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Business Strategy — ‘Stuck-in-the-Middle’ or ‘Build-in-the-Middle’: Bridging the Gap or Dead End Proposition…

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Business Strategy–’Stuck-in-the-Middle’ or ‘Build-in-the Middle’: Many business implement a ‘build-in-the-middle’ strategy, which tries to balance the key strategic elements of; competitive differentiation, product-service price, market focus… in order to build a sustainable, profitable business… However, according to Michael Porter classic book ‘Competitive Strategy’; he hypothesis that a business can secure a sustainable competitive advantage by adopting and executing only ‘one’ of three generic strategies, namely; cost leadership, differentiation, niche focus… and, when a business attempts to adopts more than one or a combination of these three strategies, then the business becomes ‘stuck in the middle’, which is a losing proposition… According to Robert F Bruner; a single-minded focus on ‘cost’ or ‘differentiation’ or ‘focus’… may be tomorrow’s business graveyard… Customers, markets, competition… are not static and business must be flexible, nimble, creative, innovative… to survive, grow, prosper… But, Porter says that business, which are ‘stuck in the middle’ have no clear business strategy, and are at serious risk… He stresses the idea that practising more than one strategy loses focus, and hence a clear direction for the future business trajectory cannot be established… However, D. Miller– questions the notion of being ‘caught in the middle’. He claims that there is a viable middle ground between strategies. Many companies, for example, have entered a market as a niche player and gradually expanded… According to Baden-Fuller and Stopford; most successful companies are the ones that can resolve what they call ‘the dilemma of opposites’… According to Davis; research has shown evidence of successful firms practicing a ‘hybrid strategy’… business employing a hybrid business strategy (e.g., low-cost and differentiation) outperform the ones adopting one generic strategy…

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According to Michael Porter in his book– Competitive Strategy: The business that fails to develop its strategy in one of the directions; cost leadership, differentiation, niche focus…  is a business  that is ‘stuck in the middle’ and is in an extremely poor strategic situation and is almost guaranteed low profitability… Businesses that are truly differentiated can fend off the competition because they are perceived as having a unique product-service, they are more likely to earn superior margins, and are virtually ‘competitive proof’… Porter’s strategy is embarrassingly simple– just pick one these strategies and align with it… According to John Kay; it’s true that a company that fails to develop its strategy in at least one of these three directions (i.e., a business that is stuck in the middle) is in an extremely poor strategic situation but the notion that business cannot pursue both cost reduction and product differentiation is clearly false… According to Anthony Fensom; being in the middle isn’t bad position provided that you offer value… business strategy can be driven by many objectives; ranging from gaining new customers, market share, improving turnover… or just generally supporting product positioning… and, being stuck in the middle can be a good place, at times– if the price is right…

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There is ample research on business strategy that suggests that the ‘middle’ is to be avoided for fear of being ‘stuck’ in it… According to Bob Bruner; problem is not the ‘middle’… but allowing the business to get ‘stuck’ at all– is the real issue… How the problem is being perceived has big implications for taking action, for example; some business experts argue that the ‘middle’ may not be all that bad since it provides the opportunity to test and discover possible new segments of ‘demand’… After all, demand can be defined well beyond just– cost and differentiation, for example; convenience, style, location… Then, there is the pesky problem that consumer demand keeps changing over time, which necessitates constant experimentation to discover new or evolving demand… Today’s single-minded focus on cost or differentiation may be tomorrow’s business graveyard; customers, competition, markets… are not static they are continually ‘changing’ and business is continually ‘jockeying for position’… But, being ‘stuck’ in a bad business without a viable exit strategy is a business waiting to fail… According to Stealers Wheel; ‘stuck in the middle’ is like being caught between clowns and jokers, they may be weak competitors, and thus may present a great opportunity for business to better serve their market, create value… and accelerate business growth… When this is true, then the middle is bad…

In the article Stuck In The Middle by Paul Simister writes: Effectively being stuck in the middle comes from trying to compromise– and it creates ‘muddle’; muddle is bad, muddle confuses customers– they don’t really know what you stand for or what to expect from you… muddle confuses employees– they don’t understand the priorities, and it affects work performance.. A stuck in the middle position happens when a business designed to be low-cost starts adding little extra frills, which don’t add a corresponding amount to the customer value– that’s when business suffers additional cost, but customers don’t get additional value… Or, when a differentiated business comes under pressure on price, perhaps due to a market disruption from new technology or a low-priced competitor, and in reaction the business starts cutting costs in areas which damages their advantage… If you think the business is stuck in the middle – or heading in that direction – then you must critically review business strategy and implement the appropriate adjustments… That means– you must decide what the business is, and what it isn’t… You must decide who the business customers are, and who they aren’t… You must decide what the business is selling, and what it’s not… Strategy is about making wise choices, and then having the courage, conviction to follow through– it’s commit to turning words, ideas… into action…

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In the article Oh, Professor Porter, Whatever Did You Do? by John Kay writes: One of the most famous propositions in business strategy is Michael Porter’s injunction not to be ‘stuck in the middle’… According to Porter; the worst strategic error is to be stuck in the middle, or to try simultaneously to pursue all the strategies. This is a recipe for strategic mediocrity and low performance, because pursuing all these strategies simultaneously means that a business unable to achieve any, due to the inherent contradictions… The trouble with Porter’s proposition is that– it’s just not true… Many successful businesses are stuck in the middle… to them ‘stuck in the middle’ means offering– medium cost, medium quality… in fact, they do slightly better than the clearly focused choices of high-cost, high-quality… or low-cost, low-quality… So perhaps Porter’s ‘don’t be stuck in the middle’ means– not that you must choose one or the other strategy, but if you don’t– you will fail… Perhaps then all that ‘don’t be stuck in the middle’ really means is that– it’s good to be good at something

In the article Stuck In The Middle? Take Flexible Approach by Bob Bruner writes: The problem is not the middle; it’s allowing the business to get stuck at all… The ‘middle’ seems to be what every executive wants to avoid these days. And perhaps for good reason. There is ample research on business strategy that suggests the middle is to be avoided for fear of being ‘stuck’ in it. The conventional view is to see the ‘middle’ as a no-win situation. I see things slightly differently; the problem is not the middle it’s allowing the business to get stuck at all… Being ‘stuck’ is one of the worst situations for business without a viable exit strategy, for example; think of manufacture operations that are obsolete and face exit costs that can ruin the economics of a business as it approaches its end… Or, minority investor who is stuck in an under-performing private firm looking to exit and investment-securities are illiquid… Or, an airline stuck with an aging fleet of airplanes, uneconomic union contracts, landing rights that don’t fit the more profitable segments of demand… Or, retailers stuck with stores in neighborhoods with the wrong demographic trends… Or, technology company stuck with commitment to obsolete technology… There are many of examples of ‘stuckness’ situations, whereby management makes inflexible commitments to what they think could be sustainable and attractive business strategy… when, in fact, these ‘difficult-to-reversible’ strategic decisions and commitments– exposes the business to potentially catastrophic consequences…

