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REINVENTING STRATEGY
Using Strategic Learning to Create and
Sustain Breakthrough Performance
WILLIE PIETERSEN
John Wiley & Sons, Inc.
▼
▼
Copyright © 2002 by William G. Pietersen. All rights reserved.
Published by John Wiley & Sons, Inc., New York
Designations used by companies to distinguish their products are often claimed as
trademarks. In all instances where the author or publisher is aware of a claim, the
product names appear in Initial Capital letters. Readers, however, should contact the
appropriate companies for more complete information regarding trademarks and
registration.
No part of this publication may be reproduced, stored in a retrieval system, or
transmitted in any form or by any means, electronic, mechanical, photocopying,
recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of
the 1976 United States Copyright Act, without either the prior written permission of
the Publisher, or authorization through payment of the appropriate per-copy fee to the
Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400,
fax (978) 750-4744. Requests to the Publisher for permission should be addressed to
the Permissions Department, John Wiley & Sons, Inc., 605 Third Avenue, New York, NY
10158-0012, (212) 850-6011, fax (212) 850-6008, E-Mail: PERMREQ@WILEY.COM.
This publication is designed to provide accurate and authoritative information in regard
to the subject matter covered. It is sold with the understanding that the publisher is not
engaged in rendering professional services. If professional advice or other expert
assistance is required, the services of a competent professional person should be sought.
This title is also available in print as ISBN 0-471-06190-5. Some content that appears in
the print version of this book may not be available in this electronic version.
For more information about Wiley products, visit our web site at www.Wiley.com
Acknowledgments viii
Foreword xi
PROLOGUE
The New Leadership Challenge xv
INTRODUCTION
A Journey of Discovery 1
A New Game • From One-Time Change to Continuous
Adaptation • The Need for Practical Tools • From the
Front Lines to the Classroom
CHAPTER 1
The New Playing Field 9
The Three Leadership Questions in the New Economy •
Understanding the New Economy • Eleven Hallmarks of
the New Economy
CHAPTER 2
The Challenge of Change 27
“Shift Happens” • The Sigmoid Curve • Leaping to the
Second Curve
v
CONTENTS
CHAPTER 3
The Search for an Answer 40
Starting with Strategy • Strategy as Making Choices •
The Dead End of Strategic Planning • The Learning
Organization • Complexity Theory • The Adaptive
Enterprise: Nature as Teacher • The Killer Competencies
CHAPTER 4
The Strategic Learning Process 57
The Four-Step Process • Implementing Strategic Learning
as a Leadership Process • Step One: The Situation
Analysis (Learn) • Step Two: Strategic Choices and
Vision (Focus) • Step Three: Align the Organization
(Align) • Step Four: Implement and Experiment (Execute)
CHAPTER 5
Winning the Battle for Insight: Doing a Situation Analysis 69
No Substitute for Insight • Vision versus Insight • The
Golden Rules for Situation Analysis • Searching for the
Scoop • How to Do It • Customers • Competitors •
The Firm’s Own Realities • Industry Dynamics •
The Broader Environment • Case Study: A Situation
Analysis of Med-Surg
CHAPTER 6
Defining Your Focus 105
A Winning Focus Begins with Insight • The Meaning of
Focus • Making the Strategic Choices • Customer Focus •
The Winning Proposition • Five Key Priorities • Simplicity
Is Not a Shortcut • The Arithmetic of Business • Vision
CHAPTER 7
Aligning the Organization 127
Clarity of Focus • Identification of Systemwide Gaps •
Aligning the Levers of Your Organization • Getting the
Business System to Work in Sync • Your Organization as
a Unique Ecosystem • Measures and Rewards •
Structure and Process • Culture • People
vi CONTENTS
CHAPTER 8
Transforming the Culture 148
What Is Culture? • Cultural Persistence and Change •
Culture at the Corporate Level • Six Myths about
Corporate Culture • The Importance of Starting with
Strategy • When Culture Fights Strategy • When Culture
Supports Strategy • What It Takes to Create a Cultural
Change • The Right Starting Point • A Sustaining
Process • The Adaptive Culture • Knowledge Sharing as
a Crucial Value
CHAPTER 9
Overcoming Resistance to Change 184
Getting from A to B • Pitfalls of Change Leadership • An
Equation for Successful Change • How to Lead Change:
Six Golden Rules
CHAPTER 10
Implementing and Experimenting 210
The Power of Mistakes • Fostering Innovation through
Experimentation • Experiential Learning: The After-Action
Review • Strategic Learning 365 Days a Year
CHAPTER 11
Strategic Learning as a Path to Personal Growth 220
Emotional Intelligence • The Elements of EQ • Strategic
Learning for Personal Renewal • Learn • Focus • Align •
Execute • “The Proof of the Pudding Is in the Eating” •
Two Real-Life Leadership Credos
CHAPTER 12
Creating an Environment for Success 249
SOURCES 261
INDEX 266
ABOUT THE AUTHOR 272
Contents vii
T he Strategic Learning concept presented in this book owes alot to the two great learning laboratories that have shaped
my ideas.
