In a discussion with Professor Thomas Lawton from The Open University Business School, Willie Walsh, CEO of International Airlines Group explores the company’s present position and possible future.
This is an interview after a recording of the OU/BBC co-production The Bottom Line.
To conclude the Business Perspectives innovation quarter, we have created a summary report that offers diverse ideas and insights about innovation – a snapshot of perspectives from around the globe.
We invite you to download and share the report and please send us any comments. We will create a similar summary report following the strategy quarter, if you would like to contribute your perspective towards the strategy theme, please contact our Business Perspectives Editor using the web-form below.
I joined the OU this past autumn and one of my first interactions with new colleagues and with OUBS alumni was at the Business Perspectives Innovation masterclass in London. I could not have been more impressed by the professionalism of colleagues and the insights of guest speakers as well as the interest and enthusiasm of alumni, current students and other friends of the OU. Therefore, when asked to lead the next event on strategy, I realised that I would have a tough act to follow. For me, the rule of thumb when following on from a successful predecessor is to pay due respect but seek to suitably differentiate. This is what we have sought to do when designing our Competitive Strategies for Business Growth masterclass.
The intent behind this event in Manchester next month is to again reach out to our graduates, students and partners, engaging them in a dialogue around business and management ideas and improvement. It is aimed at individuals and organisations keen to learn more about strategy techniques and best practices. The intent is to help those with strategic responsibilities in the design and delivery of strategy. The event is also intended to challenge the economic doom and gloom that rests like a black cloud over the UK and beyond, and to discuss ways the world’s economies can kick-start growth.
I encourage you to sign on, turn up and get stuck in on the day. Through this blog forum, I also suggest you start to mull over and debate three questions in advance of 7 February. These are:
Do you need a strategy to build and sustain a successful business?
What will it take to be a successful strategic manager in 2013?
How does strategy process and practice need to change and evolve to meet the competitive challenges of the future?
I look forward to meeting you in Manchester.
Thomas C. Lawton
Professor of Strategy and International Management
Guest blogger: Terry O’Sullivan, Senior Lecturer in Management and Head of Centre for Strategy and Marketing, Open University Business School
News just before Christmas of the bankruptcy of Monitor, the consulting firm set up by Harvard Professor Michael Porter in 1983, had many rival strategy gurus rubbing their hands in unseasonal schadenfreude. As the world’s most-cited (and highest-earning) business academic, a household name in corporations, governments and business schools since the 1980s, (and a golfer of near-professional standard to boot), you can see how he might have attracted some measure of envy over the last three decades. Explanations of the collapse of his firm abound – a failure to adjust to conditions post-2008, a reliance on methods which have outlived their relevance, even just something as simple as a lax attitude to costs in a very slow market.
But an uncomfortable question remains, in spite of all the post-hoc rationalisation – if the world’s most eminent strategist’s own business can come unstuck, what’s the point of strategy for the rest of us?
Perhaps part of the answer is to make sure we have the right expectations. Strategy can no more show us a failsafe future path than a crystal ball can. But it can help us to make more responsible decisions.
Take Porter’s celebrated Five Forces model, which first saw the light of day in the Harvard Business Review in 1979. It’s what sociologists call a ‘conflict theory’, depicting any given industry as a set of warring factions scrapping over available profit. Porter’s background in economics made him aware that some industries are more attractive than others in this respect, leaving himself open to the misunderstanding that all you have to do is choose the right industry and your strategy problems are solved. Even if anyone were free to abandon their current industry for something more attractive overnight, success is not so easy to come by. In fact the real (and to my mind genuine) value of the model is to help understand your own performance in whatever industry you find yourself, in such a way as to help improve decisions about your direction in the longer term.
Another Porter favourite is the ‘generic strategy’ idea, whereby he advises that there are only a limited number of ways to compete in any industry. A famous one is ‘cost leadership’ (epitomised by companies like Ryanair), where the name of the game is to do everything as cheaply as possible. Being a cost leader means that you can pass on your efficiencies to your customers as lower prices than those charged by rival firms (should you so desire). Again this is widely misinterpreted; this time as sanctioning competition as ‘a race to the bottom’, in which there are ultimately no winners. A more careful reading of Porter reveals that what he is actually advocating is not so much being the cheapest, or even the best in an industry, but being unique in some way that is valued by a sufficient number of customers to provide a viable, and sustainable business. Competitive strategy can thus allow a thousand flowers to bloom, rather than descending into a zero-sum game.
