Doing things as they were done in past won’t last in the rapidly changing industries. Photo:iStockphoto
I believe there will be four capabilities and skills that would affect managers in the future: (1) the greater need to think and act strategically in (2) increasingly dynamic environments (3) within global markets that (4) require customer-centric solutions.
Most of the companies are valued by their stock market listing which is based on the future. In fact 75% of company value is typically not on its balance sheet.
So, backward-looking measures such as accrued earning and short-term performance measures such as return on assets (ROA) are less relevant as they do not reflect opportunities and challenges the company is likely to face in the future.
Most of the value is created by expectations from the company for the future. We need to have forward looking thinking and decisions. An asset is no longer a property, plant or equipment for a company as it traditionally used to be.
For a company like Google an asset might be intellectual property, human capital or brand. For an Infosys, its value depends on the number of smart people working for them as they don’t have factories. For Bharti Airtel, the value lies in the size and loyalty of their customer base.
Hence managers will have to have a better understanding of the competitive assets that they own and how to nurture and leverage them. Their skill will lie in anticipating and learning from the future, not the past.
There is no longer a predictable or direct competition with in a set vertical. An automobile firm such as Nissan will have tech-based firms such as Google or Tesla as a competitor. In today’s world people who are your competitors in one part of business can be your partners or customers in another part.
For example in the tech sector if you are producing the components and also the end product then you are competition to those buying your component.
It’s becoming a world of partnerships. So, for managers it’s not just important to have a straight looking vision but they also need to know what is going beside and behind them.
Much of management thinking and behaviour is based on Greco-Roman philosophy of competition. Today the philosophy is different.
SAP benefits hugely when Infosys or TCS build applications on the SAP platform—not much different from managing the “apps war” in consumer markets. The question is, does Google benefit or lose by enabling Google Maps to run on Apple or Microsoft?
Another important aspect of strategic thinking is the ability to find the right problems.
Many companies kept on doing what they were doing in last 10 years while the industry has changed.
So, whether we look at logistics or manufacturing or any other industry, are managers using the right thinking and right approach to find out what the focus of companies should be? Do they have appropriate business assets and capabilities to survive and thrive?
Doing things as they were done in past won’t last in the rapidly changing industries.
Future managers need to understand that they can’t manage tomorrow’s business in anticipation of future market opportunities and challenges. Management faculty members are quite good in developing problem-solving frameworks and methods. But, managers should focus on finding problems worth solving. We don’t do this very well in B-schools.
Technology has made world more dynamic and we live in a VUCA (i.e., volatile, uncertain, complex and ambiguous) environment. All these things are happening simultaneously and new age managers need to think ahead of their time, they need to look beyond the present and plan according to future.
One of the biggest resistances to change and one of the biggest reasons why companies keep looking backwards is the “tyranny of budgets”.
Hence we keep anchoring resources and business activities to the past than what is needed to succeed in the future.
One of the reasons why this happens is the “tyranny of core”. Within any company the most powerful group are senior managers that control and try to preserve the core business. However, companies that stick to their core products are less able to understand market changes and leverage new opportunities.
Xerox let go many ideas including the graphical user interface (GUI) exploited later by Apple and then Microsoft as they kept insisting on being the document company.
There are lots of examples and case studies where well-established and successful companies failed as they stick to their core products or technologies.
Think of the Kodak moment—preserving memories. Kodak is just that—a memory. Only one of the 30 original firms that constituted the Dow Jones Industrial Average is still alive and kicking.
Reflecting on complexity, while it may be possible to do business in the US without too much input from the government, one cannot operate in India without understanding the “business of government”.
Managers have to learn to manage across borders. Even If you take established Indian companies like Tata’s and Birla’s, 50% or more of their sales is coming from markets outside India.
They have to learn how to manage the global markets differently as the economic condition, business conditions, tax conditions, consumer expectations, sales network all have to be tackled differently.
There is no such thing as a global strategy. Not only do future managers need to understand the markets, but they also should be culture sensitive.
Keeping up with the common refrain to management tyrannies, corporate headquarters and leaders can be blamed for “tyranny of headquarters”.
Too much focus on headquarters in decision making not only slows down the company’s speed but also miss out the local sensitivities of a market.
It is important to understand that the world is changing so managers have to design the product from viewpoints of customers. Generally, firms first work on product designing, engineering and then come out in the market—only to find that the demand is not there, the price is too high (or low), or that customers wanted different benefits.
The design thinking frameworks today reverse this thinking and focus on using customer insight and potential customer experience to help design nature of product as well the supply chain or ecosystem to ensure the availability and affordability of necessary complements, services and content.
Managers will have to be better informed, be adaptive and flexible as customer preferences and perceptions are changing. Rather than “driving markets” via advertising and marketing, companies have to be “market-driven” and listen to customers.
This is reflected in the huge importance of business analytics in shaping marketing strategies.
Finally, managers need to be ambidextrous. What I mean is that they need to have multidisciplinary perspectives. People from finance need to understand strategy and marketing people should be able to sell the financial implication of marketing approach. They need to work together with operations and strategic partners to deliver solutions desired by customers that work seamlessly.
We at management institutions should focus on making people more flexible and being able to deal with multiple issues.
In this dynamic, global, process and strategic-oriented world leaders need to be continuous thinkers and adaptive managers. What is relevant today might lose its value after a few years. Managers should listen to the market, absorb and improve ideas to keep learning.
Rajendra Srivastava is Dean and Novartis Professor of Marketing Strategy and Innovation at Indian School of Business.