Bringing the network effect to corporate decisionmaking
THE BOOK BY CHRISTIAN STADLER, PROFESSOR AT WARWICK BUSINESS SCHOOL, IS THE OCCASION FOR A DISCUSSION ON THE THEME OF OPEN INNOVATION WITH BOCCONI UNIVERSITY RECTOR GIANMARIO VERONA. AMONG THE ADVANTAGES OF THE OPEN APPROACH IS THAT IT ENCOURAGES NEW IDEAS, BUT STRONG LEADERSHIP IS NEEDED TO GOVERN THE PROCESS AND AVOID CHAOS“Disruption” used to refer to “just” the impact of new technology on consolidated business models. Now recent events have shown that CEOs need to consider environmental and geopolitical disruptions as well. It’s clear that executive toolkits need to be continually updated in real time. One of these new tools is “open strategy,” a radically different way of developing corporate strategy that opens up the C-Suite to input from employees, outside experts, stakeholders and suppliers.
The book “Open Strategy: Mastering Disruption from Outside the C-Suite” (now available in Italian from Egea) by Christian Stadler, Julia Hautz, Kurt Matzler and Stephan Friedrich von den Eichen introduces the reader to digital tools to help management open up the three stages of strategy-making -- idea generation, plan formulation, and implementation -- to outside feedback.
Sarfatti25 asked co-author Christian Stadler and Bocconi University Rector Gianmario Verona to share their views about why business strategies often fail, how open strategy can be a tool for success in a challenging environment, and why business literature has been rewritten in the past few decades.
The forerunner of “open strategy” is open innovation. But the idea of using this model for strategy is counterintuitive. What was it that convinced you it was valid?
CHRISTIAN STADLER: My first reaction when I heard about it was, “wait, is this democracy?” It is not. It is like open innovation on steroids. I saw the outcomes in the interviews I did for this book. Open strategy was actually really changing something. And it started to make more sense.
GIANMARIO VERONA: Clearly, we are living in an era of openness. The internet has created an era of access. Bringing these concepts to the board of directors, to the C suite, and to executive committees is a big challenge. What is convincing is the way they carry it out. We are living in an era where this approach makes sense.
What is the competitive advantage of an open strategy approach?
CS: Let’s say you put together your top management, the smartest guys in the room. They should have the best ideas. But over time they start to think alike. Opening up the process allows you to find new ideas you might have missed. Some might be duds. But some will be gems.
In the same way that open innovation brings together different parties to come up with better products, those who bring different points of view into this strategy conversation will probably have better ideas and better outcomes.
GV: To give an example, the fashion industry is among those businesses that needs to deal with sustainability issues in the manufacturing process. The brands that are doing the best are the ones that have listened more to their audiences and particularly Gen Z about supply chain and environmental issues. And this per se is a bit of open strategy, right? Companies can go in this direction when working on brand identity and marketing, and some have already changed their process in order to come up with initiatives that are consistent with what the customer wants.
I was surprised to read that the study said that 50% to 90% of business strategies fail. What are some of the reasons?
GV: Let me start by saying that strategy is also about failure. Strategy is also about learning, so it makes sense to fail every so often. Not too often! Companies tend to rely on things they already know. Their resources, their historical competitive advantage, is based on their past success.
But we know from the examples in the book, and also from others, that things move so fast that you need to keep changing. As a professor that teaches innovation and strategy, I know very well that one of the problems for organizations is strategy implementation. You have to convince people. The concept of openness is, first of all, within the organization. Often middle management or customer-facing staff receives top-down strategy, and there is no buy-in. If you approach them more openly to decide what is your vision, your strategic plan for the next 20 years, execution can be easier. I think this kind of openness is good, it’s organic for the growth of the company.
CS: In the book we use the example of Barclays, which is a 325-year-old bank with a UK retail staff of 30,000 people who were potentially threatened by the bank’s digitalization strategy. By developing a “strategy jam” process, every one of them was involved in the discussion, and as part of the process. They figured out what it meant for them. The bank introduced a very successful app, it had about 1 million users, and it is one of the most successful fintechs in the UK.
The advantages that are quite clear. What are some of the skills that a leader needs to govern this new way of managing?
GV: I think we have rewritten the literature on business administration in recent years to reflect an evolution away from the hierarchical models pioneered 100 years ago. My point is that it’s always about tradeoffs, and clearly the old way is no longer useful. A CEO now needs to listen to everyone, and then make the decision for the organization. And if you don’t open up, clearly you are doing something wrong.
CS: Try to meet the people who are different from you. If you find forums where you can make this possible, it is usually advantageous.
For someone who is starting off their career, try to keep ties not just to the people above you in the organization, but also the people who don’t make it up the ladder. They are the salt of the earth of their organization. And useful to have a connection to them.
The last thing I would say is read a lot and read widely. A lot of people who are successful manage to carve out time. In the Netflix series “Inside Bill’s Brain” you see him walking around with his canvas bag full of books. And if he finds time to read, I assume you and I can too.
What are some of the main pitfalls of open strategy?
CS: It is important to have a strong moderator. It’s easy for these conversations to drift off to football or lunch. Or people being not constructive because they have their agendas. Somebody has to keep these discussions on track.
And the leadership needs to make that clear in the beginning that the process is open, but not democratic. If there is the expectation that we have a big vote afterwards, people will be disillusioned.
Do you have examples of when it went wrong?
CS: Yes, Premium Cola. German drinks company Afri-Cola wanted to revive and distribute its original recipe under a new brand, Premium Cola. The process was set up as a democracy. There was an endless discussion, and no solutions were ever found.
What should a CEO keep in mind when governing this process?
CS: For a small organization, the attraction is a different one than from a large company. Its harder for an SME to have access to this sort of expertise. If you are a larger company, you can simply buy it. But for a smaller one, if you are able to dive into a wide network, you can come across ideas and expertise that you would not have been able to access otherwise. For the large ones, the problem is that they are too much locked into their own mindset.
GV: The contradictions that can rise with openness are infinite, potentially, right? Clearly you need strong leadership to govern this process and avoid chaos. You need a process, it can’t be the CEO that does this herself. It could be third parties jumping in, supporting the idea generation phase, and the selection phase by using committees. It cannot just be one person running this process, and the book addresses this aspect with concrete examples.
How does the role of consultants evolve in an “open strategy” model?
CS: It will evolve, which is good news for consulting companies. We are not trying to say there is no need for consultants any more. I have talked to the head of strategy in one of the big three firms about the open strategy model, and they were receptive to this prospect of a changing role.
GV: We’ve already seen this evolution at work back when the internet and technology exploded. The role of strategy consultants changed dramatically in the way they served organizations and companies. They are now doing some very interesting things.
In “Open Strategy: Governare il Cambiamento Dirompente Uscendo dalla Stanza dei Bottoni” (Egea, 2022) the four authors Christian Stadler, Julia Hautz, Kurt Mazler, and Stephan Friedrich von den Eichen help readers understand and plan their “open strategy” process with advice on how to organize business logic contests, strategy jams, trend radars and strategic communities. Case studies range from Telefonica and Barclays to the U.S. Navy and NASA.
by Jennifer Clark