Porter himself parted company with Monitor in 2011 (the same year it made a public apology for having done business with the Gaddafi regime in Libya) and was winding down his relationship with the firm well before the economic downturn. Since then his interests have turned increasingly to social issues — for example healthcare reform and corporate citizenship. So he can hardly be held responsible for Monitor’s doldrums. On the other hand, it has also been suggested that the bankruptcy was actually a strategic move worthy of the master of positioning himself – smoothing the path for the firm’s acquisition (with most of its staff and client book intact) by another consultancy giant, Deloitte.
“Competitive strategies for business growth: process, practice and performance”
Thursday, 7 February 2013. Marriott Victoria and Albert Hotel, Manchester
Drawing on the success of the first Innovation Masterclass last quarter, we are pleased to announce the second of our Business Perspectives events. In this, we will consider how, in an environment of austerity and reduced consumer confidence, managers and leaders can configure and implement a competitive strategy to deliver sustainable growth, enhanced performance and increased profit.
The masterclass will focus on the process and practice of strategy-making and will hear from strategy creators who run their own companies, as well as external consultants and managers who sit at senior and middle-management levels. We will explore what works for each and where the challenges exist, which strategies add most value, which make most sense and, most importantly, which are implementable.
Professor of Strategy and International Management, Thomas Lawton, will lead the masterclass and he will be joined throughout the day by key business leaders and Business School academics. The complementary but separate evening event will be hosted by the Dean of the Business School, Professor Rebecca Taylor, and we will hear Evan Davis, BBC editor, presenter and OUBS Visiting Professor, speak to “Do British companies need a more dynamic, strategic approach to prevent them lagging behind in the global economy?” alongside our keynote speaker.
Sarah Platts, Open University Business School MBA Alumnus, Change Consultant at FreshNetworks
Innovation is a common topic of debate and strategy in most businesses (be they new or well established). In the current economic climate, and with the huge potential of the likes of social media data, brands are increasingly looking at innovation (large and small) as a way to beat the competition.
But innovation is often misunderstood. After a recent event debating the topic at the Open University Business School, I left with some insights into what the attendees thought that innovation was, and some misconceptions about what it has to be:
Five things that innovation is
Inextricably linked with growth, according to the BBC’s Evan Davis. He surmised that innovation hasn’t come to a standstill in 2012, although we do have a growth problem which innovation itself will be crucial to solving.
Delicate. It’s important to nurture it gently so as not to kill it off too quickly, but also carefully contain and manage it to prevent any huge financial, market, or reputational fires.
More prevalent during recessions. The atmosphere of fear engendered by recession is often the trigger required to force organisations to adapt and survive (as opposed to ending up at the decline end of the sigmoid curve, such as Kodak), as well as being ideal for start-ups. Recessions tend to shake out the worst performers, and those simply coasting along with the status quo.
Often within your team already. Any business is likely to have great ideas and innovators already within the team. An open and creative organisational culture and office space is crucial to finding, developing, and encouraging these employees, who will always move to another company (possibly a competitor) to innovate if they can’t do so where they are.
Often the victim of resistance and sabotage. Some tactics to look out for and actively surface and manage include Peter Keen’s “lay low”, and “keep the project complex, hard to coordinate, and vaguely defined”. Plus also the wonderfully expressed “Say yes! But do nothing”.
Five things that innovation doesn’t have to be
Big or complex. Sometimes the best innovation can come through a series of incremental steps which ultimately amount to something quite large, impactful and radical. Such gradual change can often be more palatable in businesses.
Hugely expensive or driven forward by companies. As demonstrated by the user-led innovations of the maker movement, and also Jugaad Innovation’s more flexible, frugal, and bottom-up approach.
A risky business. At least not to the innovators – who have complete faith in their idea. It’s the financial backers who are taking the risks. However, if we’re taking an incremental approach, perhaps that can help reduce the overall risk by breaking innovation up into more manageable and less intimidating or costly chunks.
