The inflection seer

Organisations and governments have long valued strategic ability. Columbia Business School professor Rita McGrath spoke of agility in 1995 and has been a consistent advocate of sensing change. Her experience in thinking through models, case studies and key takeaways are evident in this book. We learn why strategic agility is important and how one can structure the organisation to be agile. This book is about seeing around the corners of your business, your industry and your consumers.

I have seen a lot of disruption in my career and I can relate to the book and the concepts in many ways. Professor McGrath argues that:

- An inflection point is one when the basic assumptions of the business model are challenged either with an impact of 10x or 100x.
- Disruption is an outcome of an inflection point.
- Disruption happens gradually and then one day it is noticed, all of a sudden.
- Disruption is complicated and complex.

When an inflection point happens, the four-step process is what most organisations go through — hype, dismissive, emergent and maturity.

Professor McGrath provides many real-life examples from Blockbuster, Nokia, BBC, Facebook, and GE. She describes in detail how people close to the market have a sense of disruption before anyone in the head office even acknowledges it. As she says, ‘snow melts at the edges and you need to be there to see it’.

I have seen that price was a big disruption in India in the 2000s and now it’s digital. When there was a price disruption, most companies would blame the sales or marketing team for inaction when fundamentally the low-cost competitor was redefining the market with lower cost structure. Management teams and boards see price as a passing storm and invariably ask the team to offer promotions, buy shelf space and give distributors and sales people some lollies. These never work as professor McGrath shows with the Blockbuster case.

While the fast broadband has been around since 2000, only half the American population was on it by 2007. The operating system and the apps ecosystem played out from then and Nokia chose the wrong ecosystem to battle this disruption. As the Windows strategy failed, leadership blamed the senior management and execution skills of the field team, and orchestrated a chorus that people were not committed to the strategy. Committing to the wrong strategy is worse than having no strategy! Many CEOs are lost on the road of the wrong strategy.

So, what is the role of leaders and what should a CEO do? Professor McGrath advises that:

- CEOs must be discovery driven. They must start by accepting that they are not always right. I have seen CEOs argue about issues they had no clue about. One CEO I reported to talked as if branding was a strength, when the person had no clue about branding. The result of such overconfidence was widely felt in many poor decisions around brands.

- CEOs and senior leaders must go to the coalface. This is where the truth is, if one cares to listen to it. The challenge for CEOs is to fall in love with the problem and not the solution. That way they can maximise the opportunity.

- CEOs must form small teams to explore and imagine the possibilities as opposed to developing right or wrong approaches. Intel, for example, invites science fiction writers, futurists and students to describe a future world. Intel executives do not argue if that world is right or wrong, rather they look at what’s possible in such a world.

- CEOs must relentlessly drive alignment and collaboration. These are components of a good culture. Professor McGrath points out how the bad culture at Microsoft led it to miss five big disruptions — search, cloud, smartphones, entertainment and operating system — since everyone in Microsoft competed with others and readily shot down anything offered.

- CEOs must look at leading indicators as opposed to working with lagging indicators. Leading indicators are employee engagement, management effectiveness and customer love. However, most businesses today are run on lagging indicators such as profit, return on capital employed and revenue.

- CEOs must look at digital seriously otherwise its consequences will be frightening. BBC saw the digital advent but worked with Siemens, a company that was ill equipped to give them an answer. Besides, the leadership delegated the task to a small junior team. GE is another example where the digital transformation playbook was poorly managed.

Professor McGrath has a significant view on how healthcare, education and big tech will change in the coming years. A degree will no longer be the key reason to hire people, but top skill will be. Repetitive functions such as coding where one can judge the skill as opposed to the degree will pave the way. Professor McGrath cites the Purdue University example of ISA (income sharing agreement) where the degree is free but the student pays the University when he/she starts earning. She also feels that, in healthcare, digital transparency will change traditional plans.

Professor McGrath argues that the inflection point for big tech companies has arrived and more than 50 countries have put in place some sort of a framework to handle big tech.

I enjoyed reading this book for its richness of thought, and academic as well as practical business tips. I see the apparel industry going through a seismic shift in terms of fast fashion cycles based on availability; I see the foods industry go through a good health cycle where discovery of what’s good will be in the hands of consumers; I see old financial service business models being challenged by a digital eco system; and I see every business realising that a middleman adds no value. The CEO should remember that knowing the model is very different from implementing it. That’s the crux of the book and its argument.