Session 3: Strategy Approaches and Ambidexterity Strategy PDF

Session 3: Strategy approaches and Ambidexterity Strategy Digital Business Two-year Msc Course coordinator: Nabila BOUKEF Ph.D Associate Professor in information Systems and digital transformation...

Session 3: Strategy approaches and Ambidexterity Strategy Digital Business Two-year Msc Course coordinator: Nabila BOUKEF Ph.D Associate Professor in information Systems and digital transformation SKEMA Business School Digital journey How should we define our digital Our focus strategy given the new rules of the 4- To remain competitive, companies should think about game? their digital growth 3- There are different strategy approaches depending on the constraints of the environment 2- There are Different ways to create a competitive advantage with digital technologies 1- There are new rules of the game in the digital era Revise and Discuss Revise and Discuss (1) After digital photography replaced film and smart phones replaced cameras. Fujifilm’s traditional business models became obsolete. Fujifilm used its expertise in chemical compounds to move into cosmetics, and in films. How does Fujifilm react to this threat? a) Creating a customer intimacy b) Reinventing its business model by creating new digital business c) Focusing on operational excellence d) Reinventing its business model by substituting its products Revise and Discuss (2) If your products are under digital threat. What would be the best approach to do? a) Ignore the threat and allocate further resources to develop your products b) Adopt “wait and see” strategy c) Consider replacing your products d) Partner with other companies Revise and Discuss (3) A company that reinvents its business model by reinforcing its presence in its current market. What this refers to: a) Rethinking value proposition to meet new needs b) Ambidexterity c) Network effect d) Learning experience Revise and Discuss (4) What can be considered as Old sources of competitive advantage ? a) Scale b) Transactional costs c) Vertical integration d) All the above Revise and Discuss (5) What is NOT a characteristic of current customers? a) Connected and active b) Can be involved in the innovation process c) More loyal d) Brand can be co created by customers Revise and Discuss (6) In the digital era, companies can test new features very quickly and see whether it works or not. To which driver of digital transformation, does this refer to: a) Experimentation b) Competition c) Innovation d) Customers Course schedule  Session 1: Rethinking strategy in the digital era  Session 2: Digital strategy formulation  Session 3: Strategy approaches and ambidexterity strategy  Session 4: Digital platforms strategies  Session 5: Differentiation strategies and competition in the sharing economy  Session 6:Digital strategy and Business process transformation  Session 7: Building digital capabilities and creating digital leadership  Session 8: Digital strategy execution in practice: Fostering innovation in the digital era Questions addressed during this session  Does strategy still matter in the age of digital disruption?  How to ensure a digital growth?  Conclusion  Drivers of digital transformation Why? Analyzing the new rules of the games and opportunities enabled by the digital technologies Create a competitive Strategy approach Digital growth advantage Creating a Adapting strategy Creating a sustainable Session 3 competitive with the constraints competitive advantage What? advantage with digital technologies of the environment. Transform your business with digital technologies Transforming the processes How? Digital capabilities Digital leadership Investing in digital technologies Transforming the organization Managing the ecosystem Outline for this session 1. Different strategy approaches 2. Ambidexterity strategy 3. Achieving ambidexterity  Conclusion 1. Different strategy approaches Strategy in the digital age of disruption The extent to which we can predict the environment The extent to The extent to which which we can we can change the survive environment. Five strategy approaches  Driven by technology the business environment has changed. The traditional approach to strategy (analysis, planning and execution) is no longer sufficient. The need to deploy different strategy approaches in different environments.  Classical approach  Adaptive approach  Visionary approach  Shaping approach  Survival approach Classical approach (be big)  Classical approach is used in stable and predictable market with strong brands, high regulation and limited technology change.  Limited imminent risk of disruption  Generally used in well-established industries with higher returns to scale. Strategy making processes Analyze Plan Execute Adaptive approach (be flexible)  It works when the business environment is hard to predict and to shape.  Adaptive approach is needed when there is technological disruption.  Companies need to be flexible and experimentation oriented. Strategy making processes Visionary approach (be first)  Companies that operate in predictable industries.  When there is an opportunity to create or recreate an industry.  Technological changes open up the possibility to reshape an industry or answer unaddressed customer dissatisfaction.  Leaders of such companies are visionary. Strategy making processes Shaping approach  Despite unpredictability, companies can reshape their environment.  The industry can be reshaped through the creation of ecosystem of many companies that collectively can reshape the industry. Strategy making processes Renewal  When the survival of the firm is Under threat, the company needs transformation.  The strategy aims to insure the company’s survival (restructuring to free up and distribute resources).  Once the survival goal has been achieved, the company can attempt to deploy another strategy. Strategy making processes Reflect and apply Teamwork: Case study Ford  Using the Five Strategy Palette, how can you define the strategy approach of Ford ? (you need to justify your answer) Teamwork: Lego case study (part 1) 2. Ambidexterity strategy Success trap  Current success may prevent companies from exploring and experimenting new ways of doing business.  