A driver to cut costs. As it’s enabling many companies to retain their current cost bases but stretch those resources further into more countries and ventures.
About technology. Thinking and process innovations show it’s not just about technology (e.g. queuing), and service innovations prove it’s not only about products either. Nevertheless, technology is certainly vital, and SAP UK’s CTO Adrian Simpson explored how innovation is being shaped by greater mobility (e.g. increase in mobile devices), social media and networks, the cloud, and huge data sets (including social data).
Ultimately, innovation seems to depend on persistence, belief, adaptability, and relevance to customers and the market. While its success relies on people, behaviour and skills, and spotting and pursuing the opportunity before it’s too late. Undoubtedly money and resources help, but perhaps more of a barrier exists in the minds of employees and cultures of organisations?
(This article was originally published on FreshNetworks on 20th Dec 2012.)
At the beginning of the Innovation Masterclass, I proposed to run a challenge for examples of an innovation that does not involve technology.
Definition of innovation:
“Innovation is the practical implementation of a new idea or invention for intended economic impact.”
1. There is a distinction between innovation and simple change: essentially we are considering innovation as a business and economic category.
2. Involvement of any technology: existing or old – does not have to be new; simple or basic – does not have to be complex.
3. An innovation may well be based on a natural phenomenon, but it has to include an extra element to make it into a human idea or invention.
4. There is a distinction between innovation as we have been discussing (essentially a business and economic category) and artistic or cultural innovation.
5. Innovations in process look like the most promising candidates, although most modern processes do in fact depend on ICT (information and communication technologies).
6. Innovations in policy look promising, but until they are practically implemented, usually as processes with determinable outcomes, they are not really innovations in the business sense.
There were 21 submissions in total. The best answer won a bottle of champagne. More detailed observations are noted under each suggestion.
Comments on submissions:
1) The wheel
Well, this is surely the archetypical innovation and if a wheel is not technology, what is?
2) The abolition of slavery (disappearance of the feudal system)
This certainly represents a major societal change, and is more a combination of many other changes than a singular change. But would slavery have been possible without ships, weapons and other instruments of oppression? There is an interesting thesis about feudalism which suggests that it is a society that results from the invention of the stirrup (which enabled the technology of horse-based warfare to underpin the emergence of a class of horse owning overlords).
3) Gay marriage
Not sure that this is a new idea, and don’t think any economic impact was intended. It’s more of a cultural change. Also see general points 5 & 6 above.
4) A choral work, performed for money
An interesting one, but more of an artistic/cultural change. Also, unless purely voice, without any musical instrumental support, then technology certainly is involved (musical instruments are technology).
5) Organised religion
Not sure what the specific idea is that is being practically implemented; not sure what the intended economic impact is, and not sure that it is in any way new. This is more of a cultural change – see general point 5 above.
6) Innovation in dementia care (a “feelings-based” approach involving quality interactions instead of task completion)
Not sure what is new about this. Surely more a reversion to what historically has been the essence of good family-based care. Perhaps the industrialised “task completion” approach, dependent on the technology of time-keeping and efficient division of labour, was the innovation?
7) The introduction of “total football” by the Dutch in the 1974 World Cup (where each player shared a posting on the field)
An interesting one – an example perhaps of a process innovation (see general point 5 above). But what about the pitch and the stadium, the football, specialist boots, TV and all the other technologies that make the modern World Cup what it is? Also, sport perhaps is more part of the artistic and cultural domain in its essence as a game. And increasingly, modern innovations in sport are in fact based on technology (goal line technology for instance).
8) The behavioural management of safety
This is very cryptic and not sure what the key innovation is. Appropriate behaviour has always been an important ingredient in safety. In its modern manifestation, I think it does depend on technology, that of monitoring and recording as well as a range of training tools to impart correct safety behaviour (I am thinking here of the programmed instruction about computer work that I have to undergo as an academic).
9) A new technique in knitting transferred from grandmother to mother
But knitting needles are technology, albeit a very simple and basic one.
10) Having children (Adam and Eve)
Mmmm. An entirely natural process. No new ideas or inventions (well…) (In the robotics literature there is a joke about how human beings are the only robots made by unskilled labour).
