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Consider the following developments in the last ten years:
* The rapid emergence of new business models enabled by the internet that blind-side incumbents in many industries: Think of the information content business. Why buy a map when you can get it on Google? Why buy a newspaper when Yahoo! News aggregates it for you?
* New products and business models that blur industry boundaries: Who needs a PDA, a mobile phone, and an MP3 player (or, for that matter, a camera) when a smartphone from Apple or Samsung could do it all?
* The emergence of vigorous and ambitious competitors from emerging economies: why look at an HP or Dell when a Lenovo could work, maybe at a lower price?
Even as rapid technological evolution and rising globalisation are posing immense competitive challenges to companies, the last decade has also witnessed additional disruptions. The deep and enduring recession in the developed world from 2008 has put under severe stress the cash flows and financial health of many enterprises. At the same time, natural disasters such as tsunamis and earthquakes or acts of terrorism have tested the global supply chains of many multinational companies.
As the world economy continues to be mired in macroeconomic turmoil and as global competition and rapid technological evolution continue to add to the flux, managers in every part of the world and in every industry face an increasingly urgent question: How do we build enduring businesses in a constantly changing world?
ET&A is essential in a world where competitive pressures call for rapid responses even as market and technological uncertainties raise the complexity of the business landscape; where businesses do not h
ave the luxury of being able to invest and own all capabilities and technologies; and where flexibility and adaptability to emerging situations
are more important than stability and irreversible commitments.How does ET&A work?
* At its core, ET&A calls for a strong commitment to innovation and entrepreneurship. Innovation is as much about developing new business models as new products or processes. Entrepreneurship is about how willing firms are to rethink how they create value for customers, deliver value through their activities, and capture value for all stakeholders. Google's coupling of its search platform with advertising is a good example of how a business can translate its commitment to innovation and entrepreneurship to create a host of profitable businesses.
* A second feature of ET&A is a commitment to developing rapid market-learning cycles. Given the uncertainty and ambiguity surrounding most innovation efforts, businesses cannot assume that they will get it right first time, every time. Success can be achieved in two ways : (a) conduct low-cost market experiments to test customer reaction, and (b) learn and incorporate quickly insights to improve underlying technologies and business models into the subsequent offering.
Ideally, this rapid action-learning cycle also incorporates learning from the attempts of competitors and businesses in other relevant industries. Witness how many generations of the iPhone Apple has launched in the last few years. Experiment and constant upgrading is more important now.
* The third aspect of ET&A is a focus on robust core capabilities. Rather than focus on positioning, this calls for building robust capabilities that are valuable under multiple market and technology scenarios.
The Taiwanese company HTC is a good example. Instead of staying as a mere contract manufacturer of phones for others, it consciously invested in capabilities such as brand building, multi-channel distribution, and alliance management skills to position itself for the future.
* Another aspect of ET&A is the need to create impact multipliers. Given the virtual impossibility of being world-class in all parts of the value chain, everyone now recognises that firms need to forge, structure, and manage a range of alliances across the globe.
What is missing is the recognition that increasingly winners in alliances are those who create, control, and capture a share of the value-pie disproportionate to their share of the total value chain. See how carefully Apple creates and nurtures its ecosystem of app-developers and content providers. It not only helps Apple's current financial performance, but also becomes a potential launching pad for future forays into a variety of internet services, such as video streaming.
* A major responsibility of senior managers is to create and leave behind seeds for growth. We need far sighted managers, who are not simply focused on short term financial goals and realise they need to seed projects that may only pay off over the long haul. For instance, Sharp's transformation in 2000 into a leader in LCD technology was driven by the seeding investments made by senior managers in that uncertain technology way back in the 1980s.
To sum up, the ever changing global business landscape has reinstated entrepreneurship at the heart of the corporation where it truly belongs. Managers need to think and act entrepreneurially if they want to build enduring businesses in a constantly changing world.
U Srinivasa Rangan
Luksic Chair Professor of Strategy & Global Studies, Babson College, US
Sam Hariharan
Professor of Strategy and International Business, Babson College, US