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The challenge for business leadership is not to avoid the middle, but rather to develop flexibility– such as a sensible Plan B– if the competitive situation turn against you. The middle is bad if you are stuck in some important way, for example; the inability to respond appropriate under new competitive conditions… It’s not particularly difficult to think of companies that are neither cost leaders nor differentiators that produce sub-par returns on invested capital, but many have historically ‘muddled’ along for years with incoherent strategies… However, the days of muddling along without a clear strategy are numbered… According to Porter; a company’s failure to make a choice between cost leadership and differentiation essentially implies that the company is stuck in the middle. There is no competitive advantage for a company that is stuck in the middle and the result is often poor financial performance… However, there is disagreement among scholars on this aspect of the analysis…

According to John Kay and D. Miller; cite empirical examples of successful companies like Toyota and Benetton, which have adopted more than one generic strategy. Both these companies used the generic strategies of differentiation and low-cost simultaneously, which led to the success of the companies... In contrast, according to Tim Friesner; Yahoo has been stuck in the middle for number of year… and future for the business is looking less and less certain. Google occupies the search and online advertising position, and Microsoft has negated its problem in the search space, with the successful development of Bing. It looks like Yahoo has remained loyal to its long serving strategists, at a time when it really needed fresh ideas. This is an example of not moving with the times in a very fast-moving and dynamic tech sector… Michael Porter has noted that strategy is as much about executives deciding what a firm is ‘not going to do’ as it’s about deciding what the business ‘is going to do‘… In many cases, business is ‘stuck in the middle’ not because executives fail to arrive at a well-defined business strategy but because businesses are simply out-maneuvered by rivals… According to Joseph Schumpeter, great economist; described the competitive turbulence of capitalism as the ‘gale of creative destruction’… being stuck in a bad business without a viable exit strategy– is a business waiting to fail…

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Grow the Business thru Charitable Giving–Rethink Business of Charities: Companies and Charities Forging New Partnerships

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Charities and giving– charitable giving– is a big business. Every year charitable and non-profit organizations solicit companies in the hope of obtaining much-needed funding to accomplish their missions that help the less fortunate. Many businesses are willing to give, but are often confused as to which charities might be best for them. According to Michele Cuthbert; a successful match can lead to a fulfilling partnership and helping others, while a mismatch may lead to disaster. Businesses can build stronger relationships with their communities through their charitable endeavors that help less fortunate while helping themselves to more growth and bigger profits. Giving to charities is a way to both brand your business and assist those in need. It helps to create respect for your business as a company that is doing good in society and so encourage more people to purchase your products and services by making them feel that they are doing something for charity by supporting your business… The legal definition of charitable organization (and charities) varies according to the country, and in some instances the region of the country in which the charitable organization operates; the regulation, tax treatment, and the way in which local laws affects charitable organizations also varies. For example, in U.S. a charitable organization is an organization that is organized and operated for purposes that are beneficial to the public interest, however, distinctions are made between different types of charity organizations: Every U.S. and foreign charity that qualifies as tax-exempt under Section 501(c)(3) of the Internal Revenue Code (IRC) is considered a private foundation, unless it demonstrates to the Internal Revenue Service (IRS) that it falls into another category. In general, any organization that’s not a private foundation (i.e., it qualifies as something else) is usually a public charity, as described in Section 509(a) of the IRC. In addition, a private foundation usually derives its principal fund from an individual, family, corporation or some other single source and, more often than not, is a grant-maker and does not solicit funds from the public. In contrast, a foundation or public charity generally receives grants from individuals, government and private foundations and although some public charities engage in grant-making activities, most conduct direct service or other tax-exempt activities… Overall, charities are good for business and the obvious main reason– to incorporate charitable giving into your business is that– it’s good to give back to the less fortunate in the community. Also, a second reason to think charitably is that it’s very important to your bottom-line: Customers patronize companies that are doing something for the greater good of the community… and having a charitable component is a business differentiator… and a reason that some customers choose one company over another… According to Jeneen Todd; I wanted my business to be in the public eye as a business that’s reaching out to the community… marketing my business with charitable events is a fairly inexpensive way to reach out to a large number of potential customers, while still helping others…

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Quick Facts About Charitable Giving and Nonprofits in U.S.:

  • Nonprofit Organizations: There are 1,537,465 tax-exempt  organizations, including: 955,817 public charities, 97,792 private foundations, 483,856 other types of nonprofit organizations, including chambers of commerce, fraternal organizations and civic leagues. In 2010, nonprofits accounted for 9.2% of all wages and salaries paid in U. S. Nonprofit share of U.S. GDP was 5.5% in 2012. There are an estimated 323,754 congregations (churches) in June 2013.
  • Public Charity Finances: In 2011, public charities reported over $1.59 trillion in total revenues and $1.49 trillion in total expenses. Of the revenue: 22% came from contributions, gifts and government grants. 72% came from program service revenues, which include government fees and contracts. 6% came from other sources… Public charities reported $2.87 trillion in total assets in 2011.
  • Volunteering and Charitable Giving: Approximately 26.5% of Americans over the age of 16 volunteered through or for an organization between September 2009 and September 2012. This proportion has remained relatively constant since 2003 after a slight increase from 27.4% to 28.8% in 2003. Charitable contributions by individuals, foundations, bequests, and corporations reached $298.42 billion in 2011, an increase of 0.9% from the revised 2010 estimates and after adjusting for inflation. Of these charitable contributions: Religious organizations received the largest share, with 32% of total estimated contributions. Educational institutions received the second largest percentage, with 13% of total estimated contributions. Human service organizations accounted for 12% of total estimated contributions in 2010, the third largest share. Individuals gave $217.79 billion in 2011, about the same as in 2010.
  • Foundation Giving: Foundations gave $46.9 billion in 2011, up 2.2% from 2010. Of total foundation giving in 2010: 71% came from independent foundations. 9% came from community foundations. 11% came from corporate foundations. 9% came from operating foundations.

In the article Charitable Giving Is Good for Your Business by Lee Polevoi on writes: Donating to worthy causes can benefit the givers as much as the receivers. When it’s done strategically, charitable giving is good for business– and we’re not just talking about potential tax deductions… While the organization appreciates your donation (financial or otherwise) you can also promote your charitable activities to build good will in the community, enhance customer loyalty, heighten brand awareness, and yes, even increase sales. Giving to a worthy cause makes good business sense. Make the practice part of your overall business strategy, and you’ll quickly see it’s a win-win situation… However, finding the right charity for your business can be difficult; here are three simple rules of thumb that can help:

  • Pick a cause that you believe in: This helps elevate your involvement from something you feel you should do– to something you truly enjoy doing.
  • Look for a local charity: Knowing that you’re helping your own community can make your involvement more meaningful, especially if it also enhances the well-being of family and friends.
  • Find a cause that relates to your business: If you run a sporting goods store, why not sponsor a kids’ soccer league or Little League team? Support a charity that affects and influences your target market.

