Previously, I read and then reviewed three books co-authored by Hagel which I greatly admire. Specifically, Net Worth, Net Gain, and Out of the Box. In this most recently published volume, Hagel and Brown assert that effective business strategy "depends on productive friction and dynamic specialization." As I began to read this book, I was curious to observe how Hagel and Brown formulate and then present what they call a "compelling case [for reshaping] the business landscape -- where and how value and profit get created -- to create a scalable catalyst for broader institutional and policy changes."
For them, "edge" has several dimensions. "First, we mean the edge of the enterprise, where one company interfaces or interacts with another economic entity and where it currently generates marginal revenues rather than the core of its profits. Second, the edge refers to the boundaries of mature markets as well as industries, where they may overlap, collapse, or converge...[Third], geographic edges, especially those of such emerging economies as China and India, where consumers of all kinds crave Western goods and services that will ease their burdens and improve their lives. Finally, we refer to the edges between generations, where younger consumers and employees, shaped by pervasive information technology, are learning, consuming, and collaborating with each other and where baby boomers are preparing to retire or switch careers over the next decade."
Hagel and Brown explain how to build a sustainable competitive advantage by focusing on three broad strategic imperatives: dynamic specialization, connectivity and coordination, and leveraged capability building. Of special interest to me is what they have to say about process outsourcing and offshoring, loose coupling of extended business processes, and what they call "productive friction." Many of those who reads this book will derive substantial benefit from completing three "quick audits" (pages 26-29) because they will help those who comprise a senior management team to build a shared view of where their organization is. Only then can an appropriate strategy (or strategies) be formulated and then implemented to get that organization where it needs to be.
By the way, according to research which Robert S. Kaplan and David P. Norton provide in The Strategy-Focused Organization, only 5% of the workforce understand their company's strategy, only 25% of managers have incentives linked to strategy, 60% of organizations don't link budgets to strategy, and 85% of executive teams spend less than one hour per month discussing strategy. If true, these are chilling statistics which suggest that few decision-makers in any organization (regardless of its size or nature) would be able to answer, clearly and realistically, questions such as these when completing a migration path audit:
What have been the five most important operating initiatives -- based on resource commitments -- during the past twelve months?
How to characterize each of the five initiatives in terms of its efficiency, specialization, coordination of third-party resources, and accelerating capability building across enterprises?
Based on a calendar review of executive involvement, how much time was spent over the past twelve months discussing the four elements of each operating issue?
Approximately what were the resources committed to these four elements across the five operating initiatives?
When you next participate in a group discussion of strategic planning, ask questions such as these. The silence which follows will be almost deafening.
As indicated earlier in this brief commentary, when Hagel and Brown refer to "the only sustainable edge," they do so in terms of four separate but closely related dimensions. It is important to keep that in mind as you follow their narrative through seven chapters to the Epilogue. It is also helpful to remember that Hagel and Brown are intrigued by an often troublesome but irrevocable convergence as digital information technology expands both within the enterprise and beyond through global communication networks as public policy in diverse domains continues to shift and thereby intensify competition on a global scale.
When formulating new approaches to developing strategy, Hagel and Brown suggest, first build alignment on the long-term direction of the company. (They pose three excellent questions on page 160. Can you answer them?) "To sustain a meaningful longer-term direction, explicitly identify what you will not do as a business. Most companies will probably shed areas of activities for which other firms have developed world-class capabilities." Next, build alignment around near-term operating initiatives. (There are two more excellent questions on page 162.) Then identify and address major organizational barriers. Finally, create tight performance feedback loops. I think it would be a serious mistake to think that this recommended process is relevant only to larger organizations, especially those competing or at least operating on a global scale. The information and counsel they provide as well as the questions they pose will be of substantial value to decision-makers in any organization, whatever its size or nature.
In their Epilogue, they shift their (and the reader's) attention to still another of those questions which are so easy to ask but so difficult to answer: How to recast public policy to develop talent? The suggestions they offer are eminently sensible and best revealed within the context created for them. Of special interest to me is the fact Hagel and Brown seem to function so effectively on both the macro and micro levels. Although they provide an abundance of specifics throughout their brilliant book, they always have the so-called Big Picture in mind. This is especially evident in the remarks with which they conclude The Only Sustainable Edge:
"By focusing on talent development, policy makers can help individuals in their society more effectively realize their full potential. But the benefits extend far beyond this. Talent development, especially when situated in economic activity, can drive improved productivity and, in turn, enhance the standard of living in any society. Even more broadly, a focus on talent development helps attract highly motivated and creative people and provides them with the resources and time to develop a rich and evolving cultural and social environment. Talent development is an ongoing race, but those who lead the race will unleash passion and rewards that will make the race worth winning."
Those who share my high regard for this book are urged to check out the works co-authored by Kaplan and Norton (especially The Strategy-Focused Organization) as well as Don Mankin and Susan G. Cohen's Business Without Boundaries: An Action Framework for Collaborating Across Time, Distance, Organization, and Culture, Robert Simons' Levers of Organization Design: How Managers Use Accountability Systems For Greater Performance and Commitment, and Strategy Safari: A Guided Tour Through The Wilds of Strategic Management co-authored by Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel.