Break free of strategic dogma and be successful

Af Claus Rosenkrantz Hansen, CBS Library

They are the black swans of the business community. They do the unexpected, and they do it with success. They do not plagiarize past triumphs but seek new ways, and successfully so.

Ryanair is a black swan. Based in, aviation-wise, unconventional Ireland, Ryanair takes on established airlines using equally unconventional methods.

The no-frills airline, with both cheek and, as it turned out, quite a lot of foresight, introduced unprecedented low fares which in turn challenged established airlines to a price-cutting war as they, with gaping mouths and shaking heads, watched their customers trickle to the low cost airline.

”Black swan companies are companies that operate in unpredictable ways. They are not afraid of thinking out of the box thus challenging the dogmas of traditional strategic literature. They look to the literature in a differentiated and selective way and implement only those aspects of strategic thinking that make sense in their particular settings. They adapt the literature for the company not the other way round,” Flemming Poulfelt explains.

With Michael Moesgaard Andersen he is behind the book Beyond Strategy – The Impact of Next Generation Companies just published by American Routledge.

The book explores the emergence in the corporate world of a new strategic paradigm and reaches the conclusion that the new paradigm is the result of the ineffectiveness of traditional strategic literature in guiding the management of future business operations.

Be a slave to literature and expect trouble
A ’true disruptor’, that is how the authors refer to Ryanair. A ’disruptor’ - simultaneously creative and destructive – is probably how established airlines considered Ryanair when it first appeared with its low cost, no-frills business model.

Most likely Ryanair will never be thought of as the good kid in class by established airlines. The enfant terrible of aviation is probably a more accurate description; the guy who dumps prices and eventually pushes old airlines, including SAS, closer to the precipice because they did not have the wit to move in time. They are caught off their guards and because of it lose significant market shares.

But what exactly is going on in SAS and in companies like it? Why do they allow themselves to be caught napping? According to Flemming Poulfelt and Michael Moesgaard Andersen the answer lies in the way strategic precepts and strategic literature are utilized.

SAS operates in a reactive rather than proactive way. The company leaves innovation to others and because of that is always trailing. It behaves in an exemplary manner, always doing what the strategic literature dictates, but nevertheless always finds itself in a difficult place.

”They are so preoccupied with doing what the literature wants them to do that they end up applying archaic and obsolete principles in their decision making. And that is a dangerous approach when up against companies like Ryanair, Apple, Tata, and Huawei – they will quite simply run you over,” says Flemming Poulfelt.

Is foresight an acquirable skill?
He goes on to mention Nokia, the terminal manufacturer, as an example of a company prone to unresponsiveness which is odd considering that Nokia started out as a beautiful white swan who, through foresight, managed to capture significant portions of the global mobile phone market. Most was lost, however, with the introduction of Apple´s iPhone, a new black swan. The rest is history - today whatever remains of Nokia has been bought up.

Flemming Poulfelt quotes the example of Nokia as a company whose self-complacency has made it blind to the sudden market entry of a new black swan, a ’true disruptor’. This is a strategic faux pas and a good example of how companies that operate within a traditional strategic mindset to a large extent content themselves with building future strategies on past successes.

But can you learn to be forward thinking or, in the words of the authors, ’hungry for change’?

”Companies need to critically challenge their mindsets and past experiences. They need to foster a culture in which the currency and appropriateness of established modi operandi are called into question as a matter of course,” Flemming Poulfelt explains.

The companies that experience problems are not sufficiently sensitive to the world around them. Instead they insist on pursuing a once effective strategy. But strategies grow obsolete – and the same goes for strategic literature.    

”It is important to heed the way strategic literature is consumed in the company. We are not anti-literature but it is worth a moment to reflect on the kind of insights that are drawn from it,” Flemming Poulfelt explains.

Aravind – India´s humanitarian strategy iconoclast
Beyond Strategy – The Impact of Next Generation Companies is organized around studies of companies identified by the authors as black swans. Indian Aravind, a company offering eye surgery at extraordinarily low cost and urged on by a humanitarian outlook, is a case in point.

In particular the history and values of the company draw attention. It was founded by retired eye surgeon Dr. Venkataswamy in an attempt to fight cataract, a debilitating eye condition prolific among India´s poorest.

The humanitarian aspect lies in the fact that 60 percent of operations are performed free of charge, paid for by the remaining 40 percent. The company does not receive donations but nevertheless operates with profits that are in turn funneled into new strategic and organizational initiatives. Professional and fiscal results are achieved by introducing mass production and mcdonaldization principles into the field of eye surgery, thus cutting costs to a mere fraction of what they were. In their book Flemming Poulfelt and Michael Moesgaard Andersen refer to this phenomenon as ’frugal innovation’.

”We believe that developing economies such as India in future will be at the cutting edge of innovation and that companies in the western world will be forced to learn from this. If they do not, hallowed western companies run the risk of losing momentum as is the case in telecommunications with the appearance of Huawei”