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In the article Why Aligning Your Business With Charity is Important by Jane Greece writes: Aligning your business with charity can be a little difficult to understand, but companies who have aligned with charities are seeing the big picture. There are business benefits for doing the charitable projects even in developed and underdeveloped countries: This is called strategic philanthropy… Most importantly, aligning business with charities, lays some of the foundation for future markets. People will come to associate the business as the good guy, and this matters a lot to some people… If good works matter to them, then good sales for the business follows… Thus, aligning your business with charity or cause can do a lot of great things, and that’s what makes it important. Doing this type of strategic marketing has many benefits; for example; First, it adds another element to your business’ character. Second, aligning business with charity can attract positive publicity to your business. Third, strategic philanthropy can elicit new ideas to improve or enhance your products and services. And fourth, doing charity would give more meaning to the business… Nothing beats the feeling of feeling good, and  aligning your business with charities is being wise with the business and also being responsible, socially…

Many savvy companies are affiliating themselves with charities to market their businesses. Not only is it a primary means for developing a powerful network, but also it helps others in the process. According to David Frey; people like to associate themselves with businesses that support causes, which help disadvantaged people in a meaningful way. And, don’t think that charities are oblivious to your motivations. Most charities today understand your secondary purpose for participating in charities and are experienced at helping business receive a return on their charitable investments… From a business standpoint, look for charities that will give you meaningful exposure to a large number of influential people… Linking your name with the charitable cause is an important part of charitable marketing. Even if you are participating in a charity for altruistic reasons, there’s no reason why you should not benefit from the resulting positive exposure… Charities like businesses are interested in building their membership base… Partnering with your charity to market to a niche will bring new customers to the business and new members to the charity… Taking the idea of charity partnerships a bit further, you may consider establishing a full-time commercial venture with your charity. Both parties would provide specific resources to run the venture. For example, you could provide the financial funding and the charity could provide the staff, expertise and equipment… Although there are a lot of legal and tax issues to address with this strategy, many such ventures are being established with success… Most corporations enter the philanthropic arena to achieve specific business objectives through a program of good deeds… however, an increasing body of scholarship shows that corporate giving programs actually can generate increased sales and revenues, especially for firms that market directly to consumers… According to Carlson; corporations represent a vital portion of total charitable giving… it’s important that the strategic priorities of both charities and companies are aligned in order to have an effective partnership… For example, a grocery-store chain partnering with food pantries, instead of other types of nonprofits… or a financial services company that supports school math education… According to Gregg Carlson, Chairman of the Giving USA Foundation; we have started to see a sustained recovery in corporate giving, and the outlook for business in philanthropy is very positive…

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The Power of Big Idea Thinking: Think Smarter, Faster, Create Value– Driving Imagination Beyond Abstraction

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The Big Idea is the only thing with the ability to attract enough people around a new concept when real change is needed in an organization… ~Winfried Schoepf– Big ideas guide us to put our brain to work… ~Rodrigo Borgia– The big idea is of little importance without effective implementation.. you can have the biggest idea in the world but if you don’t make it personal… the idea will go nowhere...~ Matt Crichton

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A Big Idea is a way of seeing connections, not just another piece of knowledge… A true idea doesn’t end thought, it activates it. It has the power to raise questions and generate learning… That little extra makes the difference between ordinary and extraordinary. According to Grant Wiggins; a big idea is a way of seeing better and working smarter, not just a vague notion or another piece of knowledge. It is more like a lens for looking; more like a theme than the details of a narrative; more like an active strategy than a specific skill. It is a theory, not a detail. When an idea is ‘big’ it helps us make sense of things, and when an idea is not ‘big’ it merely categorizes a lot of content, e.g., change, relationships, global… certainly these encompass an enormous amount of knowledge and understanding, but these concepts don’t contain much insight or direction beyond their definition… In short: Think of ‘big’ as ‘powerful’; not a large abstract category. It’s a ‘powerful idea’ vs. ‘mere abstraction’. The ‘idea’ is the easy part, but the real test of visionary leadership is the execution of an idea and its impact on business… According to Seth Godin; ideas are easy, doing stuff is hard, and the more often you create and share ideas, the better you get at it. The process of manipulating and ultimately spreading ideas improves both the quality and the quantity of what you create… History is littered with inventors who had ‘great’ ideas, but kept them quiet and then poorly executed them. Also, history is lit up with do-ers who took ideas that were floating around in the ether and actually made something happen. In fact, just about every successful venture is based on an unoriginal idea, beautifully executed. So, if you’ve got ideas, let them go… The big idea can be game-changing, and it means taking risks, bucking trends, and making innovation the priority– and, all while keeping your team fully engaged…

In the article Why Your Business Needs a Big Idea by Carmine Gallo writes: As business focus on simply surviving; what’s lost is the Big Idea. Your business needs a moon shot goal that will fuel its journey for the next decade and inspire your employees, your partners, and you. In my work, I hear plenty of small goals for the next year– but few moon shots, e.g., ‘we hope to avoid layoffs’ is not a moon shot. Face it: A goal to increase sales by 2% next year isn’t going to inspire your team. Your employees want to know how you’re going to change the world. A big idea has a better chance of becoming relevant if it contains three components when articulated to its intended audience, namely; boldness, specificity, and consistency:

  • A big idea is bold: Great visions inspire: I do believe there is such a thing as dreaming the dream of a grand vision… Great entrepreneurs are focused on today, but the most innovative have a road map of where they will be tomorrow.
  • A big idea is specific: President Kennedy set a deadline to reach the moon, which contributed a lot to its success. An ambiguous idea such as becoming the ‘best-of-breed solution provider’ means very little. It’s not inspiring. Nor does it give employees a specific goal to reach.
  • A big idea is consistent: A big idea that’s not communicated consistently and frequently stands little chance of sparking action in others…

In the article Big Idea by Michael Masterson writes:  You will never win fame and fortune unless you invent a Big Idea. It takes a big idea to attract the attention of consumers and get them to buy your product. Unless your advertising contains a Big Idea, it will pass like a ship in the night. Big ideas come from the unconscious: This is true– in art, science, and advertising… But the unconscious has to be well-informed, or the idea will be irrelevant. Stuff your conscious mind with information, then un-hook your rational thought process… But, how do you recognize the Big Idea: Just ask yourself these five questions: Did it make me gasp when I first saw/heard it? Do I wish I had thought of it myself? Is it unique? Does it fit the strategy to perfection? Could it be used for many years? A big idea is instantly comprehended as; important, exciting, beneficial, and will last for a long time. That is a mouthful, so let’s break it down:

  • Big idea is important: Important to the customer
  • Big idea is exciting: Exciting to the customer
  • Big idea is beneficial: Benefiting to the customer.
  • Big idea leads to an inevitable conclusion: The big idea must be fundamentally simple: Easy to grasp, easy to see how it solves problems or delivers on stated promises…

In the article Big Ideas, Trends, Predictions–2013 by David Mielach writes: Media outlet ‘BusinessNewsDaily’ asked business owners, entrepreneurs, experts… to predict the most popular ‘Big’ trends in 2013. Here’s what they had to say:

