CXO

Innovate like Amazon: Put values and tactics ahead of strategy

Gartner's Janelle Hill made an unorthodox recommendation to the tech leaders at Gartner Symposium this week. She told them to stop spending so much time on strategy.

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Janelle Hill, Gartner analyst, spoke about a new innovation paradigm at Gartner Symposium 2016.

Image: Jason Hiner/TechRepublic

Gartner analyst Janelle Hill told a room full of CIOs at Gartner Symposium ITxpo that they needed to start acting more like poker players than chess players.

Hill told them that they had been trained to devise big strategies, but that approach is holding them back as we transition into the digital age. Because we're living in a time of uncertainty, upheaval, and disruption, she said strategy is overvalued and "business transformation is really hard." According to Gartner's research, 70% of business transformation initiatives fail to deliver the value expected.

SEE: 5 things CIOs need to lead digital transformation (TechRepublic)

For that reason, Hill said it's time to throw out the traditional textbook on leadership. She said that a new model for how to compete and thrive can be found by looking at the "digerati" companies that have grown up on the internet and had to adapt multiple times to thrive and continue to grow. She was talking about Amazon, Google, Facebook, Netflix, and their peers.

She particularly pointed to Amazon, reminding everyone that they started by selling paper books on a website and now they're working on drones, autonomous trucks, cloud platforms, consumer electronics, and AI-powered personal assistants. They pivot quickly to new opportunities because they don't get bogged down by their own plans.

"They are incredibly good at driving strategic change," Hill said, "but they don't do it the way you were taught to do it."

The traditional lesson from business school is to "figure out a strategy that will differentiate your business from others," she said.

That makes strategy pre-eminent in the old model. It is the realm of leaders. Meanwhile, tactics are something for middle management to figure out, and values are a squishy thing that companies aren't very good at talking about in an authentic way.

To succeed in the digital age, leaders have to flip that paradigm. That's what the high flying tech companies like Amazon have figured out, she argued. They have put the focus on values and tactics and worried less about strategy—because in a constantly changing environment, it's almost impossible to predict a good strategy. It's like throwing darts at a moving target.

Thus, the radical formula she put forward for IT leaders was that "values, underpinned by great tactics, beat strategy every time."

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Image: Gartner

Internet companies have succeeded by taking this alternative approach to strategic planning. They've made things like innovation, adaptability, and experimentation their core values and then created a standard playbook of their best tactics for dealing with whatever changes happen in the market, or in their industry, or among their competitors.

Hill acknowledged that a lot of the executives in the room were probably thinking that these digital businesses looked nothing like theirs—since they were asset-lite, totally online, and competing in new, fac-paced markets. But, Hill brought up four traditional businesses that have embraced the values-tactics model and used it to create big success over the past decade:

  • Ford Motor Company - The only major US automaker to not take a government bailout in 2009 did it because its leaders felt it would undermine their trust with customers and partners (a core value). It also re-embraced in-house research and invention (a traditional tactic). Ford is once again among the most profitable automakers in the world.
  • Southwest Airlines - The No. 1 value at Southwest is that it puts its employees first. As a result, its employees love to work for the company, go above and beyond the call of duty, and create a great product with great financial results. Southwest always ranks at or near the top of the airline industry in customer satisfaction.
  • Marriott - The famous hotel chain has famously articulated five core values—focused around taking care of people— and it explicitly works to connect those values to its operating model. The hospitality giant regularly gets named to lists of America's best-run companies.
  • Costco - Some of Costco's values include paying its employees a living wage (so it compensates them 2-3x more than its competitors) and making sure its executives understand the day-to-day from an employee and customer perspective (so all executives take shifts working in the warehouse). It now tops other retailers in customer satisfaction and has grown faster than its direct competitors in both revenue and profit for the past five years.

For more on the Ford example, here's Hill's slide:

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Image: Gartner

To help get the juices flowing on how companies could implement this type of thinking, Hill recommended five tactics that could be added to the playbook:

  1. Set up a sense/respond apparatus - Figure out the environmental factors that your business is sensitive to (weather, seasonality, pricing, geography, regulations, etc.) and then use a combination of data science to detect changes and algorithms to automatically trigger actions.
  2. Start a culture of innovation - Share and spread innovation stories within the company, crowdsource innovative ideas, absorb innovation techniques and best practices, use your values to vet the best ideas.
  3. Enable 360 communications - Put a closed loop feedback mechanism in place, recruit peer advocates, acknowledge the voices who speak up and reinforce your company's values by responding appropriately.
  4. Draw a picture of your enterprise with the 3 B's - Diagram your company's enterprise context in terms of Business architecture, business, performance, and business process. (See sample diagram below.)
  5. Start a lab for exploratory behavior - Labs can easily go wrong when they just become a box to check. Promote cross-functional collaboration in your lab, stock it with inexpensive tools, allocate workers time to experiment, and challenge your employees to pick problems they can solve themselves.
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Image: Gartner

And finally, here's Hill's slide on how it all fits together:

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Image: Gartner

Her conclusion: "Business strategy changes over time, whereas corporate values and tactics last forever."

Of course, choosing to not focus on strategy is still a strategy in itself.

More from Gartner Symposium ITxpo 2016

About Jason Hiner

Jason Hiner is Global Editor in Chief of TechRepublic and Global Long Form Editor of ZDNet. He's co-author of the book, Follow the Geeks.

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