The first was my two decades as a CEO. These years infused in
me a strong sense of pragmatism. Life in the trenches, I discovered,
is always messy. So the most important question to ask about any
business idea is simply, Does it work? In these pages, I’ve tried to
capture some of the ideas that do work, so that my colleagues in
business leadership may benefit from them.
My second learning lab has been the five years I’ve spent at Co-
lumbia Business School as a teacher, consultant, and researcher—
an opportunity to step back from the fray and try to make sense of
it all.
Columbia has been the avenue to a second career for me and a
catalyst for my personal reinvention. I’ve received wonderful sup-
port and encouragement from many colleagues at the school. In
particular, I’d like to thank my good friends Bill Klepper and Mike
Fenlon for their rich and generous contributions to my thinking, as
viii
ACKNOWLEDGMENTS
well as Victoria Marsick of Teachers College, Columbia University,
especially for her scholarly guidance on learning theory.
For the past five years, I have also had the great privilege of
serving as chairman of the board of trustees of the Institute for the
Future. This has been an education in its own right, for which my
thanks go especially to the Institute’s president, Bob Johansen.
Bob’s inspiring ideas, unstinting support, and wise advice have con-
tributed enormously to this book.
As every teacher knows, teaching is the greatest way to learn. I
have learned a lot from the participants in the many programs I
have taught, ranging from young and eager MBAs with their probing
questions to seasoned executives with their no-nonsense chal-
lenges. I owe them all a debt of thanks, but I’d like to express my ap-
preciation especially to the people from CGNU, Chubb, Deloitte
Touche Tohmatsu, Ericsson, Henry Schein, Inc., International Spe-
cialty Products, SAP, and Sony. Strategic Learning has been applied,
battle-tested, and honed in workshops with executives from all
these companies.
Responsibility for the content and ideas in this book is entirely
my own. However, I could not have written it without the profes-
sionalism, dedication, enthusiasm, and tireless work of a wonderful
creative team.
On the writing side, I initially had the expert help of journalist
Alex Prud’homme. With Alex I formed the basic structure of the
book and set out its key ideas. I am indebted to Alex for constantly
pushing me to develop the stories and examples.
After Alex left the project to join the staff of Talk magazine, Karl
Weber, who had been serving as an editorial advisor, seamlessly
took up the task of assisting me with the writing. Karl’s admirable
writing skills helped him do a marvelous job of turning the work in
progress into a final manuscript. He also developed a keen under-
standing of the concepts involved and proved to be a valuable
sounding board and intellectual sparring partner.
On the research side, I had the invaluable help of Jeff Kuhn, an
adjunct professor of organizational learning at Teachers College,
Columbia University. Jeff and I often work together on Strategic
Learning workshops. Thus, Jeff was also able to bring a keen pro-
Acknowledgments ix
fessional eye to the shaping of the manuscript. I’m grateful for his
insights and suggestions. In addition, Jeff provided skillful work in
developing many of the case studies.
Thanks also go to my literary agent, Judith Ehrlich of Linda
Chester & Associates. Judith has been a wonderful and very caring
ally. She expertly steered the project from the development of a pro-
posal to finding the right publisher and has remained engaged and
committed throughout the process.
My editors at John Wiley & Sons have been a pleasure to deal
with. At the start, I worked with Karen Hansen, who provided su-
perb guidance. Later, Airie Dekidjiev took over the project with en-
thusiasm and expertly piloted it through to publication. Her help
and advice have been invaluable.
I leave till last the support of family. Writing a book, I’ve discov-
ered, is an all-consuming project. One’s personal life must often go
on hold when wrestling yet another revision into shape. Without the
help of family, the effort would be nearly impossible to sustain.
Many thanks to my grown-up kids, Chris and Sally, who kept rooting
for me all the way. For more than a year, every conversation we had
included a “How’s the book going, Dad?” (I think it’s done now,
kids.) Even my sister Phoebe in far-away South Africa has been
cheering me on from the sidelines. This affection and support from
my family has sustained and inspired me.
Finally, there is my wife Laura. Herself an author, Laura has
been a pillar of support and understanding. She has also demon-
strated a wonderful knack for injecting just the right idea at just the
right time. And her sense of humor keeps me on an even keel, never
letting me become too discouraged when things go wrong. Thank
you, Laura.
WILLIE PIETERSEN
New York, NY
November 2001
x ACKNOWLEDGMENTS
W illie Pietersen’s Reinventing Strategy fills a genuine void be-tween organizational learning and strategy, without the cum-
bersome jargon of either field.
In these early years of the twenty-first century, it has become
increasingly clear that the old ways of creating and implementing
strategy no longer work. At the Institute for the Future (IFTF),
we’re reminded daily about today’s frenzied pace of change, most
obviously in technology but also in the social, economic, and po-
litical spheres. No wonder traditional methods of strategic plan-
ning, which tend to assume that the future is more predictable
than it really is, have largely failed.
Consequently, finding ways to transform companies into adap-
tive organizations able to respond intelligently to an ever-changing
environment has become the top priority for business leaders.
Reinventing Strategy offers a proven process for doing just that. It
is a wonderful mix of theory and practice, plus commonsense rea-
soning that works—for all the right reasons.
Willie Pietersen’s background makes him an ideal guide to this
xi
FOREWORD
TE
AM
FL
Y
Team-Fly®
new process. He is both a gifted teacher and a practitioner—a pro-
fessor of the practice of management at Columbia Business School
with decades of experience at the helm of global companies. Think
of Willie Pietersen as a player-coach. Having played the game of
business at the big-league level, he has the respect of current play-
ers and understands the realities they face each day. Thus, Rein-
venting Strategy has the feel of a coach’s notebook, an energizing
guide to the creation and implementation of winning strategies—
not just once, but repeatedly.
I got to know Willie Pietersen at a time of intense pressure for
both of us. Willie was the chairman of the board of trustees of IFTF,
while I was leading the largest research program at the Institute. An
emergency forced the then-president of the Institute to leave us
abruptly. I was the only easy choice for his replacement, but at first
I was not enthusiastic about being president. During the accelerated
search process that followed and the first months after I accepted
the presidency of IFTF, I really got to know Willie as well as the
principles of Strategic Learning he presents in this book.
I learned that Willie is guided by principles. I once called him for
advice about a sticky issue involving confidential information con-
cerning two competing companies that were both clients of IFTF.
Willie helped us articulate the issues, reminded us of the bedrock
principles involved, and guided us in the process of learning how to
draw the line between competitors clearly and fairly—without sac-
rificing the business interests of any party involved.
Perhaps the most valuable lesson I’ve learned from working
with Willie Pietersen has to do with the crucial importance of in-
sight. At IFTF, we focus on foresight—the art of forecasting the al-
ways uncertain future. Willie Pietersen is all about translating
foresight into insight—understanding today’s business environ-
ment better and faster than competitors, so as to gain a crucial
strategic edge. Most important, Willie has created a practical
process to turn insights into action.
Reinventing Strategy is an insights-to-action guidebook, leav-
ened with engaging, revealing stories drawn from real-life compa-
nies in many industries that vividly illustrate key concepts. In its
pages, Willie Pietersen will teach you how to learn, focus, align, and
xii FOREWORD
execute—the essential steps in his Strategic Learning process. To-
day, more and more global companies are discovering the power of
Strategic Learning, both through Willie’s own coaching and through
its important role in Columbia Business School’s executive educa-
tion programs, which were recently ranked number one in the
world for the second consecutive year by the prestigious Financial
Times of London.
No matter what kind of organization you are in, Reinventing
Strategy will coach you to develop your own insights and then
transform those insights into action—again and again, as our ever-
changing world demands.