  • Companies will focus on being remarkable: Becoming  remarkable has never been as important! It’s more important than ever for business to intensely focus on what it is that they are better at than any other competitor…
  • Crowdfund investing will grow: There is nothing bigger for some business than the ability to raise capital via crowdfunding; crowdfund investing will be an important option for entrepreneurs seeking to tap into new sources of capital to fund their business venture…
  • Mobile video consumption will continue to explode: It will surpass 50% of all mobile traffic. Those looking to develop their mobile presence, without having a mobile video strategy, will lose customers and market share…
  • Use of sensors will grow: Expect to see third-party payers and health care systems moving more aggressively to improve outcomes through the use of technology, such as; electronic monitored packaging, microchips embedded in pills, wearable sensors…
  • Social media will continue its evolution: Social media must have a two-way conversation tool with customers. Using three  important things: Listen before you speak… Understand what customers are saying about you… Develop relevant types of conversations that appeal to customers…
  • Content marketing will grow: Content marketing will rise to be the primary emphasis for brands wishing to increase; awareness, engagement, drive traffic… Move past the infographic fad to an era of truly entertaining and useful content.
  • Mobile shopping gets optimized: It’s now a business necessity for business retailers to provide mobile shoppers with an optimized mobile store that meets their unique shopping needs…
  • Personalization will grow: Technology converges to allow fast, inexpensive and convenient personalization of almost anything… allowing consumers to express themselves and their  individuality in ways never thought possible before…
  • Mobile-centric products will increase: Tech companies are realizing that mobile-centric products are not just an after-thought, but a necessity… we’ll see more technology companies opting for mobile business models. Some may even see the traditional Web as unnecessary.
  • Social media needs to show ROI: KPI (Key Performance Metrics) are most important: Everyone wants to know how  their campaigns are helping contribute to the company’s bottom line. Activity is not enough– its business outcomes that count.
  • Big data injects information science into relationship selling: While many companies leverage internal data to aid their selling efforts, companies will take it to the next level by  combining internal data with external data to make stronger predictions about which customers and prospects are most likely to buy, why, how much…

A Big Idea is formulated in a person’s imagination-mind; and, the human imagination is one of the world’s greatest forces. All of our world’s greatest achievements were once just thoughts-ideas in the mind of a person who dared to dream… According to Ed Mylett; creative imagination is the first step to action… when we are creatively imagining something, we are actually causing it to come alive. However, deep in our consciousness lies the force of ‘conformity’, i.e., do it as it’s always been done… The person caught in this destructive cycle never does anything– Big or worthwhile… Some say that the opposite of bravery is not cowardice; but ‘conformity’… According to ‘pakhandipandit’; mediocrity is one of the biggest hurdles… the problem is not that– ‘we aim too high and miss, but we aim too low and hit’… The problem is when we say some thing is– ‘big’, ‘unachievable’, ‘impossible’… we make our minds believe that we our incapable of doing those things, and thus we never do… Fear of failure is another reason which stops us from thinking Big. When we think about something really ‘worthy and difficult’ to achieve, we quickly come to conclusion that we will ‘fail’… But, this should not be where the story ends, for example; ‘fail is not failure, until you quit’. The reason for not reaching goals is not that we make an attempt for something near-to-impossible and fail, but the reason is we failed because we ‘quit’– without trying it again for the second, third, forth… time. I am saying that when you dream ‘Big’ you get an internal force which pushes you to make that first small step, which is usually the most difficult one– then, it’s a matter of persistence… The option is clear: Big Idea Thinking means: Be phenomenal or Be forgotten!

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Global Innovation Barometer–2013: Unconventional Strategy Unlocks New Drivers for Innovation– Pushing Comfort Zones

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Innovation rules are changing, globally, and companies must reinvent their strategy in order to stay competitive, drive growth and contribute meaningfully to the economy… For innovation to flourish, you must embrace a new innovation paradigm that promotes collaboration between all players– big, small, public, and private– fosters creativity, and emphasizes solutions that meet local needs…

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One-in-three business leaders are concerned over their ability to maintain a competitive edge in a faster paced, more global and resource-constrained environment. There is increasing anxiety over– what, how, when… to innovate as competition accelerates… Business executives continue to value innovation as a strategic priority; An emerging ‘innovation vertigo’– an uneasiness with the changing dynamics of today’s business landscape and uncertainty over the best path forward– is challenging leaders to think differently about how they can achieve growth. Many executives, however, seem to be embracing this complexity by exploring new and sometimes unexpected opportunities to innovate… According to Beth Comstock, General Electric (GE); business change has become constant and leaders are responding by betting big on more unconventional approaches to innovation to unlock growth… exploring different markets, partnership structures and business models – all in the pursuit of uncovering new ways to better serve customers… The key points in the ‘Global Innovation Barometer Report, 2013’ are:

  • Protectionist Policies.
  • Business Model Innovation.
  • Collaborative Innovation.
  • Government Policies.
  • Workforce Preparedness.

The Global Innovation Barometer Report, 2013: Now in its third year, the survey is commissioned by General Electric (GE) and conducted by StrategyOne. It includes interviews with more than 3,000 executives in 25 countries and explored the issues of how business leaders around the world view innovation and how those perceptions are influencing business strategies in an increasingly complex and global environment… It examines what factors business believe to be drivers and deterrents of innovation and analyzes specific approaches and policies that enable innovation and drive growth. A top line summary:

  • Protectionist Policies: Many  executives appear torn about how to best respond to the changing business environment. In efforts to mitigate perceived risks to their business and local economies, many are responding by adopting protectionist tendencies; 71% of executives reported that their government should prioritize promotion of domestic innovation rather than imported, while 71% reported that their governments should actually open markets further and promote imported innovation and investment. Paradoxically, there was a 53% overlap between these two opposing views. Executives in Mexico (80%), India (56%) and Brazil (50%) were most likely to advocate both open and closed market policies as a means to better innovation. 
  • Business Model Innovation: While incremental and product innovation have, historically, been main drivers of growth for companies; business model innovation is gaining momentum as a route to success. Innovation of a new business model may offer business a less risky and resource-intense path to better understand and reach customers over traditional methods…
  • Collaboration Innovation: Collaboration between businesses is emerging as a means to surpass competitors and generate revenue, particularly in emerging markets. However, despite the global acknowledgement of the power of partnerships; the lack of effective IP protection, trust, talent poaching– pose important barriers to action…
  • Government Policies: Global business leaders are concerned with policies affecting innovation and calling policymakers to create more stable, supportive policies to help enable better innovation in markets and across borders. Business executives perceive safeguarding the business interests– knowledge, IP, talent, removing policy barriers, over-regulation… as key to allowing innovation to flourish…
  • Workforce Preparation: Talent is consistently identified as a critical concern for innovation leaders across the globe; as the creativity and technical prowess of workforce is seen as key to unlocking innovation potential. Concerns about workforce preparedness (i.e., education…) and access to talent (i.e., cross-border mobility, retention, poaching…) abound, as companies are seeking to match the right job with the right people and line up the right skill sets to meet tomorrow’s economic needs, today…

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In the article Innovation Barometer: How Collaboration Breeds Advantage by Ideas Lab Staff writes: The smaller the world becomes; the greater are the possibilities for growth and collaboration… Those most experienced at partnership are among the most successful: Germany, China, Brazil and Sweden. Where 87% of the more than 3,000 executives, in the survey, were confident that their firms could be more innovative and successful if they collaborated or partnered with other businesses… The reasons to collaborate are clear: accessing new technologies and new markets: Executives in China (41%), South Africa (38%) and Mexico (37%) expect to report revenue and profit from their partnerships and continued growth… The biggest dissuaders are lack of confidentiality-intellectual property (IP) (64%), trust (47%) and a fear of having their talent poached (45%)… Talent has been consistently identified as a critical concern for innovation leaders and fears of having trained, skillful and successfully innovative staff leave are a serious deterrent for more innovation and collaboration. At the same time, 41% of the business leaders surveyed said they believe restrictions on access to foreign talent are increasing and those restrictions negatively impact businesses’ ability to innovate…