11) In nature where mutations occur which result in increased longevity of that species
Another natural process. No new idea and no practical implementation. But once there is practical implementation for intended economic outcomes, then perhaps you do have an innovation. Artificial selection for breeding?
12) Free entry to museums about 10 years ago leading to a massive increase in visitors and attendant cultural benefits
A clear example of a policy innovation (see general point 6 above). Not sure how new this was as museums were always free when I was a boy. Also not clear what the economic impact has been.
13) Sigmund Freud
Not sure where the practical implementation is. And perhaps there is a distinction between factually based new ideas and imaginative new ideas? Clearly an artistic/cultural example (see general point 4 above).
Another very interesting example. Originally money emerged as a universal barter commodity, such as salt. But the real innovation when money became money in the modern sense, was the invention of coinage with symbolic value indicated on its face. And this of course depended on the technologies of metallurgy and minting. Even with salt and other barter goods, some means of measuring or weighing the quantity of the goods was required.
15) “Kissing it better” innovation in child and health care
As with example 6 above, not sure there is anything new in this. This is rather a reversion to ancient family based approaches.
Is this in itself an innovation? The effective control and harnessing of fire surely is the basis for innovations, and these all constitute technologies such as design of hearths, furnaces, chimneys etc.
17) Change from counter-service to self-service in shopping
I think this does necessarily involve a range of technologies, from effective tagging systems for the goods purchased, scanning systems for the checkout points and the design of the checkouts themselves so they are easy to use by a range of customers.
18) Agile methodologies
A good example of a process innovation (see general point 5 above) but rather generic and difficult to consider in the abstract. And surely it intrinsically involves technology especially in its practical implementation? As I understand it, it is a software development methodology, and is software not a technology? Moreover, various other supporting software technologies are required for monitoring and managing the overall process.
An interesting example, but one which necessarily ultimately depends on all the technologies involved in the modern financial system, even though the front end might be a very low technology of local paper records.
20) The way in which we now queue in one line rather than many, thus avoiding choosing the wrong line
21) The post office queue from many lines to one, saving frustration
These two suggestions (20 & 21) both capture a key idea arising from the formal mathematics of queuing theory, namely that one queue feeding many servers is far more efficient than many queues each feeding their own server. In essence it requires no technology as it could be implemented in any situation although to be purist, usually various technologies are involved (barriers to direct the lines; checkout technology in the servers etc).
Nevertheless, this impressed me as the best example of an innovation that does not involve a technology, and so the two people proposing this example shared the bottle of champagne. (And very kindly, they offered me a glass as well!)
Bridget Grenville-Cleave, Open University Business School MBA Alumnus, MAPP graduate of the University of East London, is a UK-based positive psychology consultant, trainer and writer
I recently had the privilege of attending an Open University Business School Masterclass and networking event at which Ken Keir, the Executive Vice President of Honda Motor Europe, talked about the way innovation, the lifeblood of the Honda company, drives its success.
Even though he focused on Honda’s R&D philosophy, explaining for example how, in recessionary times, the company goes against the tide and invests more in R&D rather than less, by the time we reached slide 5 of the presentation on the Honda strategy, vision, values, and behavior, it was pretty clear to me that here is a company founded on positive psychology principles.
What intrigued me was that Ken Keir didn’t mention positive psychology once. For all I know, he has never even heard of it. However, if you look at how Honda operates strategically, how it works day-to-day as well as the kind of language it uses to describe the business, it’s pretty clear that it’s a strengths-based company through and through.
How did I reach this conclusion?
An Organisation Based on Three Joys
Quite simply, Honda is a company which lives and breathes its values.
Back in 1951 the founder, Mr Soichiro Honda, outlined in a Management Policy document the principles on which the Honda Company is based.
It may surprise you to discover that these are:
The joy of making
The joy of selling
The joy of buying
Now many corporate leaders might raise their eyebrows at this point and baulk slightly at the use of the word joy. If you’ve worked in the corporate environment you’ll know how pretty much any mention of emotions is unwelcome, especially positive ones like joy, kindness, and awe. The only time emotion really gets its foot over the corporate threshold is when we’re talking about that rather rational and sanitized topic, emotional intelligence. The difference here is that Honda brings these three values alive. It lives and breathes them in everything it does. You could say that the Three Joys are its raison d’être.
