these personalizations, AI makes it possible to cater to every customer better based on their preferences and improve customer experience drastically. It also helps to increase conversion and retain customers better.

5. Automated decision-making

AI can automate decision-making processes. For example, chatbots can cancel orders and initiate refunds upon request. In a variable pricing scenario, AI helps to determine the pricing based on predefined rules and criteria. It helps reduce human errors and make data-driven decisions to achieve success consistently.

5. Automated decision-making

6. Risk management

AI analyzes data and identifies business risks to help companies prepare for these eventualities and avert risks. For instance, AI can analyze patterns and save insurance companies from false claims by assessing historical data and finding the correlation between connected events and a spike in claims, such as the connection between the loss/damage of smartphones and the launch of next-generation models. The use of AI in risk management is gaining popularity in recent times.

A Step-by-Step Guide to Integrating AI into Your Strategic Execution

AI needs to be set up and customized to your use cases. Before you can start integrating AI, you need the following.

A clear understanding of the business goals and objectives
In-depth understanding of the data and systems required to support the strategy
Human resources and infrastructure to support the development and deployment of AI models and systems

You can start integrating AI and enhance your strategy execution by following these steps.

1. Encourage the adoption of data analysis

While AI can provide insights that can lead to business-critical decision-making, the stakeholders and decision-makers need to realize the importance of data. They should build a deeper understanding of how to decode insights and rationalize decisions and actions based on that. Otherwise, your team won’t be able to leverage the data for the organization’s benefit. So it is essential to train your workforce, management, and leadership team on data analytics and ensure they have the analytical skills to drive business outcomes. A consistent understanding and interpretation of insights go a long way in driving sustained change.

2. Identify your use cases

While implementing AI Can bring efficiencies and ensure better strategy implementation, it also costs a lot. So it is essential to study how your competitors and the leading companies outside the industry implement their strategy using AI. You can draw inspiration from them, but identify your unique use cases and analyze the feasibility of integrating AI. It is crucial to discuss with all the stakeholders, including concerned teams, and analyze if the benefits outweigh the costs.

3. Select the areas of opportunity

After you can identify the use cases, you have to select the areas in your business operations that will benefit the most from AI integration and get a quick return on investment. You can forecast this using various metrics to analyze the potential impact of AI implementation in these areas.

4. Audit your capabilities

You have to thoroughly analyze and identify the human resource and technology requirements to implement artificial intelligence in the identified areas. You need to identify the gaps in existing technology and the lack of skills required to leverage AI. Based on this analysis, you have to organize training and workshops for concerned employees and seek the expertise of consultants and other third-party associates, to leave no stone unturned regarding AI implementation.

5. Narrow down your choices

While you can choose broad areas of business where artificial intelligence makes sense for your operations, you have to narrow your focus further. For instance, if you want to implement AI in marketing, you can do it in many ways. You can use AI to automatically segment customers based on their preferences and behavior on your e-commerce website and create categories in the mailing list accordingly; you can automate sending of emailers based on certain pre-determined conditions; you can use AI to track the performance of marketing campaigns and optimize marketing efforts; you can use AI to provide personalized experiences by sending personalized offers to customers and creating loyalty programs optimized to increase conversion rates. You can narrow your focus to specific operations and processes in your broader use cases by identifying inefficiencies in operations, finding suitable AI solutions to address them, and doing a cost-benefit analysis.

6. Implement a pilot project on a small scale

When integrating AI for strategy implementation, you can first test it on a smaller scale. You need to gather data, develop customized algorithms and release it on a smaller scale in a controlled test setup involving experts in artificial intelligence, data analytics, and the concerned business processes. It helps to measure the impact, foresee the risks and tweak your AI models before scaling them up.

7. Establish a baseline understanding

Document your learnings and establish a baseline of understanding. Compare the results with the forecasts and see whether your small-scale pilot project met its objectives. It helps to build on your experience and knowledge of AI and fathom its impact on your strategy implementation.

8. Scale your AI integration

Once you verify the effectiveness of your AI on a small scale, you can gradually scale AI deployment. As you scale up the AI integration, you may need to continuously tweak the algorithms and business processes. Ideally, the impact of AI on your strategy implementation will show up in your metrics and help build confidence across the organization. It will convince the stakeholders to experiment with AI integration in other aspects of your business and broaden the influence of AI in your strategy implementation.