In the article Barriers To Innovation, And How To Break Through by Janie Curtis writes: One of the interesting statistics of this study was that over 50% of U.S. executives believe that new innovation models or processes are needed in order to accelerate the rate of introduction of market-changing ideas. However, I would make the observation that innovation processes in many Fortune 500 companies are thorough, but perhaps not exactly inspiring. When it comes to steps within the process and checks and balances that are in place to make sure that sub-standard ideas don’t move forward, there is a great deal of rigor. However, there is often a lack of rigor around the need to engender a level of inspiration and creativity that would enable members of the innovation team to launch new products, which are more than tweaked facsimiles on what is already on the market. Frequently, the idea-generation part of the process doesn’t go beyond getting a group of smart people in the room with a pad and starting to put ideas up on the wall. This can work very well for generating those marginal adjustments on the existing category reality, but often does not provide enough fodder for real leaps of imagination. Still another interesting barrier to innovation can be the– oh so popular ‘consumer insight’…I don’t think that the person who first invented bottled water, went to the consumer and asked whether they would like their tap water in plastic bottles so that they could pay a dollar or two for the privilege… Marketers-innovators in medium-to-large companies have come to a point where they don’t dare to trust their own instincts anymore; if the research doesn’t say it is a good idea, it isn’t a good idea. However, experience would indicate that in order to keep the door-open to paradigm changing innovation ideas, you must marry the need of process rigor with the ability to make the occasional leap of faith. The third barrier to significant innovation can be a weak brand or positioning strategy. We have all heard how difficult it is these days to come up with an insight that leads to the ownership of a consumer benefit that is truly different from the competition. This seems to have become the case; whether benefits are very direct and rational (e.g., better performance…), or more on the emotional end of the spectrum (e.g., improving quality of people’s lives…). It has undoubtedly become harder, but luckily– not impossible: If the strategy behind brand represents real market differentiation, and consumer inspiration and relevance… then, the chances of the innovation ideas that emanate from it; will be revolutionary, and increase dramatically…

Efficiency versus Innovation: According to Rowan Gibson; when the economic barometer is pointing upward, all the talk in company boardrooms is about growth, innovation and value creation. When the global economy lingers in the doldrums, corporate strategy shifts inexorably back to the safe haven of operational efficiency. Now you might argue that this reaction is both inevitable and understandable, and I would accept that at some level. But remember this: something far deeper and more significant than these periodic upswings and downswings is the fact that we are now in a new kind of economic era. An era in which fanatical cost-cutting, downsizing, lean Six-Sigma, mergers-acquisitions, supply chain management, off shoring or outsourcing are no longer the basis for competitive advantage. Companies all over the world are becoming increasingly worried about their ability to innovate and compete in the fast-changing technology world… However, one person’s alarm can be another one’s opportunity. Many executives seem to be embracing the new complexity by exploring new and sometimes unexpected ways to innovate. For example, a growing number of respondents, 52%, believe that development of new business models will contribute the most to their company’s future performance. Some 87% were confident that their firm could be more successful at innovating through partnership and collaboration, and 68% of respondents report already having developed or improved a product in partnership with others. Other companies are moving beyond product and incremental innovation to developing innovative business plans that offer a less risky and resource-intense way to open new markets… It seems that business leaders, globally, are being pushed outside their comfort zones with an uneasiness about the pace of change and confusion over best path forward… The feel of ‘vertigo’ can go beyond the usual symptoms of light-headedness and dizziness and is possibly far more than a chronic lack of solutions, which begins to creep into their psyche as their worlds are spinning out of their control… the whole economic system is still out of balance, and according to the survey; having ‘innovation vertigo’ may be part of a bigger malaise…

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Building-Managing a Business without Borders– Borderless Global Business: World is Flat… Baloney, Borderless is Myth

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Borderless business–‘world is flat’: Three primary changes at the dawn of the 21st century are the keys to the changing world. One, addition of China, India, the former Soviet Union and other countries with a combined population of 3 billion to the global world economy… Second, technological changes such as the Internet that have made distance less of a factor. Third, shift from hierarchical, vertical power structures in business and government to democratic, diffuse ones in which it is easier for individuals to make their own destinies. This triple convergence– new players, new playing field, new processes and habits for horizontal collaboration – are the most important forces shaping global economies and politics in the early 21st century… ~Tom Friedman

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Borderless business: Building and managing a value system that emphasizes seeing and thinking globally is the bottom-line price of admission to today’s borderless economy. On a political map, boundaries between countries are as clear as ever. But on a competitive map, map showing the real flows of financial and industrial activity, those boundaries have largely disappeared. Eaten away by persistent and ever speedier flow of information. According to Kenichi Ohmae; today people everywhere are more able to get information they want directly from all corners of the world. They can see for themselves– tastes and preferences in other countries, styles of clothing now in fashion, sports, lifestyles… Major changes in communications and information technology, rapid progress in transportation, active international institutions, trade agreements, commitments to globalization… have resulted in significant economic-financial interconnection between nations and markets, which in effect creates ‘borderless world’. Capital investment, technology, information– do not have nationalities anymore; they flow, essentially, freely in-out through national borders… A recent study by ‘Hackett Group’– involving nearly 200 executives representing companies in U.S., Europe, Asia-Pacific– found that most companies fully realize that growth is no longer limited by physical borders… the globalization of business functions is, in part, driving the increasing need for knowledge about– customers, suppliers, employees, operations… Certainly, globalization has detractors, but for today’s business leaders, the issue is not to debate the merits of globalization but to learn how to thrive in the global marketplace.  The winners in this ‘new normal’ for business won’t be those with the biggest offices or the most radical architecture, but those that keep a firm eye on the bottom line, while remaining open to the possibilities of new business and organizational structures underpinned by managed technologies…

In the article Borderless Business: Pros and Cons by Steve Purdy writes: Conducting business is becoming increasingly more global as technology, mobility and revenue opportunities in emerging markets are tempting enterprises to expand into new markets in order to reach new customers. While the world continues to face well-documented economic challenges, from austerity measures in Europe, to the sluggish recovery in the U.S., and from inflation concerns in Asia to geopolitical instability in the Middle East, going global can deliver a new avenue for prosperity– despite the current climate. According to HSBC; world trade is predicted to grow by 86% in the next 15 years as global markets boost their demand for traded goods. The global economy presents immense opportunities for investment and commerce, and with the right focus and commitment, businesses can succeed in the global marketplace… Selecting a new market for a business operation requires balanced consideration of many factors, including; personnel, costs, legal and regulatory concerns… New technology underpins regulatory best practice around the world, and as emerging markets improve their technological infrastructure they are increasingly becoming revenue opportunity markets for the global business community.  In addition to a local market presence and strong technology platform; a critical key driver fuelling globalization is the top-tier talent pool that can be found in developed and emerging markets. A flexible work strategy, which gives workers access to a professional workplace when needed, has been shown to increase productivity and work-life balance. A recent World Bank Report found that more countries are implemented business reforms to make it easier for overseas firms to trade with them… Emerging markets in Africa and Asia showed particular improvement in terms of business regulations, construction permits and easing the administrative burden of tax compliance. Being able to deal with the local legal and regulatory red tape should be top priority when a business is looking to expand into a particular market. Businesses should be looking for transparent and predictable legal and regulatory rules that are conducive for businesses. Reductions in corporate income tax for certain markets have helped increase ability to attract business from foreign countries. Businesses without borders are reshaping the global economy…

