Editor’s Note: Rita Gunther McGrath, a Professor at Columbia Business School, is a globally recognized expert on strategy in uncertain and volatile environments. She is an author of three books: The Entrepreneurial Mindset, Marketbusters and Discovery-Driven Growth. She is about to publish her new book: The End of Competitive Advantage (Harvard Business Review Press). In addition, she has been a regular contributor at Harvard Business Review. Her thinking is highly regarded by readers and clients who include Pearson, Coca-Cola Enterprises, General Electric, Alliance Boots, and the World Economic Forum. She is a popular instructor, a sought-after speaker, and a consultant to senior leadership teams. She was recognized as one of the top 20 management thinkers by global management award Thinkers50 in 2011.
She’s also been recognized as one of the top ten business school professors to follow on Twitter. In 2009, she was inducted as a Fellow of the Strategic Management Society; an honor accorded those who have had a significant impact on the field. In 2013 she will serve as Dean of the Fellows. You can read her full bio from here. Follow her on Facebook, Twitter and LinkedIn. Read her regular write ups at Harvard Business Review Posts.
eTalk’s Niaz Uddin has interviewed Rita McGrath recently to gain her ideas and insights on Strategy in Volatile and Uncertain Environments which is given below.
Niaz: Dear Rita, thank you so much for joining us. We are thrilled to have you at eTalks.
Rita McGrath: It’s a pleasure.
Niaz: You are globally recognized expert on Strategy in uncertain and volatile environment. Can you please tell us about the term ‘Strategy’? Why is strategy so much important?
Rita McGrath: Strategy is fundamentally about making choices. Choices, of course, about what to do but equally importantly about what not to do. I think of strategy as a central, integrated concept of how we’re going to achieve our objectives. In a business sense, it’s what customers we seek to serve, what we’re going to do for them that is better than other options they have, and how we differentiate our offerings.
Niaz: How to differentiate between ‘Personal Strategy to live everyday life’ and ‘Business Strategy to Run Google’?
Rita McGrath: Personal strategy obviously involves your own choices about how you are going to spend your time, invest your resources and plan for your future. A business strategy is different in that it involves persuading many more people to support you and take actions that are consistent with your vision for the future.
Niaz: How can we integrate personal and business strategy to ensure that both personal life and professional life are going smooth and exciting?
Rita McGrath: I think you need to allocate personal time to different activities and then let the best uses of your time in each case “win”. I don’t think you always have personal and professional life in perfect balance – but you can try to get them to work together. I like to use the metaphor of a gyroscope – never falls over but adjusts to its environment.
Niaz: You have written an article at Harvard Business Review Blog ‘The world is more complex than it used to be’. How the world is more complex than it used to be? And why?
Rita McGrath: As I say in the article, it’s because things are more connected and interdependent than they have historically been. That means that you can have interactions that are unpredictable, so that you can’t predict the outcome by knowing the initial conditions. The net and advanced communications technologies have made many more connections than used to be possible.
Niaz: In your book ‘The Entrepreneurial Mindset’, you have said, ‘We have to have Entrepreneurial Mindset to succeed in unpredictable world’. Why do you think entrepreneurial mindset can help us to succeed in unpredictable world?
Rita McGrath: Because in a world of temporary advantage, you need to innovate to create a pipeline of new advantages even as old ones fades away. That requires thinking like an entrepreneur at all times.
Niaz: How can we stop acting by the old rules and start thinking with the discipline of habitual entrepreneurs?
Rita McGrath: Adopt what I call the “new playbook” for strategy – stop thinking in terms of sustainable advantage and start considering what strategy looks like when advantages are temporary. For instance, get away from industry analysis and realize that you are competing in arenas. And that your most significant competition may come from other industries, not within your own.
Niaz: As you know we love to talk about ideas, spreading ideas and getting inspired by ideas. But at the end of the day, Business Models are very important to implement and survive with those ideas. Can you please tell us about Business Model and its importance?
Rita McGrath: Well, an idea without a business model behind it is simply entertainment, in my view. A business model describes what you are going to sell, to whom you are going to sell it and how you are going to get paid for it. If you don’t have that, you don’t really have a business.
Niaz: In this world of full of uncertainties how to make great and sustainable Business Model?
Rita McGrath: I think it’s going to have more to do with networks and longstanding ties than with product or service innovation. It will also have to do with the customer experience – that’s much harder to copy than a technical innovation.
Niaz: What should be the strategy of startup companies those who are getting all giant companies like Google, Apple, Facebook and Amazon as competitors?
Rita McGrath: Find a customer niche that really wants what only you can provide and service them with well designed offerings that create a complete experience.
Niaz: Can you please briefly tell us about your best selling HBR article ‘Discovery Driving Planning’?
Rita McGrath: Discovery Driven Planning was developed to create a disciplined way of planning for new ventures, when you don’t have a lot of information. It emphasizes learning and incorporating new information into your plan when you hit key checkpoints in the development of your venture. It provides a discipline, but one that is suitable for uncertain environments.
Niaz: Why do we need ‘Discovery Driving Planning’?
Rita McGrath: Because conventional plans don’t work without a great deal of information that you simply don’t have with a new venture. It’s a recipe for developing big, expensive flops, like the Iridium project or the recent bankrupt casino in Atlantic City.
Niaz: In your books ‘Market Busters’, you cited, ‘Companies must grow to survive’. Can you please tell us how to identify specific types of growth opportunities?
Rita McGrath: In marketbusters, we look at 5 lenses to find new growth opportunities. First is the lens of the customer experience – how can you make that better. Then, are there ways to reconfigure products and services to better match customers’ desires. Next, could you develop a new business model? Or anticipate and take advantage of shifts in your entire industry? Or finally discover entirely new market spaces where you could compete. We find that any one or more of these can help to identify opportunities.
Niaz: You have said, ‘For Growth, New Ideas Aren’t Enough’. So what do we need in addition to ideas for growth?
Rita McGrath: A systematic innovation process, with a governance process, a funding process and concrete ways for ideas to get transformed into businesses.
Niaz: By this time we have created much knowledge, generated many ideas, innovated important tools and gained efficient and effective productivity. In such an exciting time, we see companies to fail to grow. Why so many good companies fail at growth?
Rita McGrath: Because they are trapped in old ways of thinking. Many try to exploit old businesses, even though that isn’t where their future lies.
Niaz: Could you explain the principal steps that a company needs to go through to create a growth framework?
Rita McGrath: Sure. These are the steps-
- Identify the growth gap
- Obtain senior level support and resource commitment
- Set up an innovation governance process
- Build a system to deliver the key steps – ideation, incubation, launch, acceleration – of a successful venturing program
- Create the supporting processes for innovation
I go into this in more detail in my new book – I can send you a copy if you’d like.
Niaz: I would really love to get a copy. Rita, Thank you so much for giving us your invaluable time, sharing us you impressive ideas and illuminating us with your great experience. All the best wishes for your upcoming book ‘The End of Competitive Advantage’.
Rita McGrath: You’re welcome Niaz.
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