9. Complete the AI integration

Integrating AI is one thing, but gaining a competitive advantage in the long run and achieving long-term growth by improving its lifecycle, testing, and deployment is another.

You can achieve these by building a modern data platform that enables the streamlined collection, storage, and structuring of data so that the accuracy of chosen metrics and the quality of insights and reporting remain consistent. You can structure your organization in such a way that the development of data platforms and governance based on the priorities of your business power your goals and decisions. You should also build processes and expand the technologies required to manage data elements from various parties.

10. Build on the implementation and find room for improvements

AI models and processes require continuous improvements to keep in sync with the rapid changes in the business environment and quickly respond to changes in the strategy. It would be best to listen to feedback and proactively address the lack of AI adoption or resistance to AI at every level of the organization.

Frequently Asked Questions

1. What is the role of AI in business strategy?

AI helps companies improve strategy execution by analyzing massive data, offering valuable insights, influencing business-critical decisions, and optimizing operations to achieve a sustained competitive advantage.

1. What are the 4 AI business strategies?

AI strategies can be classified into

(a) Effectiveness strategy – to make operations more effective and impactful

(b) Expert strategy – for the automation of decision-making

(d) Innovation strategy – for promoting creativity and innovation

1. What is an example of how businesses use AI?

An example of AI usage by e-commerce businesses is the automation of sending personalized abandoned cart emailers.

Conclusion

AI is transforming the way businesses approach strategy. By leveraging AI to analyze data, automate operations, and personalize the customer experience, businesses can gain a competitive advantage in today’s fast-paced business environment.

Source: profit.co

Strategic development is a joint board-management responsibility. It is the key stage of the strategy process where the board and senior management team work together to develop the organisation’s strategy. At this stage, the attention is on the top-level strategy; the overall corporate strategy and, depending on the size of the organisation, the business strategies of the major divisions.

It is now common for the board and management team go off-site for a board retreat to discuss the current strategy in detail. If the strategy is working and is well understood by both directors and managers, this stage might involve nothing more than an annual review of progress, discussion of changes in the strategic landscape and a reaffirmation of the core strategies. On the other hand, if current results are poor or if major changes are forecast for the external environment, a far more searching review and re-evaluation of strategy might be required. This may take a longer than one retreat and may require a number of follow-up workshops.

The advantage of the retreat is that by isolating the board from regular distractions and spending a significant time delving into the organisation’s strategy, the quality of any decisions is likely to be enhanced. A strategy retreat also provides an ideal opportunity for team building and encourages active participation from all board members. It is also a major opportunity for discussion and development of shared views about strategy both among directors and between the board and senior management.

The decision to hold a retreat is an important one, because it represents a significant time commitment for board members and in many cases management. Retreats commonly occur over one or two days, generally on a weekend. If directors are to spend this much time dedicated to strategic issues, it is important to plan the weekend to ensure that optimal results are obtained.

The importance of planning

But strategy retreats do not always live up to their potential and can fail to meet the board’s objectives without proper planning and commitment from both the board and management. From personal experience, boards that are not engaged in the planning and committed to the process can very easily derail a board retreat. For example, it is not productive to have three directors delay the start of the afternoon session by an hour on the first day of a retreat because they were unhappy with the lunch menu approved by the CEO without board input and demanded alternate meals be prepared for them.

As such, planning should include:

Date – it should be in the board’s calendar at the earliest opportunity, as having all directors attend can be vital to the acceptance of the decisions made during the retreat;
Objective(s) – this will depend on whether it is it an annual strategy retreat to develop a new strategic plan, review the current strategic plan or in response to a major change in the organisation’s environment, e.g. funding cuts, loss of a major customer;
Duration – this will depend on the objectives;
Budget for the retreat – this will influence many of the other decisions;
Responsibility – allocate responsibilities, e.g. organising bookings, preparing discussion papers or presentations;
Attendees – will it be the board only or the board and management? Are spouses invited?
Facilitator – an external facilitator can often help to keep the agenda on track; ensure all attendees are given a chance to participate; and deal constructively with any conflict that arises without becoming emotionally involved;
Location:
- Meeting facilities – size of the room (it should allow participants to spread out for group work), whiteboards, projector, internet access, printing, photocopying, etc.;
- Accommodation;
- Catering; and
- Recreational activities;
Data – what input/information is required from directors and managers prior to the meeting?

