Defining your own sustainable future

Transcription

1 University of Copenhagen From the SelectedWorks of Jacob Johnsen, MSc September 28, 2015 Defining your own sustainable future Jacob Johnsen Available at:

2 DEFINING YOUR OWN SUSTAINABLE FUTURE 249 In time of rapid change, experience could be your worst enemy DEFINING YOUR OWN SUSTAINABLE FUTURE Jacob Johnsen Ipostes.com INTRODUCTION How do you create and maintain an attractive service portfolio, and how do you compete in a shifting environment? In our changing world, survival is not a question of size, speed or coverage. You have to be adaptive. Normally however, this is easy to strive for, but much more difficult to execute. We will examine how your strategy can be adapted to an ever-changing marketplace, by sensing the changes in your postal customers needs and desires, identifying and seizing the opportunities that creates and using this to define the future and transform the postal business model. LONG LIVE THE POST If you look at the lifespan of most companies, it is normally limited. Most companies are born with an idea, they exploit their possibilities and grow, but at some point their lifespan is over, and they die. The limited life is often due to changes in the demand for their products, solutions or services, be it because of new technology, customer behaviour, pricing or something else. With faster changes in environment, this lifespan is getting shorter and shorter. Why did they not react while they were ahead? Perhaps the company did not see market signals or changing customer demands, perhaps it was trapped in an old business model, or perhaps it went for quick wins instead of long-term sustainable decisions. Alternatively, they simply were victims

3 DEFINING YOUR OWN SUSTAINABLE FUTURE 250 of weak leadership, stupid management, internal politics or poor strategies. IBM, Nokia, Kodak, Microsoft are all examples of companies that were top of their class, but suddenly realized that their business model had failed and their customers had turned somewhere else. This is normal: most companies will have a limited life span (and it is getting shorter and shorter). The million-dollar question is: what can be done about this? How can we be sure to see new market signals, changes in the environment, new customer demands? In fact, we must stop using well-known analyses with standard forecasts, extrapolating from historic data, making Monte Carlo simulations and all these tools, coming from the traditional planning toolbox. Instead we must look at new planning techniques that are mainly based on scenario planning, option analysis, dynamic monitoring and more. Posts pride themselves with a very long history and an evolution that has kept up with changing demands and possibilities. As technology evolved, so did the post, at least within transportation and mechanization. Industrialisation and related technologies have helped a lot, so for many posts, the production set-up is top of the class. Certainly for the classical virtues of postal production: collection, sorting, transport and distribution of physical mail items. However, what happens when the market changes? The gradual shift away from physical letters and the emergence of e-commerce is all well known. This has posed an interesting challenge to the ability of posts to adapt and adapt you must, if you want to survive in a changing environment. Here, posts must take the necessary steps to ensure that they keep their market share and defend their unique position and brand. DYNAMIC CAPABILITIES In 1997, three authors defined dynamic capabilities in what became the most cited article ever in Strategic Management Journal1. David J. Teece, Gary Pisano and Amy Shuen analysed the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change. Their conclusion was that success for any company is based on its ways and ability of coordinating and combining their capabilities and skills, shaped by its specific 1 David J. Teece, Gary Pisano and Amy Shuen, Dynamic Capabilities and Strategic Management, Strategic Management Journal, 18(7), 1997, pp

4 DEFINING YOUR OWN SUSTAINABLE FUTURE 251 asset positions (such as their portfolio of difficult-to-trade knowledge assets and complementary assets), and the evolution path(s) they have adopted or inherited. Like always, the stability of market demand, as well as the ease of replicability (expanding internally) and imitability (replication by competitors) guide the risk of losing their market. This means that success requires the ability to hone internal technological, organisational, and managerial processes inside the firm. One must quickly identify new opportunities and organise the company in order to effectively and efficiently embrace them. A number of models have been used to predict the future (for example, based on political, economic, social, cultural, demographic or technologic evolution). However, we cannot define the future, let alone predict it. Analysis is no longer what it used to be. Now, one must first have the ears to the ground and sense changes and tendencies very early. Then seize the opportunity when it has been spotted and finally adapt the internal technological, organisational, and managerial processes to exploit it. Dynamic capabilities are often defined as the firm s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments. If posts want to exploit quickly changing conditions, they have big challenges ahead. Posts have gradually shifted their portfolio of services to focus on the new demands, sometimes by adding new electronic services for electronic pickup, delivery or certification, or by enabling e-commerce integration. Very few were too early, and most have entered too late, opening up for competition. Only a few posts have in fact adapted their structure to the new demands, and even fewer for the demands yet to come. Why is this, you may ask. Some would say that after centuries of monopolism, posts have suffered from corporate arrogance or the Fat Dumb & Happy syndrome. For most posts, this is not so. Most posts find themselves stuck between a rock and a hard place and must still meet universal services, with their revenues (postal rates) regulated and often requiring subsidies in order to meet their challenges. In this environment, it is hard to prepare for dynamic changes, but not impossible! DEFINING A SUSTAINABLE FUTURE Because of the long history and tradition of posts, changes are identified using welldefined, planned and rational techniques. Posts examine market trends, customer surveys and analyse financial, political, social, cultural, demographic or technological changes. Decisions are based on a very rational foundation, but often

