Building New Strategies with Lessons of the Past

At last month’s Cannes Lions festival, I had the privilege of participating in a session with advertising legend Chuck Porter on “building new strategies for creative excellence.”  The session was organized by the Berlin School of Creative Leadership around the contrast between strategic insights drawn from the successful creative work of his agency, Crispin Porter + Bogusky, and more orthodox strategic approaches associated with Harvard Business School Professor Michael E. Porter (no relation).  In preparation, my Berlin School colleague, Professor Paul Verdin, and I had drafted a White Paper on the topic.

The session and paper yielded several conclusions about new priorities for building strategy for creative excellence.  For example, while acknowledging the greater need for flexibility and speed in decision-making today, we identified the persisting importance of making adaptive commitments to brand values and strategic priorities.  Likewise, we identified other crucial principles: serving communities of participation, building trust through storytelling, and finally recognizing accumulative value creation rather than pursuing competitive advantage for strategic success.  Overall, we proposed a fundamental shift from the traditional, largely adversarial orientation focused on competitors to an emphasis on value creation through the engagement of customers.

In doing so, the White Paper picked up on several currents of thought about the evolution of strategy.  Customer-centricity, involving better understanding and engagement of customers as well as enhancing capabilities for serving customers, is one such stream.  Another is the transformation of traditional value chain and scale economies by digital technologies and an information economy whose creation, distribution, and transaction costs have an entirely different structure.  Perhaps best-known, to use the title of Rita Gunther McGrath’s 2013 book, is “the end of competitive advantage.”  Rather than achieving a long-term, stable and sustainable market position in a well-defined industry, following Michael Porter, the new world of strategy is marked by developing a portfolio of transient advantages able to capture shifting “connections between customers and solutions.”

At same time as the Cannes festival, another debate around innovation and disruption began roiling.  Jill Lepore, a professor of history at Harvard (in the Faculty of Arts and Science, not Business School), published a withering piece on the contemporary “gospel of innovation” in The New Yorker.  “The Disruption Machine” took on the prevailing model of disruptive innovation associated with Clayton Christensen, another Harvard Business School faculty member.  His theory contends that while an incumbent firm seeks to maintain its market advantage through sustaining, or incremental, technological innovations, it is often overtaken by new entrants whose disruptive innovations, typically offered at lower-cost and with lower-performing technologies, end up remaking the market and leading to the failure of the incumbent firm.  Lepore alleged the theory, which she extracted primarily from Christensen’s groundbreaking 1997 The Innovator’s Dilemma, mistakenly explained the emergence of new technologies and the dynamics of firms.  In doing so, she also personalized the critique by questioning the integrity of his research and his claims about the theory’s ability to predict market failures.  In a Bloomberg BusinessWeek interview, Christensen responded briefly and quizzically both about the personal nature of the attack and the lack of actual difference in their questioning of innovation.

Much commentary and side-taking has ensued.   Many pieces noted how “disruption,” in particular, had become an overused shorthand for innovation-driven (some would say, -fixated) entrepreneurs and businesses.  On Vox.com, for instance, Timothy B. Lee’s post was tellingly titled, “Disruption is a dumb buzzword.  It’s also an important concept.”  Kevin Roose similarly wrote on nymag.com that, “for actual disruption to work best,‘disruption’ has got to go.”   Some comments took on the larger state of innovation in both business and management studies.  In the Financial Times, Andrew Hill thus made the case for a more measured use of the theory of disruption, citing its relevance to analyzing corporate failures like Kodak and Blackberry. 

While Christensen has understandably been at the heart of many of these discussions, Michael Porter’s place has also been important.  On Forbes.com, Stephen Denning wrote that Lepore had been “the assistant to the assistant of Porter” and he then cast her attack in terms of the conflicting views of Porter and Christensen.  Specifically, this meant distinguishing the strategic goals of maximizing shareholder value and creating and maintaining customers.  The recent imbroglio around disruption is a “symptom,” in Denning’s word, of a more far-reaching debate around core assumptions of contemporary management and business.

In fact, among the most important lessons of the Lepore-Christensen exchange seem precisely the value of reflecting on and wrestling with one’s own guiding principles and assumptions in business leadership.  That lesson was also a basis of the Porter vs. Porter White Paper and Cannes session.  Such questioning can include:

1. Language

Too often, as with “disruption,” we use or overuse language without fuller explanation or understanding.  Sometimes context is lacking.  For those in creative and marketing communications, for instance, Jean-Marie Dru, now the Chairman of the TBWA Worldwide advertising agency, developed the distinct concept and specific creative methodology of “disruption” at the same time as Christensen in the mid-1990s.  More generally, as I wrote in a recent post, we don’t take adequate care in our everyday usage of key words like innovation and creativity to ensure clear and effective communication of their meaning in given situations.