As noted above, I have witnessed a number of board retreats go awry for a variety of reasons. Too much to drink at the previous evening’s dinner or during lunch can see directors or senior managers falling asleep or obviously intoxicated during a session. Lower level managers may be reluctant or not interested in participating because they have not had previous exposure to the board and have no idea what they are doing there. Directors being rude to the managers present or each other. Just as in regular board meetings, clear ground rules about what is expected for the retreat in terms of behaviour and participation is a good start, so too is gaining buy-in from the attendees to the outcomes of the retreat so that it adds value to the organisation rather than draining its resources, which are often scarce in the case of not-for-profits.

To ensure that optimal results are obtained. Board retreats are most effective if the following steps are followed:

Before the retreat – management should collate and develop materials such as competitor analyses for discussion well in advance of the retreat, while both directors and managers should do pre-work (see below for the benefits of pre-work).
Conduct targeted analysis prior to the workshop, and then develop a clear agenda focused on achieving specific outcomes and resolutions in key decision areas.
During the retreat – management presentations at the retreat should be concise and factual. The objective of the retreat is to stimulate discussion of strategic issues, not to spend your time listening to lengthy presentations by managers or invited guest presenters. A note taker should be appointed to capture agreement succinctly.
After the retreat – management will incorporate the decisions made at the retreat into strategic options, detailed objectives and strategies for board review and approval. This will then be followed by the annual implementation plan and budget.

For those organisations without the time or resources to conduct a retreat, there are other options. For example, a review of the board’s strategic plan can be included as part of the yearly board agenda, and has the added advantage of regularly concentrating the board on strategic issues. Another option for the board is to hold a number of special board meetings to review particular strategic issues. As part of this process, the board may wish to consider a one-day facilitated session with senior management to consolidate previous board discussions and decisions to guide management.

The benefits of pre-work

The benefits of pre-work include:

Sets the ‘climate for strategic change’ within the organisation;
Establishes a ‘strategy mindset’ for participants prior to attending the workshop. They are now ‘ready to learn, listen, contribute and participate’ – after all, they are the ones who have to make it work;
Frees up the retreat for discussion;
Saves time – reduces the threat of ‘time-pressure’ facilitation;
Enables facilitators to present the ‘group view’ or ‘invisible group consensus’, rather than their own views;
Participants are more likely to respond openly in pre-work than in front of their peers;
Identifies topics for debate.

Compiling a databook

To get the most from a strategy retreat, the board must ensure there is a real understanding and agreement as to the major issues facing the organisation that is based on facts. As noted above, a solid understanding of the organisation’s strategic landscape comes from gathering relevant data and allowing directors and senior managers to consider and discuss this data using a sound framework. I always recommend compiling a databook that includes the results of the survey (collated and themed) and the information developed by management. For example:

External data
- Industry trends
- Competitor analysis
- Market trends
Internal data
- Current strategy and goals
- Financial
- Operational
- Markets

The data book will be used in conjunction with this workbook to guide the discussion throughout the retreat. The databook should be circulated to directors at least seven days before the retreat to give them time to prepare.

Incorporating risk into the strategy retreat

Risk and strategy are totally interrelated. Consequently, any discussion or decision by the board concerning strategy also involves a discussion of risk. The challenge for boards and management teams is to integrate these two essential roles of the board. For example, considerations of alternative strategies should use the organisations approved risk approach as one technique for analysing these strategy alternatives. Workshops or retreats devoted to risk can be conducted in tandem with a strategy retreat, but at the very least the major strategic risks to the organisation should be considered.

Conclusion

Holding a successful strategy retreat can be a key factor in the achievement of an organisation’s strategic objectives. As discussed, the preparation for the retreat will be the difference between a retreat that achieves little in the way of genuine strategic planning and one that provides a solid basis for management to formulate the detailed strategic, business and implementation plans, and budgets that the board will be asked to approve.

Source: effectivegovernance.com.au

As the year 2023 steadily draws to a close, it’s an opportune moment to pause and reflect. For businesses, this prompts a critical question: how successful have we been in executing our strategic plans? In the fast-paced realm of strategic planning and execution, success transcends lofty visions and boundless ambition. It hinges on setting a clear course, continuously monitoring progress, and making data-driven decisions.

Vital to this journey are Key Performance Indicators (KPIs) and metrics, which bridge the gap between your strategic objectives and the path to achieve them.

In the following article, we will explore the essential elements of mastering KPIs for strategic success, offering you valuable insights to conclude this year on a high note and step into the next with even greater confidence.