Exploration is necessary to face uncertain future and ensure sustainability.  To remain competitive, companies need to avoid the success trap.  Many companies got in this trap and failed (Example: Nokia). Perpetual search trap  This happens when companies continually search for new ideas but fail to monetize them.  This strategy is also risky. The need to balance between exploitation and exploration Firms need to balance between exploitation (make use of old ideas) and exploration (search for new ones) to remain competitive.  Ambidexterity: Exploitation vs. exploitation « Ambidexterity refers to finding a balance between exploitative and explorative innovation activities so as to introduce incremental and radical innovation for a superior sustainable performance » (Bozic and Dimovski, 2019). Božič, K., & Dimovski, V. (2019). Business intelligence and analytics use, innovation ambidexterity, and firm performance: dynamic capabilities perspective. The Journal of Strategic Information Systems, 28(4), 101578. 3. Achieving ambidexterity strategy Digital growth (Ambidexterity) The need to balance between exploitation and exploration. Different options are possible Integration Separation Ecosystem Switching (Top down Creating a separate BU Acquisition approach) Partnership Self-organizing (decided Incubator by the team). Separation  It is the most common approach to achieve ambidexterity  Company creates a separate team and search for alternative source of growth.  It is appropriate for companies facing relatively stable but diverse environments.  Separation creates barriers that may prevent the flow of information between separate unit. Switching  Switching is required in dynamic environment  While start up are particularly good at switching, many large organizations managed to deploy switching strategies (Glassmaker Corning with its Gorilla Glass product).  It requires the rapid flow of information and resources across the organization.  Companies may face resistance (resource conflict, slow response, reluctance to move to a new project that may not succeed). Self-organizing  Small teams choose which style to employ and switch between them when needed (the switching top-down approach is not efficient in this case).  Haier succeeded in adopting a self-organizing approach. Ecosystem It is used when the environment is extremely diverse and dynamic. It consists on sourcing ideas externally  Acquisition (Example: Acquisition of videdressing by Leboncoin)  Partnership (Example: Hilton partnership with Uber)  Incubator (Example BNP Parisbas open innovation Fintech incubator) Reflect and apply Teamwork  Please refer to the 3 case studies seen in previous session and answer the following question:  How did the companies ensure their digital growth? Resource allocation Exploitation Exploration X% 1- X% Resource allocation ajustement  X evolves depending on the company’s environment evolution.  The need to continuous adjustment of resources to guarantee the exploration/exploitation balance. BI & A and Ambidexterity Business intelligence and analytics (BI & A)  The use of Information systems to gather and analyze information from internal and external sources in order to make better business decisions.  BI helps organizations swiftly respond to external threats and opportunities.  Timely and accurate BI enables organizations to continuously monitor and analyze business processes, which leads to ongoing adjustments. Data, Knowledge and decision-making Data and knowledge are the most important assets an organization has. BI & A and ambidexterity  The use of Business intelligence and analytics tools aim to improve knowledge acquisition and decision making.  The use of Business intelligence and analytics tools is positively associated with a successful ambidexterity strategy. Illustration: BBVA case study Use analytics to create meaningful product features and customer experiences  “It’s true that we are constantly adding more functionality to our mobile app, with releases nearly every month. But, it’s not just functionality for functionality’s sake. We add tools that our customers have told us they want and need in order to manage their financial lives.” (https://www.bbva.com/en/bbva-compass-mobile-banking-app-adds- budgeting-spend-tracking-tools-latest-release/) Teamwork: Lego case study (part2) Conclusion  Takeaways  Companies need to anticipate digital disruption and find new digital growth: self disruption.  Companies should avoid the trap of perpetual search trap and perpetual success trap: The goal is to achieve ambidexterity (the balance between exploration and exploitation).  The need to continuously adjust resources allocation depending on business environment and its evolution.  Drivers of digital transformation Why? Analyzing the new rules of the games and opportunities enabled by the digital technologies Use the Framework of D. Rogers (Data, customers, Value, Innovation, competition) Create a competitive Strategy approach Digital growth advantage  Classical approach Switching Customer intimacy  Adaptive approach Self-organizing operational excellence  Visionary approach Separation What? Rinvent BM   Shaping approach Renewal Ecosystem (acquisition, partnership, incubator). Transform your business with digital technologies Transforming the processes How? Digital capabilities Digital leadership Investing in digital technologies Transforming the organization Managing the ecosystem What is next? What’s coming up next  Session 1: Rethinking strategy in the digital era  Session 2: Digital strategy formulation  Session 3: Strategy approaches and ambidexterity strategy  Session 4: Digital platforms strategies  Session 5: Differentiation strategies and competition in the sharing economy  Session 6:Digital strategy and Business process transformation  Session 7: Building digital capabilities and creating digital leadership  Session 8: Digital strategy execution in practice: Fostering innovation in the digital era AT HOME WORLDWIDE* * Chez vous, partout dans le monde