In the article Globaloney–Myth of Borderless Economy by Ian Fletcher writes: We live in a borderless global economy, and to dispute this is to risk being considered, not simply wrong, but ignorant. Yet this widely held belief does not survive serious examination when we get down to the hard numbers… The world economy remains what it has been for a very long time: a thin crust of genuinely global economy (more visible than its true size due to its concentration in media, finance, technology, and luxury goods) over a network of regionally linked national economies, over vast sectors of every economy that are not internationally traded at all… On present trends, it will remain roughly this way for the rest of our lives. The nation-state is a long way from being economically irrelevant. Most fundamentally, it remains relevant to people because most people still live in the nation where they were born, which means that their economic fortunes depend upon wage and consumption levels within that one society… Capital is a similar story: Capital cares very much about where it lives, frequently for the same reasons people do. (e.g., few people wish to live or invest in Zimbabwe; many people wish to live and invest in California)… Although liquid financial capital can flash around the world in the blink of an eye, this is only a fraction (under 10%) of any developed nation’s capital stock. Even most non-human capital resides in things like real estate, infrastructure and types of financial capital that don’t flow overseas, or don’t flow very much at all. As a result, the output produced is still largely tied to particular nations. So although capital mobility causes big problems of its own, it is nowhere near big enough to abolish the nation-state as an economic unit. Will it do so one day? Unlikely. ‘Inevitable globalization’ is a catch phrase that doesn’t accurately describe current trade, economic or political reality…

In the article Challenge of Change in Borderless World by John Psarouthakis writes: Fifty years ago the U.S. with 27% of world’s gross domestic product (GDP) was the world’s economic power. The ‘poor’ countries of the world, such as; India, China… were barely making 4% of the world’s GDP each. Now let’s jump ahead in today’s world. Let’s look at the state of the economies about 50 years later and see what changed: The U.S. portion of the world’s GDP has dropped to 22%, whereas ‘poor’ countries of 50 years ago are growing at a rate, such that, in another 20 years or so, their economies will surpass those of the U.S., Western Europe, and Japan together. However, companies, today, still run business using traditional models that are no longer effective in the rapidly changing and high-uncertainty global marketplaces. For example; traditional business planning is based on ‘world of high-certainty’ and achieving specific business performance goals, numbers… In contrast, today’s marketplace reality is ‘world of high-uncertainty’ where there simply isn’t enough accurate information-knowledge to predict, with any degree of certainty, what business performance goals, numbers… might be achievable. While further insisting that management stick to the traditional rigid business plan with expectation that the business will– make numbers, deliver earnings… However, this can be dangerous commitment to a potentially flawed business strategy with unrealistic goals when underlying business logic-strategy may have shifted. An argument that is central to modern business thinking is the need to use different disciplines when operating in an environment where there are many more uncertainties-assumptions– than there is knowledge. Then, one must think ‘out of the box’. In such a world, forget about a short-lived, often meaningless ‘competitive advantage’… it’s a concept built for  20th century. In 21st century, there is nothing more asymmetrical– more disruptive, more revolutionary, or more innovative– than the world-changing power of an ‘idea’. Where are the ideas in your organization? The breath of impact of today’s rapid change including; sophistication of communications, greatly broadens the number of people, globally, who know something about and will be affected by new ideas. As a result, we are closely interrelated with and more interdependent on other people than ever before. Therefore, each of us, whatever our role, must be more aware of other people, globally, as we initiate and adopt change…

Let us imagine, a borderless world: A world where borderless means: People can move from one place to the other without Visas. Goods and services can be bought and sold without import/export duties. Education is free (at least basic education). People would be free to do what they want to do (lawfully)… According to Pravin Koshti; the leading economic ‘-isms’ and many spiritual/religious ‘-isms’ have been trying to do that for years. The economic ‘-ism’ are capitalism and socialism: Socialists want it by making a world a single big society where everyone is working for the society… Capitalists are trying to do it through single-minded profiteering… But until now, the results are mixed at best. USSR (Russia) failed, and is becoming more capitalistic, China is becoming more capitalistic, U.S. is walking on the way to become more socialistic… But, is there a middle path where these ‘-isms’ can work together: Some people think– yes, and other say– impossible. But ‘what if’ the world was unified in different ways: For example;  ‘what if’ we really become an educated world, without politics, without divisions, without borders… and removed egos, greed… would that facilitate a kinder and gentler– borderless world?

 

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Understand Business Cycle– Upward-Boom, Downward-Bust– Economic Movements-Shifts: Critical for Good Decision-Making

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Business cycle is a fundamental, and yet elusive concept in macro-economics… it’s a pattern of economic booms-and-busts– economy-wide trends– that can have significant impact on businesses… The term business cycle (or economic cycle) refers to economy-wide fluctuations in production, trade… and economic activity, in general, over several months or years…

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The business cycle is the upward-and-downward movement of GDP (gross domestic product) with periods of expansions-contractions in the level of economic activities (i.e., business fluctuations) centered around its long term growth trend. The fluctuations typically involve shifts, over time, between periods of relatively rapid economic growth (expansion or boom), and periods of relative stagnation or decline (contraction or recession). The basic definition of the business cycle was developed by Arthur F. Burns and Wesley C. Mitchell in their book ‘Measuring Business Cycles’: Business cycles are a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions and revivals, which merge into the expansion phase of the next cycle. Another definition by Parkin and Bade says; the business cycle is periodic, but irregular up-and-down movements in economic activity measured by fluctuations in real GDP and other macroeconomic variables. A business cycle is not a regular, predictable or repeating phenomenon like swing of the pendulum of a clock. Its timing is random and, large degree, unpredictable. However, many experts say that the term business cycle is misleading– ‘cycle’ implies that there is some regularity in timing and duration of upswings and downswings in economic activity–and most economists prefer the term ‘short-run economic fluctuations’ instead of business cycle

In the article What Is a Business Cycle– Why Is It Important? by Gregory Hamel writes: The rise and fall of economic conditions are part of the business cycle. Business planning usually revolves around decisions related to specific markets in which a company operates, but economy-wide trends can have significant impact on businesses. The business cycle is a pattern of economic booms-and-busts exhibited in the modern economy. Understanding business cycle is important because it affects– sales, profitability… and they ultimately determine whether a business succeeds-fails. Business cycles have four phases: booms, downturns, recessions, and recoveries. During booms; economic output increases quickly and businesses tend to prosper. Eventually, a booming economy reaches a peak point where economic growth rates start to fall, leading to an economic downturn. Downturns lead to periods of economic stagnation or decline called recessions. Also, the point at which economic growth rates begin to increase again is called the trough of the business cycle; a period of economic recovery follows the trough and leads back into an economic boom. The business cycle can have major effect on total level of employment in the economy: During periods of economic growth-prosperity, employment tends to be high because businesses need more workers to meet demand and expand their companies. Whereas, economic downturns-recessions are characterized by cuts in worker hours, cuts in worker pay, rising unemployment… Also, business cycle can have significant influence on consumer demand: High levels of unemployment and under-employment mean consumers have less money to spend on products and services and that can lead to lower sales… Overcoming economic downturns-recessions is one of the biggest challenges for sustaining business: During economic recovery-boom, conditions are ripe for businesses to enter markets, but during downturns-recessions the result can be the failure of many weak businesses. Surviving sluggish business cycle typically revolves around cutting costs, improving efficiency, drawing on resources saved during periods of prosperity.