Establishing Impactful KPIs within your Strategy:

When it comes to using KPIs in strategic planning, two extremes often emerge. Some plans lack metrics entirely, relying solely on immeasurable qualitative descriptions, while others become swamped with metrics, lacking a clear strategy for their effective use.

The key to success lies in striking a balance. At the pinnacle of your strategic plan, you’ll find overarching goals or lagging metrics, representing your ultimate destination—outcomes you can’t directly control but can improve over time with diligent effort. Supporting these lagging metrics are leading metrics, elements within your control that provide immediate insights and the power to drive change.

Imagine it as setting a New Year’s resolution to become healthier. You could trust your instincts or overwhelm yourself with countless health metrics. The optimal approach involves setting a clear lagging metric, such as losing 20 pounds, and pairing it with actively measurable leading metrics like exercise frequency, calorie intake, and sleep hours. An effective plan encompasses both elements, turning strategic planning into a journey where you monitor not only your destination but also the progress along the way.

Selecting the Appropriate Metrics and KPIs:

One common pitfall in metric selection is emphasizing leading indicators at the expense of lagging ones. While leading metrics are essential for immediate progress, an overabundance of them can lead to a tactical focus that misses the big picture.

Imagine diligently tracking your exercise routine to lose 20 pounds but neglecting your calorie intake. Similarly, focusing solely on driving website traffic without converting visitors into customers won’t fulfill your overarching goal of revenue generation.

To avoid these pitfalls, strive for clear alignment between leading and lagging metrics. If your chosen leading metrics don’t contribute to your overarching goals, you’re on the wrong track. Ineffective plans often blur the line between objectives and execution or get lost in activity-based metrics that don’t drive strategic success.

Recognizing these missteps and ensuring a strong correlation between selected metrics and strategic goals enhances your organization’s planning and execution processes.

Measure the Success of Your KPIs and Strategy:

In strategic planning, many organizations spend excessive time selecting metrics. It’s crucial not to get bogged down by this decision. What matters most is getting started and ensuring your chosen metrics serve one of three primary purposes: increasing, decreasing, or maintaining a specific value.

Begin with your current state and aim for incremental improvements. For instance, aim to improve your revenue by 10 percent. This provides a benchmark to adjust throughout the year.

Avoid overcomplicating the process; focus on setting realistic goals. We suggest a goal to achieve around 80 percent of your metrics. Aiming for an 80 percent success rate allows you to maintain momentum and refine your strategy. Reaching 100% may imply your goals weren’t demanding, while achieving just 20% could be discouraging, hinting at excessively difficult objectives.

When assessing the effectiveness of your plan, focus on completion of initiatives, KPI tracking, timeliness of updates, and project timelines. These aspects collectively contribute to measuring the success and effectiveness of your strategic plan.

Conclusion:

Remember, it’s not about finding the perfect metrics but about taking the first step, continuously improving, and making informed decisions on your strategic journey. With the wisdom shared by H. Pierson’s Strategy team, you’re well-equipped to master KPIs for your strategic success.

Author: H. Pierson Strategy Team

In today’s rapidly changing world, businesses face an ever-expanding range of risks that can disrupt operations, impact financial performance, and even threaten their very existence. While traditional risk management practices focus on known risks, it is crucial for organizations to proactively identify and manage emerging risks. These are risks that may not be well-understood or have not yet materialized but have the potential to significantly impact business objectives. In this article, we will delve into the realm of emerging risks, explore their characteristics, and provide practical strategies for identifying and managing these unknown threats.

Understanding Emerging Risks

Emerging risks are dynamic and multifaceted, constantly evolving as technology advances, social and regulatory landscapes shift, and new global challenges arise. These risks often stem from emerging trends, such as technological advancements, regulatory changes, geopolitical uncertainties, environmental shifts, or socio-cultural transformations. Identifying and understanding these risks requires organizations to be forward-thinking and adaptive.

Characteristics of Emerging Risks

Uncertainty: Emerging risks are characterized by a high degree of uncertainty, making it challenging to predict their exact nature, timing, and potential impact. For example, the rapid emergence of new technologies like artificial intelligence (AI) or blockchain introduces unknown risks that may disrupt industries or create unforeseen vulnerabilities.
Complexity: Emerging risks often exhibit complex interdependencies and systemic effects. They can transcend organizational boundaries, simultaneously affecting multiple sectors, industries, or geographic regions. An example of this is the interconnectedness of global supply chains, where a disruption in one region can have cascading effects worldwide.
Novelty: Emerging risks are often novel or unfamiliar, lacking historical data or established risk management frameworks. As a result, organizations must adopt a proactive and adaptive approach to identify and address these risks effectively.

