Shaping Strategy in the world of constant Disruption

Presented by:Amit Khandelwal

What is Disruptive Innovation

• In simple terms disruptive innovation is an innovation that disrupts an existing market.

• Was introduction of automobiles in the nineteenth century an example of disruptive innovation??

Shaping Strategy

• A shaping strategy is no less than an effort to broadly redefine the terms of competition for a market sector through a positive, galvanizing message that promises benefits to all those who adapt to new terms.

• Eg: Bill Gates in early 1980s. (mainframes to desktop machines).

Digital Infrastructure

• New powerful enabling infrastructure.• Strengthen the hands of strategy shaper and

reduces the exposure to risk.• Unlike the other technical (disruptive) innovations

like steam engine, electricity.• Above forces stabilized after business harnessed

their potential.• Provides potential for small actions and investments

to make an impact disproportionate to their size.

Rethinking the Substance of Strategy

• Convention wisdom holds adaptation as the best strategy in case of absence of equilibrium

• Real opportunity missed??• Successful shapers: “ Reduces risk and magnify

hopes”.

Success in Shaping Strategy

• Risk Taking

• Unique insights at both Macro and Micro Level

• Need managers who can evangelize shaping views (internally and externally)

• Coordinate relationship with a no of third party participants.

Elements of Shaping a Strategy

Elements of Shaping a Strategy

• Changing Risk/Reward calculus as you shape your strategy involves:

1. Shaping View: helps focus participants.2. Shaping Platform: provides leverage to reduce the

investment and effort participants need to make.3. Shaping acts and Assets: Persuade participants that the

shaper is serious and can pull off the shaping strategy.All the three shapers provide shapers:• Quickly attract and mobilize a critical mass of

participants.

Shaping View

• Change the way the potential participants perceive the market opportunities.

• Altering mindsets can materially influence the perceived economic incentives to participants.

• Start with a clear long term view of the market• It makes sense of fundamental forces at work, helps

participant envision the rewards and act accordingly.• Reduces perceived risk by making the positive outcome

inevitable.• Never in detail; leaves room for refinement• Helps participants make difficult choices in long term.

Shaping View and Vision

Vision• Vision tends to be narrow – only the direction of company

articulating the vision.• Vision tends to be broad– they define future so vague to

accommodate virtually choice or action.

Shaping View• It starts with clear perspective on direction of relevant market and

articulate the value creation implications for all companies involved.

• Must be at a high enough level to account for general business uncertainty and leave room for experimentation and innovation.

Shaping Platform

• Set a defined standards and practices that helps organize and support the activities of many participants.

• Shaping platform provides leverage.• Development Leverage: derived from new technologies.

Reduces investment and effort• Interaction Leverage: Reduces cost and effort for a

diverse array of participants to coordinate their activities.• Key is standard protocol and practices defined.• Scalability makes specialization by participants more

attractive.

Shaping Acts and Assets

• Worries from participants about their own business niches being vulnerable to competition

• Doubt on lack of conviction and capability needed for success.

• Novell selling off hardware business in 1980s

Shaping Acts and Assets…

• Assets of shaping company become a significant factor in persuading potential participants to invest in shaping strategy.

• Large established companies have an advantage. • Massive assets attest credibility of shaping view and

platform.• Smaller companies have a disadvantage here.• Can gain needed assets through strategic relationship with

large, better known companies.• Microsoft• Google’s Open handset alliance.

Demonstration of ability to would-be participants

• By achieving critical mass quickly• By mobilizing the magnitude. Trend on large scale mobilization for efficiency. Google’s adSense and Visa• By Shaping again and again. Previously relatively long period between disruptions allowed

companies to enjoy long term competitive advantage.“ Successful strategies require a series of shaping initiatives

over time , rather than one disruptive big bang effort.”