The Joy of Making
Take the joy of making. Ordinarily engineering isn’t a term which lights many fires, unless you happen to be an engineer. Engineers are not known for their people skills nor their positive emotion. In fact engineering tends to be perceived as a bit dull. Dry even. And definitely dusty. Engineering is a highly technical, specialized domain, dominated by deep-thinking, serious left-brainers.
But just read Soichiro Honda’s explanation of the first joy:
“the joy of producing…is a joy known only to the engineer. Just as the Creator used an abundant will to create in making all the things that exist in the natural universe, so the engineer uses his own ideas to create products and contribute to society.”
So what does this tell us? Firstly, that the joy of making, the engineering that is at the heart of the Honda company, is its strength. Secondly, that Honda encourages its engineers to embrace and play to their strengths, rather than try to be something they’re not. Thirdly, Soichiro Honda clearly saw that using this strength in the service of something greater was crucially important to the success of his company. More than half a century later positive psychology research tells us that this is the essence of finding meaning and a key to flourishing.
Mr Honda continued,
“This is a happiness that can hardly be compared to anything else. Furthermore, when that product is of superior quality so that society welcomes it, the engineer’s joy is absolutely not to be surpassed. As an engineer myself, I am constantly working in the hope of making this kind of product.”
Not only does he refer to joy, but also to happiness and hope.
The Joy of Selling
The second joy, the joy of selling, arises naturally from the creation and manufacturing of high quality, high performing, reasonably priced products.
“…it goes without saying that the people who engage in selling it will experience joy… What sells well generates profits, as well as pride and happiness in handling those items…”
Students of positive psychology will have come across the study by Martin Seligman that suggests that optimistic sales people are more successful at selling. What sales people wouldn’t be passionate and optimistic about selling a product that they knew would delight their customer?
The Joy of Buying
The third joy, the joy of buying, is the sole preserve of the customer, the person who buys a Honda, whether that’s a motorbike, a lawnmower with a Honda engine, or a car. I’m currently driving my 4th Honda, so I can personally vouch for the joy of buying. The way Soichiro Honda describes this third value makes you believe that other people’s happiness is the sole reason the company exists:
“It is neither the manufacturer nor the dealer that best knows the value of the product and passes final judgment on it. Rather, it is none other than the purchaser who uses the product in his daily life. There is happiness in thinking, “Oh, I’m so glad I bought this.” This joy is the garland that is placed upon the product’s value. I am quietly confident that the value of our company’s products is well advertised by those products themselves. This is because I believe that they give joy to the people who buy them.”
So in these three, deceptively short and simple values, we have a whole positive psychology philosophy, culture, and way of doing business. As Soichiro Honda concluded,
“The Three Joys form our company’s motto. I am devoting all my strengths in order to bring them to reality.’
Learning from Honda: Creating Your Own Company Joys?
So what can we learn from Honda’s Three Joys? I’d suggest the following:
Stick to what you’re good at! Allow, encourage and facilitate all your employees to play to their unique strengths. This assumes that a) you know what their strengths are and b) you need these strengths in your company.
Don’t shy away from positive emotions at work. They have a place in every successful company. If this seems a bit scary, you could start by looking at how to create a more healthy balance of right brain and left brain, feeling and thinking, intuition and analysis. Alternatively, if you had to suggest Three Joys for your company, what would they be and why?
Make meaning important. People want to know how the work they do benefits others, especially customers, clients, patients and society generally. Help them make those connections and find ways to reinforce them.
When I heard Ken Keir speak, I was expecting only to find out about Honda’s innovation and creativity. Instead, I also discovered a company imbued with positive psychology principles. Every time I drive my Honda I’ll be thinking about the Three Joys. And every time I meet an engineer I’ll be reminded of why you should play to your strengths.
Bridget Grenville-Cleave, MAPP graduate of the University of East London, is a UK-based positive psychology consultant, trainer and writer. She is author of Introducing Positive Psychology: A Practical Guide (2012), and The Happiness Equation with Dr Ilona Boniwell. She regularly facilitates school well-being programs and Positive Psychology Masterclasses for personal and professional development. Find her on LinkedIn, Facebook and Twitter @BridgetGC. Website. Full bio. Her articles are here.