COO Insights "Growth through transformation" - Roland Berger

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THINKING ABOUT LIMITS
How do companies manage to stay in business for
decades? How do they deal with the growing
complexity in the world around us? And what are
the implications for good management? Three
thoughts on these issues by Burkhard Schwenker,
Chairman of the Supervisory Board of Roland
Berger Strategy Consultants*
First: Corporate management is growing
more complex
When it comes to corporate planning, uncertainty
has become virtually ubiquitous. This has several
implications for good management. It means that
business acumen is once again coming to the fore as
predictability wanes. It means that it is important for
leaders to know where they stand and to be able to make
up their own mind about the future. And it means that
the ability to reflect on things and the willingness to think
in interdisciplinary terms is at a premium. After all, if
we as entrepreneurs want to successfully overcome
uncertainty, we need to look beyond our own backyard
and build bridges between business management
concepts (What is the right way to organize the
company? How do you gain lasting competitive
advantage?), economic concepts (How does growth
work? How is economic policy changing?), sociopolitical
concepts (What values are important? What attitudes
will shape future societies?) and geopolitical concepts
(Where do security risks exist? What significance will
regional alliances have?).
Second: The validity of our traditional
strategy and planning concepts is eroding
We have all learned that the unit cost of a product can
be reduced by 20% to 30% every time the cumulative
production volume is doubled. Or rather, that this is
true when growth rates are high and the business
environment is stable. But what do you do when the rate
of growth shrinks to just 3%? Or when new technology
suddenly enables new production methods? Or when
growth of any sort is so volatile that reliable growth
forecasts are no longer possible? In such circumstances,
what was previously useful cost information is worse
than obsolete: it can actually be dangerous. Of course,
as far as good management is concerned, that doesn't
mean that we should do without modern quantitative
models and concepts altogether. But we must be aware
of the assumptions and limitations that underpin them.
If trends are no longer reliable, numbers will be of limited
use as a basis for planning and decision making. If
numbers cannot help us, we must wave goodbye to
the idea of wanting to quantify every entrepreneurial
decision. And if the people in our companies are
unsettled by complexity, trust in the capabilities of
management will play a pivotal role.
Third: We need a new understanding of what
management means
Communicating a sense of security is very important to
good management. I see org charts, for example,
as symbolic of how we strive for this security. The
challenge today is that no truly responsible manager is
in a position to say how long any org chart will remain
valid. We need something new to replace the security
that we have lost. To my mind, this can only be anchored
in the personality of managers and leaders. Managers
must be able to explain their convictions and how they
see the future. The good news is that this approach once
again makes management more entrepreneurial, more
enterprising. The challenging news is that, on its own,
that's not enough. Managers also need to cultivate
an interdisciplinary mindset if political and social
developments are to be factored into their business
decisions. That's why analytical skills are still paramount:
For all the complexity that surrounds us, identifying
patterns will be as necessary as ever in the future.
*This is an excerpt from the book "On Good
Management. The Corporate Lifecycle.
An essay and interviews with Franz
Fehrenbach, Jürgen Hambrecht, Wolfgang
Reitzle and Alexander Rittweger".
Professor Burkhard Schwenker and Mario
Müller-Dofel, BrunoMedia Verlag,
EUR 19.80 http://rbsc.eu/UwZ6GU
think:act
CONTENT PVM
The balancing act
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value management
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think:act STUDY
Innovation
The global race for
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think:act MAGAZINE
Comeback
Our latest edition
of think: act explores
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No one likes to admit
to setbacks and defeat.
Yet mistakes must
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opportunity to do things
better in the future.
COO Insights | 01.2013
37