In the article Economic Business Cycle Indicators by Shane Hall writes: Business cycles are difficult to predict but certain indicators can provide signals to corporate leaders, investors, economists, government officials… about the onset-progress of business cycles. The ‘Conference Board’, global business research association, identifies three main classes of business cycle indicators, based on timing: leading, lagging and coincident indicators. The Conference Board website states that all the indicators are designed to predict– peaks-troughs of business cycles in several nations-regions around the world including; U.S., Britain, Australia, China, Japan, Euro area of Europe, Germany, France, Mexico… Leading indicators are measures of economic activity in which shifts may predict the onset of a business cycle. For examples, leading indicators include; average weekly work hours in manufacture, factory orders for goods, housing permits… Increases-decreases in these measures could signal beginning of a business cycle. The ‘Conference Board’ reports that leading indicators receive the most attention because of their tendency to shift in advance of business cycles. Other leading indicators include; index of consumer expectations, average weekly claims for unemployment insurance, interest rate spread… If leading indicators signal the onset of business cycles, lagging indicators confirm these trends. Lagging indicators consist of measures that change after an economy has entered a period of fluctuation. Lagging indicators include; average length of unemployment, labor cost per unit of manufacturing output, prime rate, consumer price index, commercial lending activity… Because lagging indicators change direction after the economy enters a business cycle, they are sometimes dismissed as unimportant. The Conference Board points out, however, that lagging indicators are costs of doing business, and can provide valuable insight into structural issues of an economy. Coincident indicators consist of aggregate measures of economic activity that change as business cycle progresses. Therefore, according to the ‘Conference Board’; these indicators help define business cycles, and examples of coincident indicators include; personal income levels, industrial production, unemployment… Although leading indicators receive the most attention, the ‘Conference Board’ emphasizes the importance of all three classes of indicators when observing business cycles. Leading indicators are most meaning, when they are included as part of a framework that includes coincident and lagging indicators that help define and describe fluctuations in economic activity…

In the article 4 Phases of Business Cycle in Economics by Gaurav Akrani writes: Business cycle (or trade cycle) is divided into four phases:

  • Prosperity Phase: Expansion-Boom-Upswing of economy. When there is an expansion of output, income, employment, prices and profits, there is also a rise in the standard of living. The features of Prosperity are: High level of output and trade. High level of effective demand. High level of income and employment. Rising interest rates. Inflation. Large expansion of bank credit. Overall business optimism… There is an upswing in the economic activity and economy reaches its Peak.
  • Recession Phase: The turning point from Prosperity to Depression is termed as Recession Phase. During a Recession  period, the economic activities slow down. There is a steady decline in the output, income, employment, prices and profits. Business loses confidence and become pessimistic… reduces investment, business expansion stops, stock market falls. Typically, an increase in unemployment that causes a sharp decline in income and aggregate demand. Recession, generally, lasts for a short period.
  • Depression Phase: There is a continuous decrease of output, employment, income, prices, profits, and fall in standard of living… The features of Depression are: Fall in volume of output and trade. Fall in income and rise in unemployment. Decline in consumption and demand. Fall in interest rate. Deflation. Contraction of bank credit…The aggregate economic activity is at the lowest, causing a decline in prices and profits until the economy reaches its Trough (low point).
  • Recovery Phase: The turning point from Depression to Expansion is termed as Recovery or Revival Phase. During the period of revival or recovery, there are expansions and rise in economic activities. Steady rise in output, employment, income, prices and profits. Business gains confidence and optimistic… increases investments, banks expand credit, business expansion takes place, increase in employment, production, income and aggregate demand, prices and profits start rising,  and business expands. Revival slowly emerges into Prosperity, and business cycle is repeated.

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The ‘media’ often likes to refer to the business cycle model, since it can use terms, such as; ‘boom’ and ‘bust’. It’s a model that can communicate several important pieces of information about a nation’s economy. Basically, the business cycle is a graph which shows the level of real GDP over time. The ‘vertical axis’ shows– level of GDP, and ‘horizontal axis’ shows– time frame. A typical nation’s business cycle will most likely look like a wave, showing how GDP ‘rises and falls’ over time. Assuming that a country is achieving economic growth over the long-term, the business cycle’s ‘line of best fit’ or ‘trend line’ will slope upwards, indicating that over the span of years or decades, a nation’s economy will produce more output. But over shorter periods of time, output may fluctuate, as the economy experiences those ‘boom’ and ‘busts’ that the media is so fond of. According to Jim Riley; the business cycle is crucial for businesses because it directly affects demand for products. Every business is affected by the stage of the business cycle, but some businesses are more vulnerable to change than others. For example, a business that relies on consumer spending for its revenues will find that demand is closely related to movements in GDP. During a boom, such businesses should enjoy strong demand for their products… But during a slump, a business can suffer a sharp drop in demand… Businesses whose fortunes are closely linked to the ‘rate of economic growth’ are referred to as ‘cyclical’ businesses. By contrast, however, some businesses actually benefit from an economic downturn. If their products are perceived by customers as representing good value or it’s a cheaper alternative, then consumers are likely to switch. According to Noah Smith; modern business cycle models used by mainstream macro-economists are, for the post part, not actually models of cycles. When we think of a ‘cycle’, most of us think of something like a wave– it’s a harmonic motion such as; snapping rope or whip, ocean waves, bouncing ball… also, it may be natural to think of business cycles in this same way. When a recession comes on the heels of boom or economic bust– we can easily conclude that booms cause busts. However, very few macro-economists think like this! And very few macro-economic models actually have this property. In modern macro-economic models, since ‘cycles’ are nothing like waves. A ‘boom’ does not make a ‘bust’ more likely, or vice versa. Modern macro-economic models assume that what may looks like ‘cycle’ is actually ‘trend’… Some economists argue that the business cycle is an essential part of an economy. Even downturns have their role to play– they tends to ‘shakeup’ the economy and weed-out weak firms– creating greater incentives to cut costs and more efficiency. However, this view is controversial and other economists argue that in recession, even ‘good’ firms can fail– leading to permanent loss of productive capacity…

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Scenario Planning– Thinking Future-Uncertainity-Unexpected: Strategic Playbook-Plans to Navigate Tomorrow and Beyond…

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Scenario planning is discipline for discovering the entrepreneurial power of creative foresight in contexts of accelerated change, greater complexity, and genuine uncertainty. ~Pierre Wack… In preparing for battle, I have always found that plans are useless, but planning is indispensable. ~Dwight D. Eisenhower…