Strategies for Identifying Emerging Risks

Horizon Scanning: Regularly scan the business environment for emerging trends, technological advancements, regulatory changes, and socio-cultural shifts that may have an impact on the organization. Engage in foresight exercises, monitor industry publications, attend conferences, and collaborate with external experts to stay abreast of the latest developments.
Scenario Planning: Develop and analyze plausible scenarios that explore potential emerging risks and their implications for the organization. These scenarios should consider a range of future possibilities, helping management anticipate and prepare for potential threats. By conducting scenario planning exercises, organizations can better understand the potential impacts of emerging risks and develop appropriate risk response strategies.
Stakeholder Engagement: Engage with internal and external stakeholders to gather diverse perspectives on emerging risks. Employees, customers, industry experts, regulators, and other relevant parties can provide valuable insights and identify risks that may not be evident from a single viewpoint. Encouraging a culture of open communication and collaboration can help foster a proactive risk management mindset within the organization.

Managing Emerging Risks

Risk Assessment and Prioritization: Conduct a comprehensive risk assessment to understand emerging risks’ potential impact and likelihood. This process involves evaluating the organization’s vulnerabilities, assessing the effectiveness of existing risk mitigation measures, and prioritizing emerging risks based on their severity and potential consequences.
Agility and Adaptability: Cultivate an organizational culture that embraces agility and adaptability. This includes fostering a mindset of continuous learning, encouraging experimentation, and empowering employees to identify and respond to emerging risks promptly. Agile organizations are better equipped to effectively adjust their strategies, operations, and risk management approaches to mitigate emerging risks.
Robust Risk Response Plans: Develop robust risk response plans to address emerging risks. These plans should include specific actions, responsibilities, and timelines for implementation. Depending on the nature of the risks, response strategies may involve enhancing organizational resilience, diversifying supply chains, investing in technological solutions, or creating contingency plans to ensure business continuity.

Conclusion

Organizations must proactively identify and manage emerging risks to safeguard their future as the business landscape becomes increasingly complex and interconnected. By understanding the characteristics of emerging risks and adopting effective strategies, businesses can enhance their risk management practices, strengthen resilience, and seize opportunities arising from uncertainty. Embracing a proactive approach and fostering a risk-aware culture will enable organizations to navigate the unknown and thrive in an ever-changing world.

References:

Global Risks Report 2023: World Economic Forum.
https://www.weforum.org/reports/the-global-risks-report-2023

“Managing Emerging Risks: A New Approach” – Deloitte.
https://www2.deloitte.com/us/en/insights/focus/risk-management/managing-emerging-risks.html

“Identifying and Managing Emerging Risks” – Harvard Business Review.
https://hbr.org/2018/05/identifying-and-managing-emerging-risks

“The Agile Risk Management Manifesto” – Risk Management Society (RIMS).
https://www.rims.org/resources/agile-risk-management-manifesto

Organizations are well served when they examine, embrace, and utilize what makes them unique in the perspective of the clients they serve during these most difficult times. A discriminating competence assessment is a common name for this type of study. Such an analysis identifies the collection of knowledge and tools that enables a business (or organization) to offer a certain value to a consumer.

A discriminating competence or core competence is a highly developed skill that enables a business to provide distinctive value to clients. It represents an organization’s collective learning, notably on how to coordinate various production skills and integrate various technology.

Understanding discriminating competencies enable organizations to invest in their competitive advantages and be distinct from the competition.
For government and nonprofit organizations, discriminating competence is essential for determining where programs and services can/should be delivered in an efficient, cost-effective way.

Organizations use Discriminating Competencies to:

Create positions and plans for competition that take advantage of organizational strengths.
Create new markets and penetrate developing ones swiftly
Improve knowledge and skill transfer between business units and functional units within the organization.
Increase the range of an organization’s innovation capacity to provide new goods and services
Improve branding and increase consumer loyalty
Choose where to put resources.

Amazon is a prime example. As they put it, Amazon wants to be “earth’s most customer-centric company.” In this case, we can see that Amazon’s main capabilities are focused on:

offering a first-rate customer experience through quick delivery based on their innovative infrastructure and logistics
excellent customer support
and easy access to a broad variety of goods at a cheaper price.