2.  Assumptions and Contexts

If the language around disruption or innovation would benefit from greater care and precision of usage, the assumptions underpinning that language can likewise have greater impact when more fully understood.  This is not to suggest, of course, that any discussion of innovation should revert to exploring the finer points of Christensen’s (or Porter’s) research.  It is, however, to posit the value of stepping back and assessing the larger ideas behind, or wider implications of, specific potential decisions, actions or strategies.  Some of the best commentaries on Lepore and Christensen, like John Hagel’s, are illuminating exactly because they analyze seemingly familiar ideas more acutely and pose bigger questions.

3. Beyond Prediction

One of Lepore’s major critiques in “The Disruption Machine” is how poorly Christensen’s model predicts business success or failure due to disruptive innovation.  Similarly, in the Cannes session, Chuck Porter observed how our White Paper about his agency’s creative work amounted to “backfilling” explanations for earlier strategic and creative work that may not be practically useful going forward.  Any prediction or forecasting for an increasingly uncertain future is obviously challenging.  Yet predicting the future is not the only standard or purpose for analyzing and modeling the past.  Even more, as Lepore herself allows (in quoting a recent New York Times report on innovation), “disruption is a predictable pattern across many industries” – patterns being a matter of deeper understanding and far different from concrete predictions about future performance at specific firms.

4. Models and Theories – and Learning

The distinction is essential.  As an educator who uses historical cases and models, my priority is often to connect particular examples to wider patterns.  However, the purpose in doing so is not the connections themselves but to help build individuals’ capacities for effective analysis and action.  Those capacities are enabled by learning multiple examples and experiences, models and patterns, and developing the discernment and agility to use them, as appropriate, to make sense of different situations and contexts.  Models and theories, like that of disruptive innovation, are always only potential means for conducting analyses.  Rather than ends in themselves, we should look to them to help us improve our thinking, sharpen frames of reference, and ultimately serve as aids to better understanding, decisions, and problem-solving. 

Building New Strategies for Creative Excellence: Michael Porter vs. Chuck Porter

On Thursday evening, June 19, I had the privilege of presenting ideas for 'building new strategies for creative excellence' at the Cannes Lions International Festival of Creativity.  The session grew out of a White Paper with the same title co-authored with my Berlin School of Creative Leadership colleague, Professor Paul Verdin.  Guiding both session and paper were a series of contrasts drawn between the strategic thinking of Harvard Professor Michael Porter and the strategy Paul and I identified in the words and work of advertising legend Chuck Porter.  (The full paper is downloadable here.)

The Executive Summary reads:

Strategy is changing amidst volatile markets, disruptive technologies, and transformed customer and public relationships. Contrasting some of the major tenets of traditional strategic thinking, an analysis of the work and words of Chuck Porter enables the mapping of several key principles of a new strategy of creative excellence.  These include 1) forming an adaptive commitment to strategic intent and ongoing public engagement, 2) fostering communities of participation as part of generating a wider cultural conversation of creative work, 3) building trust through imaginative, often offbeat and interactive storytelling, and 4) moving beyond competition to highlight the value emerging through creative breakthroughs or community-building.

The following images give a further sense of the contrast we draw between the 'Five Forces' model of industry competition that shape firm strategy of Michael Porter and the emergent Forces that enable value creation we associate with Chuck Porter.

People, too, Can Eat Strategy for Breakfast

Culture eats strategy for breakfast.  Attributed to the management guru Peter Drucker, the line became popular in the middle of the last decade when Mark Fields, President of the Ford Motor Company, posted it in his war room.  The company’s culture warranted sustained attention from his leadership team, Fields was saying, otherwise it could make their strategic planning and priorities meaningless.  Even more fundamentally, implicit in Fields’ posting was the message that leaders could address and actively shape their organizational culture for the better. 

How to foster that strong, positive and creative culture has always been the real question.  Changing beliefs, changing behaviors, and providing common goals are among the general approaches that leaders have adopted when wanting to create a culture in specific contexts.  Yet all of these must begin, quite simply, with the people in a team or organization – and it is often in leading those people, and the talent they bring, that the strongest and most creative cultures are built.