Scenario Planning, in simple terms, is a strategic planning method expressly developed to test the viability of alternative strategies… a process that stimulates imaginative, creative thinking to better prepare an organization for the future. To flourish in today’s volatile business environment, decision-makers must have vision to evaluate what may lie ahead and identify the best course of action. Scenario planning allow organizations not only to avoid dead-ends but, more important; ensure equilibrium in off-balance economy, think through change, choose the way forward with quicker, more complete, accurate decision-making for success. According to Caspar van Rijnbach; scenario thinking is not primarily about planning, it’s about learning (that’s why I refer to scenario thinking instead of scenario planning). It’s about teams working together, discussing, sharing… It’s about connecting with experts that are able to provide insights about economic, social-political trends, raising questions and provoking insights. Also, it helps to mitigate the dogmatic ‘true view’ group thinking by the management team… Instead, it instills a fresh strategic thinking awareness for creating new innovative insights… According to Kay Sargent and Peyton Pond; through scenario planning, a firm’s stance is proactive-optimistic, yet also defensive and even preemptive. Scenario planning takes into account the many forces driving change in the current business environment… According to Rob Willey; scenario planning is described as a way of rehearsing the future to avoid surprises by breaking through the ‘illusion of certainty’. However, unlike traditional strategic planning, which assumes that there is usually just one best answer to strategic question; whereas, scenario planning entertains multiple possibilities. Also, unlike contingency planning that normally focuses on a single uncertainty, scenario planning investigates several simultaneously. According to Ross Dawson; the greater the uncertainty, the greater the value of scenario planning– and, in most industries today uncertainty is increasing. In fact, engendering scenario thinking among executives is far more important than scenario planning itself; however, scenario planning is often the best route to that outcome. According to Global Business Network; scenarios are not predictions; rather, they are plausible accounts of how relevant external forces might interact and evolve in future. In scenario planning, typically, organizations create three-four scenarios that capture a range of possibilities; examines the opportunities and threats that each may bring; then makes short- and long-term strategic decisions based on these analyses. Although scenario planning has gained much adherence in industry, its subjective and heuristic nature leaves many academics uncomfortable, for example: How to know what are the right scenarios? How to go from scenarios to decisions? Furthermore, significant misconceptions remain about its intent and claim… but, to take the scenarios too literally as though they are static beacons that map out fixed future is a mistake. However, scenario planning is an important tool for examining uncertainties, framing perceptions, collective learning… In actuality the aim is to bind the future, in a flexible way– such that it permits learning and adjustments as the future unfolds…

In the article Secret Of Successful Scenario Planning by David Niles writes: In business, as in life, real outcomes often don’t follow the averages. Yet much of corporate strategy is planned as if they always did. Far too many companies make strategic planning a routine exercise. They take last year’s budgets and results, and assume some modest variation from last year’s mean (average). By relying on simple variations on the mean, companies effectively homogenize data and miss crucial key information. When you average-out the customers’ demand, you lose sight of the customers’ key decision thresholds. For example; Which ones will buy tomorrow and why? What does that say about their changing needs? Similarly, when thinking about competition, you just can’t model where the competitors were last year; in terms of pricing, service… You must discern where they’ll be in future… These ideas may not sound revolutionary, but very few businesses show discipline to create scenarios and measure probabilities for unexpected market changes. However when you do, you can better evaluate possible outcomes, probabilities, underlying drivers… and greatly improve the company’s ability to see around corners and prepare for the future.

In the article How to Build Scenarios by Lawrence Wilkinson writes: Scenarios are specifically constructed stories about the future, each one modeling a distinct, plausible world in which we might someday have to live and work. Yet, the purpose of scenario planning is not to pinpoint future events but to highlight large-scale forces that push the future in different directions. It’s about making these forces visible, so that if they do happen, the planner will at least recognize them. It’s about helping make better decisions today. This all sounds rather esoteric, but according to Peter Schwartz; scenario making isn’t rocket science… scenario planning begins by identifying the focal issues or decision factors… Ultimately, the power of scenario planning helps us understand the uncertainties that lie before us and what they might mean… It helps us ‘rehearse’ our responses to those possible futures… it helps us spot them as they begin to unfold.

In the article Ways to Apply Scenario Planning by Paul Schoemaker writes: Whenever you face high uncertainty, you need to be creative as you navigate uncharted waters. But you also need a prepared mind. Many organizations use scenario planning to test robustness of their current strategic plans against a wide range of alternative scenarios. Its equivalent of putting an airplane wing in a wind tunnel to see at what point it fails as pressure builds up. Stress-testing helps companies minimize potential negative consequences and be better positioned to seize opportunities. Companies on the move often use scenario analysis to expand their geographic footprint, explore adjacent markets, invest in new technologies, reach beyond their industry boundaries… considering a wider range of futures that might bring new opportunities… However, don’t think of scenario planning as just a corporate activity conducted by futurists and staff people. Savvy organizations translate and adapt the scenarios to multiple management levels to connect with those managing functional and business strategies… Agility requires that your strategic intent is flexibly combined with actions that will make your strategy happen, which requires adaptive leadership as well as a good strategic radar… sharing views, discussing trade-offs and building support for key strategic initiatives. Use scenarios to explain strategic choices and build support inside the company, and well beyond.

Planning is all about getting to where you want to go, while scenarios are about getting there on the best available road. Making decisions based on prior events can be dangerous and counterproductive for thriving-surviving in these uncertain times. Scenario planning answers: ‘What if’ questions– that involve important issues and large external influences. Unlike strategic planning that postulates single anticipated future, scenario planning looks at alternative versions of the future without trying to predict it. The goal is to work laterally and consider unexpected surprises that undo most extrapolations… According to King Whitney; we all adapt to change in a variety of ways. The most detrimental is getting stuck in the past. It’s easy to fall into the trap of running your business while looking in the ‘rear-view mirror’... However, despite the growing popularity of scenario planning a number of misconceptions remain, for example; all too often, scenario approaches deteriorate into little more than a conventional forecasting effort that involves assigning explicit probabilities to potential outcomes. Or, at the other extreme, scenario planning devolves into loosely grounded futurist musings with little if any relevance to current circumstances. Another common mistake is casting scenario planning as an abstract exercise that may provide value in the distant future but has little or no practical application for immediate decision-making. But, on the contrary, scenario planning provides leaders with a better understanding of the world and the macro drivers of change that are at work…

The art of scenario-based strategic planning is to connect the world of ‘what ifs’ with down-to-earth decision-making process. Necessarily, that suggests the requirement to translate 50,000-foot concepts into clear-compelling implications for markets, companies… If done effectively– creative, rigorous manner with engaged, open-minded stakeholders– scenario planning is an invaluable tool for gaining immediate impact and longer-term advantage… According to Peter Drucker; most common source of mistakes in management decisions is emphasis on finding the ‘right answer rather than right question’. This highlights one of the challenges that business leaders face; an overriding desire for greater certainty and precision at time when certainty and precision are increasingly elusive. In practice, as we know, the future is never certain: Consider, for example, the long list of ‘unknown unknowns’… According to Michael Litchfield; the value that a properly executed scenario planning exercise delivers is not to predict best or most likely future, but to uncover wide range of possible situations and develop range of associated strategic responses. Perhaps even more valuable, however, is the development of a sense of risk awareness and disaster readiness within an organization… However, despite widespread use of scenario planning there are those who criticize the method, and mostly challenge the subjective nature of the process, and inability to quantitatively measure its effectiveness… According to Pierre Wack; the future is no longer stable; it’s a moving target. No single ‘right’ projection can be deduced from past behavior. The better approach is to accept uncertainty and try to understand it, and make it part of our reasoning. Uncertainty today is not an occasional, temporary deviation from a reasonable predictability; it’s a basic structural feature of the business environment. The methods used to think-plan about the future must be appropriate for a changed business environment. Scenarios planning starts by dividing our knowledge into two broad domains: (1) things we believe we know something about, and (2) elements we consider uncertain or unknowable… The art of scenario planning lies in blending the ‘known and unknown’ into a limited number of consistent views of the future that span a very wide range of possibilities. The real value of scenario planning is that it allows policy-makers the opportunity to ‘rehearse the future’ and, in this sense scenario planning is much about– the journey as the destination.

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