These capacities open doors to a variety of markets, make it difficult for rivals to copy them, and significantly increase the perceived value for customers. The fact that Amazon has been able to develop, use, and rearrange its discriminating competencies into long-lasting competitive advantages is a prime example of why the company is so well-positioned to grow its services and thrive in a quickly shifting external environment.

Maximizing Your Core Competency:

First, you need to identify where your organization has competence mastery. The following list of typical core competence areas includes:

Product Quality – superior to industry norms in terms of product or service quality.
Service levels that are far superior than industry norms.
Strong consumer focus resulting in a high level of customer closeness.
Brand reputation & image – built over several years of exceptional performance.
Special and distinctive technical abilities of one or more team members

Particular attention should be paid to the internal capabilities of the organization which customers recognize as its competitive advantage. The organization’s core competency becomes the center around which pertinent business prospects are selected and the organization’s strategic direction is established.

Discriminating competences have to be seen as dynamic components that change over time in response to the operational environment of the firm. You can turn a skill into a core skill and become “competitively different” in the process.

For a competency to be considered unique, it must be a quality that the customer appreciates and that competitors would like to have in their own business. A discriminating competency cannot be an essential quality to the organization’s operations (but not exceptional in any way) because it does not distinguish the organization from competitors.

An ability that is essential to an organization’s operations but is not remarkable in some manner should not be regarded as a core competency since it does not set the company apart from its rivals.

Amazon has undoubtedly embraced this justification. Perhaps it’s time to implement this practice if your company doesn’t already.

H. Pierson Strategy Consulting Team.

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Digitize, digitalize or digitally transform?

Digitalization is a vehicle

Digital transformation – a continuous process

How the transformation actually works – five secrets to success

1. Capacity for change – a genuine opportunity

2. Innovative capacity – identifying and adopting new approaches

For your checklist: How your company can promote a passion for innovation

3. Specialist expertise and methodological know-how – rapid know-how transfer is essential

4. Cooperation – networking with partners

5. Data expertise – finding and reading the right sources

From War Rooms to Boardrooms

Corporate Strategy vs. M&A Strategy

Corporate Strategy: Setting the Stage

M&A Strategy: Aligning with Desired Outcomes

Setting Well-Defined Goals: The Cornerstone

Making Strategic Choices: The Heart of M&A

Executing with Precision: Bringing Strategy to Life

Contextualizing Strategy in Mergers and Acquisitions

Strategic Fit: Aligning for Success

Integration: Seamlessly Unifying Forces

Challenges and Pitfalls of M&A in Action

Warfare Metaphors in Strategy: Modern Relevance

Conclusion: Elevating the Art of Strategy

What is an M&A strategy?

Financial buyers

Strategic buyers

Strategic planning in M&A

Types of M&A strategies

The human factor: Cultural mergers in strategy

Risk mitigation in M&A strategy

ESG considerations

Key takeaways

Alignment with Public Policy and Regulations

Stakeholder Engagement is Key

Resource Allocation and Constraints

Accountability and Transparency

Change Management and Cultural Adaptation

1. Growth Strategy Will Take on a Whole New Meaning

2. Data and Market Research Will Play a Pivotal Role

3. Building a Resilient Workforce amid Economic Uncertainty

4. Developing More Flexible, Agile, and Adaptable Supply Chains

5. Continued Acceleration of Digitization

It’s All about Staying Ahead of the Trends and Capturing Future Value Today

Rising Usage of AI

What is a Strategy?

How does AI help with strategy implementation?

1. Automation of repetitive tasks

2. Data analytics and insights

3. Predictive modelling

4. Personalization

5. Automated decision-making

5. Automated decision-making

6. Risk management

A Step-by-Step Guide to Integrating AI into Your Strategic Execution

1. Encourage the adoption of data analysis

2. Identify your use cases

3. Select the areas of opportunity

4. Audit your capabilities

5. Narrow down your choices

6. Implement a pilot project on a small scale

7. Establish a baseline understanding

8. Scale your AI integration

9. Complete the AI integration

10. Build on the implementation and find room for improvements

Frequently Asked Questions

Conclusion

The importance of planning

The benefits of pre-work

Compiling a databook

Incorporating risk into the strategy retreat

Conclusion

Understanding Emerging Risks

Characteristics of Emerging Risks

Strategies for Identifying Emerging Risks

Managing Emerging Risks

Conclusion

Organizations use Discriminating Competencies to:

Maximizing Your Core Competency:

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