5 DEFINING YOUR OWN SUSTAINABLE FUTURE 252 lack imagination and the ingenuity and changes in human behaviour, where you exploit the dynamic capabilities of the organisation. Have you been in your bank lately? Perhaps you have, but for an increasing number of people, the bank is in their mobile phone or their computer. They do not go to the bank. No need to have beautiful offices, counters and a security guard by the door: it is all right there in front of you, whenever and wherever you need it. Remember that banks have the same long history as the posts. Jean Paul Getty said In time of rapid change, experience could be your worst enemy. In many ways, posts have also learned to adapt to the swift changes in the market and with their customers. The shift from having only the sender as the (paying) customer to also see the receiver as a customer is ongoing, so is the addition of electronic services. However, some posts are still lacking the ability to make quick changes and exploit new opportunities as they appear. In order to improve market position and strategic capabilities, the post must identify the foundations upon which distinctive and difficult-to-replicate advantages can be built, maintained, and enhanced. One must identify the capabilities that are rooted in user needs (so it can generate revenue), unique (so pricing can be reasonable) and difficult to replicate (to protect from competitors). In this, the post must act as one big and undivided entity that can use all the advantages, skills and competencies of the entire post, to create value for the customer. A typical problem is the artificial division between the letter and parcel business that is being challenged by the steep growth in e-commerce, and where customers do not distinguish between mail types. If the internal organisation is optimised for flexibility and quick changes, this can become a capability, which is difficult to replicate. New entrepreneurial companies have this ability, and can piece together solutions and the organisation to support it very quickly. The capability to adapt cannot be bought or sold, but is inherent to the company s organisation. It becomes part of their dynamic capability. In the above mentioned article, Teece, Pisano and Shuen emphasize that the organisational capability is based on processes, positions, and paths. Processes because this is the way things get done, including learning and approved practices, and because it is a trait that cannot be easily replicated by competitors. The position includes your knowledge, your IPR2, your assets and your customer base as well as your contacts with suppliers and cooperation partners. Reputation is an important 2 Intellectual Property Rights

6 DEFINING YOUR OWN SUSTAINABLE FUTURE 253 asset, and for posts, the institutional position and access to regulators can also be an asset. Finally, you need paths. Paths are strategic options that are available and they are where you can find new business. These can lead your business towards profitability - or not. There can also be paths leading to other paths, or some that are interdependent. Many are looking for paths through market analysis or by making technology surveys3. However most of the real opportunities are found in markets that are not yet ready, but must be created. CONCLUSION When working towards finding and enhancing your posts dynamic capabilities, you will probably need to focus on processes, positions, and paths. You might want to evaluate the first two with an eye for dynamic capability. If identified, some changes can be necessary. The question of how processes are organised must all focus on bringing value to customers (and shareholders). Incentives must all promote strategic behaviour and not quick wins or other short term tactical goals. The position is enhanced by having constant learning and exchange of experiences, know-how integration and securing of all values (patents, brands, source codes and other IPR). Assets and processes must all be pointing toward the strategic goals. Based on this, one can start identifying possible paths, and these can be found in the current business or in new opportunities, often with new markets or diversification. It may also require additional focus and specialisation. Professor Richard P. Rumelt once explained: The capabilities approach suggests that if a firm looks inside itself, and at its market environment, sooner or later it will find a business opportunity. QUESTION FOR THOUGHT AND DISCUSSION What processes, positions and paths can you identify that will help you to define your own sustainable future? What changes could you suggest to your processes to make your company more agile and adaptable to new situations, challenges and opportunities? Does your organisation promote and facilitate constant learning and exchange of knowledge, experience and facts, in order to improve your position? 3 See Michael Faltum, Emerging Technologies and operational planning, in Reinventing the Post changing postal thinking, Libri Publishing, 2014, pp

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