I recently had the opportunity, with the Berlin School Executive MBA program, to visit an outstanding example of talent leadership: the UFA Lab – a Content Lab based in Berlin and also in Cologne.  The Lab is part of UFA, one of Germany’s oldest and most distinguished entertainment brands, with an artistic heritage of films. UFA is part of FremantleMedia, represents a group of dynamic production companies, and is owned by the conglomerate Bertelsmann. 

The Lab retains exceptional autonomy, however, to pursue revenue-neutral projects and enter into imaginative partnerships to explore opportunities and innovation in the shifting digital media and communications marketplace.  Indeed, as the following graphic makes clear, the Lab has emerged over the last three years as a platform for the digital entertainment industry, developing interactive entertainment with some of the most creative organizations in the world, including YouTube/Google, Apple and Nintendo, as well as German start-ups like Couchfunk and movinary.

The outcomes of such collaboration have included a host of innovative new media projects, productions, and events.  Consider Rescue Dina Foxx!, a transmedia project joining broadcast television drama with online video content and gaming to produce an interactive captivating thriller for audiences to solve. Produced with German broadcaster ZDF and teamWorx in 2011, the carefully designed project generated both actual and online communities to investigate a fictional murder.  While an engrossing and interactive thriller, the project also smartly employed multiple media tools and platforms to explore with viewer-participants contemporary issues around digital identity theft. It’s Germany’s biggest-ever alternate reality game. Watch the full trailer.

While the UFA Lab has leveraged its place within Bertelsmann to forge imaginative collaborations with major global partners and to pioneer innovative media and entertainment productions, other drivers of their success are more human scale.  Speaking to Jens-Uwe Bornemann, the UFA Vice President Digital Ventures & Innovation who founded and leads the UFA Lab, and some of his senior producers, it quickly becomes evident how crucial to the Lab’s success have been the personal interactions in the space on Mehringdamm in Berlin’s Kreuzberg neighborhood, in Cologne, and through individual connections beyond, including in London and New York.  One of the clear takeaways of a visit, in fact, is that Bornemann’s flexible project-based business design and open leadership of such diverse and cross-functional talent, who often reside in different sites and sometimes organizations, have been indispensable to the UFA Lab’s consistent creative productivity.

Legendary adman Jay Chiat once famously said, “How big do we get before we get bad?”  That is still a useful maxim for many agencies and firms wanting to remain nimble and adaptable.  More recently, a current legend, R/GA’s Bob Greenberg, offered the following variation: “How diverse are we going to get before we get good?”  Such recognition of the power, even necessity, of successfully deploying diverse talent marks a critical priority for leaders of creative production, teams and wider communities today. 

Diversity, of course, is about people and their different experiences and outlooks, ideas and perspectives.  It’s also about how leaders guide those people toward shared goals.  Culture, after all, is crucially about people and the values, beliefs, and goals they share.  Effective leadership, like that of the UFA Lab, continually enables and inspires people by envisioning the opportunities that those with shared belief and collective effort can explore and achieve.  Without such leadership and its catalyzing effects, diverse talent can remain dispersed, disorganized, and chaotic.

Culture still eats strategy for breakfast.  But so can people, particularly in creative businesses, if they are not empowered to pursue shared priorities and achieve common goals.  With the increasing diversity of talent brought to bear today in teams, projects and organizations, there’s perhaps no greater challenge – and opportunity – for creative leaders than to enable and inspire their people. 

The Leader’s Guide to Building an Everyday Strategic Practice: Lafley and Martin's 'Playing to Win'

A.G. Lafley and Roger L. Martin, Playing to Win: How Strategy Really Works, Cambridge: Harvard Business Review Press, 2013.

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A.G. Lafley, CEO of Procter & Gamble from 2000-2009, is one of the most-respected and successful corporate leaders of the young twenty-first century.  Roger Martin, a long-time business consultant and currently Dean of the Rotman School of Management in Toronto, is among today’s most original and prolific management thinkers.  Having worked together for nearly three decades, the pair have written a book arguing that “strategy really works” through the development and practice of ongoing strategic leadership rather than the application of specific frameworks, analyses or best practices.

That said, Playing to Win does advance its own original model, which involves answering  five key questions:

     1.  What is your winning aspiration? 

          (The purpose and motivating objectives, financial and non-financial, of your enterprise.) 