BOB JOHANSEN
President, Institute for the Future
Menlo Park and San Francisco
August 2001
Foreword xiii
The September 2001 terrorist attacks on New York and Washing-ton and the unsettling world events that followed them have
profoundly changed the context in which leaders must lead. In a
seismic shift, many of the things we took for granted—the seeming
certainties on which we once relied—were drastically undermined.
Our personal security, many of our freedoms, our confidence in the
continuity of our way of life—all were apparently shattered.
This new sense of dislocation has caused people everywhere to
pause and search for fresh answers to life’s big questions: What do I
stand for? What is really important? How should I live my life?
There is a new desire to get in touch with the spiritual dimensions
of life, to rediscover community and values, and to make a commit-
ment to what really matters.
As we examine the implications for leadership, one important
aspect now looms much larger than before. More than at any time in
the recent past, people are seeking meaning in what they do. To re-
spond to this quest calls for a high order of leadership, one that is
able to engage people’s hearts and minds, offering them a sense of
xv
PROLOGUE
The New
Leadership Challenge
A New Game
When I was a globe-trotting CEO, I wrestled with a commondilemma—how to spend more time with my kids, Chris and
Sally. I developed a weekly ritual with Sally, then eight years old.
Every Saturday morning, we’d sit down to play a game of checkers.
It was our quality time together. Sally was a rather good player for
such a small child, and she wouldn’t tolerate my attempts to help
her with an extra checker or two; she wanted to win on her own
skill. But she never quite managed to beat me.
Then early one Saturday morning she dragged me out of bed to
play a new game. I was jet-lagged after a long trip, but happy to play
with her. Sally’s new game was a Nintendo video soccer game, and
within minutes she had vanquished me. Her peals of triumphant
laughter filled the house. Chagrined, I tried my hand at the new
game again, and then again, but she beat me every time. In fact, I
was never able to beat Sally at video soccer.
I share this story because it neatly encapsulates a powerful lesson
1
INTRODUCTION
A Journey
of Discovery
for all of us, one that’s as true for organizations as it is for individuals.
No matter our age or background, we are all born in one era and
must learn to adapt to another.
From One-Time Change to
Continuous Adaptation
We often hear that the central challenge facing business leaders to-
day is “the need for change.” In fact, this idea has been repeated so
often that it has become accepted as a truism. But it’s only half true.
And a half-truth, like a little learning, is a dangerous thing.
The problem with this idea is that it strongly implies that
change is a one-time event; that a company only needs to go from
point A to point B in order to succeed. This A-to-B approach is at
the core of traditional strategy, but in today’s economy it is poten-
tially lethal for corporations. One-time, A-to-B change will only get
you stuck in a new rut, and in the meantime the market will roar
ahead and leave you behind. As the American humorist Will Rogers
used to say, “Even if you’re on the right track, you’ll get run over if
you just sit there.”
Instead, change must never stop. In today’s global, fast-changing
economy, companies must keep making the leap—to adapt from
checkers to video games to Web-based adventure games and to
whatever games will succeed these—over and over again. Because
the environment in which we operate is continuously changing, we
must respond by continuously innovating and adapting to it. Thus,
the central challenge facing managers today is to create and lead an
adaptive enterprise—an organization with the built-in ability to
sense and rapidly adjust to change on a continuous basis.
Indeed, one of the biggest headaches facing executives is the
struggle to repeatedly mobilize their companies behind new ideas.
This is a much harder task than one-time change. Sustainable com-
petitive advantage cannot come from any particular product or ser-
vice, no matter how good it may be. Those things have a short shelf
life. In today’s marketplace it is the organizational capability to
adapt that is the only sustainable competitive advantage.
2 A JOURNEY OF DISCOVERY
The twenty-first century’s global, networked economy con-
fronts all organizations with disruptive technologies, high levels of
uncertainty, and a demand for insight, speed, and innovation. This
has created a near-revolution in the way successful companies are
run, and it presents managers with both opportunity and peril. The
following statistics (adapted from Creative Destruction by Richard
Foster and Sarah Kaplan) provide a call to action:
▼ By 1987, 61 of the companies listed in the original Forbes 100
in 1917 had ceased to exist. Of the remaining 39, only 18 had
managed to stay in the top 100.
▼ In the 1920s and 1930s, the turnover rate of the S&P 90 (the
original Standard & Poor’s list of major U.S. companies) av-
eraged about 1.5 percent per year. Thus, a new member of
the S&P 90 list could expect to remain on the list,