     

     2.  Where will you play?  

          (The playing field – geographies, product categories, consumer segments, channels, vertical stages of production – where you can achieve this aspiration.)

     3.  How will you win?  

          (The way you will win on the chosen playing field or market -- your value proposition, profit models, partnerships, or competitive advantage.

     4.  What capabilities must be in place?  

          (The set and specific configuration of distinctive capabilities and reinforcing activities required for you to win in the chosen way.)

     5.  What management systems are required?  

          (The systems, structures and measures that enable your capabilities and support your choices.)

These steps and questions are interconnected, cascading into and reinforcing each other as visualized below:

Lafley and Martin nicely demonstrate how each of these questions can be answered and linked, mostly using examples from P&G like the creation of the new market category called “masstige” for the re-launch of Oil of Olay in 2000.  They mount a compelling and always accessible argument that includes a very helpful “logic” flow of sub-questions to help users make better decisions about each of the five major questions.  In doing so, they underscore how theirs is less an analytical than a process model, less about analysis or vision-formation or priority-setting and more about enabling continuous strategic thinking and decision-making. 

This is an essential insight because it shifts strategy from being about a static plan or analysis to being more about an ongoing process.  Put differently, the book emphasizes strategic management or leadership rather than a one-dimensional approach to strategic plan-making or priority-fixing like the BCG matrix or Michael Porter’s Five Forces (which makes an appearance here).  While such tools are important for assessing point-in-time conditions, Lafley and Martin focus on how they are really means to developing an everyday way of strategic thinking and acting. 

It is in that focus that Playing to Win becomes as much a leadership as a strategy handbook.  If the process model rolled out in the book is ultimately “an integrated cascade of choices,” both the strategic value of the choices and the motivations and drivers of those making the choices share emphasis here.   Repeatedly, the articulation of how the five questions can be answered is couched in some of any leader’s fundamental challenges and responsibilities: knowledge and information management, communications, decision-making.  Far-reaching and robust strategic analysis is a crucial part of that process but should finally be relegated to serve the leader’s wider obligations.  As a result, the leadership thinking celebrated here is integrated, disciplined and courageous, in part because it never grows too removed from decisive action. 

Yet one of the issues that arises in approaching the book as a guide for leaders concerns the potential wider applicability of lessons and insights that are mostly drawn from P&G.  With its scale, diversity and resources, one wonders about the relevance of the approach to strategic leadership to different types of businesses.  Lafley and Martin do cite other examples throughout, but they tend (think Apple, Google, or General Motors) to be similarly outsized compared to most businesses.  While no one size fits all, of course, some of the guiding assumptions here would be well-tested by smaller and creative firms.  There’s also the further, fascinating question of whether the rapidly changing relationship between firm and customer, client or public is more varied than assumptions grounded in P&G’s consumer goods markets allow.   

Upon reflection, the emphasis on strategic leadership thinking and action seems mostly quite promising for businesses of diverse sizes and market orientations.  For creative organizations, in particular, the centrality of creative talent and the aspiration to creative excellence can often make the requisite assessments of capabilities and systems more challenging.  In ways, though, that very need can be seen to recommend the embrace of more robust and ongoing strategic thinking and action outlined here.  “There is simply no one perfect strategy that will last for all time,” Lafley and Martin write.  “That’s why building up strategic thinking capability … is so vital.” 

Reading these lines brought to mind a memorable presentation I had attended in 2011.  At the Cannes Lions festival that year, the leadership of the award-winning and always forward-looking creative agency, R/GA, was recounting its history and also describing the thoroughgoing strategic review and re-organization it conducts every nine years (http://www.rga.com/about/featured/the-next-nine-years).  The review by Bob Greenberg and his team is certainly done in planned cycles.  A crucial takeaway from the presentation, however, is that these cyclical re-organizations are merely the most conspicuous outcomes of a thoughtfully developed and decisive strategic leadership capability that has proven enormously successful in creative communications.

A.G. Lafley is a renowned and passionate believer in deep customer understanding.  He nevertheless recognizes the limits of uncovering knowledge of shoppers and other end-users.  As he has observed elsewhere, “Customer research doesn’t tell you the answer. It is only an aid to judgment.”   That approach is also a good way to think more generally about Playing to Win.  While we can embrace the fundamental importance of strategic models and practices – even Lafley and Martin’s own – such knowledge must finally be less an end in itself than an aid contributing to a broader leadership practice driven by everyday engagement with purposeful prioritization, communications, and decision-making.